On-Chain Derivatives Are DeFi’s Next Boom Opportunity – Apollo Capital

Henrik Andersen, chief investment officer at Australian crypto investment firm Apollo Capital, says that on-chain derivatives are set to become the next big growth area in the decentralized finance (DeFi) sector.

In an extensive interview with Cointelegraph, Anderson said he believes the growing popularity of decentralized spot trading will inevitably drive demand for decentralized derivatives.

“The first decentralized spot exchange was launched about six years ago. Decentralized fixed and futures trading is very new, so there is a high growth opportunity with on-chain derivatives.

Anderson pointed out that decentralized spot exchanges have steadily gained market share from centralized exchanges – a trend that has grown since the collapse of FTX last November.

During May’s memecoin mania, daily trading volumes on decentralized exchanges (DEXs) like Uniswap somewhat eclipsed those of main centralized crypto exchanges like Coinbase.

Months later on June 7th, trading volume on the DEX spiked again, surging over 400% following the SEC crackdown on Binance and Coinbase.

“Over the past year we have seen Uniswap trade higher daily volume than Coinbase and if you look at (the DEX’s) overall market share, it is still small, but it is making gains,” Anderson said. ” “On a monthly basis, we are trading over $50 billion in spot volume on the DEX.”

In June, futures trading on centralized exchanges accounted for about 80% of the trading volume of the entire crypto market. Anderson said he sees this futures-heavy trend repeating itself in DeFi as well, lauding on-chain derivatives as the “best product-market fit” the DeFi space has seen in years.

“Most of the volume is in futures, so there is even more growth opportunity for on-chain derivatives.”

In addition to decentralized derivatives, Anderson also mentioned two emerging market sectors that have piqued his interest in recent weeks.

The first is NFTFI – a mix of non-fungible tokens (NFTs) and DeFi – which allows investors to rent, borrow and partially split NFTs as well as create derivative and prediction markets based on them.

Describing the emerging sector as a “strong investment narrative,” he claimed that DeFi investors will inevitably use NFTs for a wide range of functions.

Another emerging topic is LSDFI, which seeks to increase the utility of Liquid Staking Derivatives (LSD) tokens such as Lido Staked ETH (STETH) and Rocket Pool Staked ETH (RETH) by allowing investors to borrow, speculate, and hedge against their LSD tokens. bootstraps the .

Connected: DeFi Hacks and Scams Lost Over $204M in Q2: Finance Redefined

LSD’s popularity has grown exponentially in the wake of Ethereum’s Shapela upgrade, with the LSD protocol overtaking DEX as a category in terms of Total Value Locked (TVL). statistics From DeFiLlama.

“We have seen an increasing number of protocols using staking derivatives as collateral in DeFi and I think we will see a lot more of this,” Anderson explained.

With the LSD sector gathering momentum, Anderson made it clear that the market will need to address worrying levels of centralization among a few staking providers and create a more balanced chain of protocols.

“Lido is a little too impressive for Ethereum. We want a large pool of potential stakeholders and protocols providing that service,” he said. “All of us in this space would like to see not only more protocols, but a more diverse environment overall.”

magazine: Tornado Cash 2.0 – The Race to Build a Safe and Legal Coin Mixer