BlockTower Bets Big on DeFi

BlockTower Capital sees big potential in decentralized finance. 

The digital investment firm has raised $25 million to invest in decentralized finance, or “DeFi,” solutions and assets. 

“We think that DeFi is going to be one of the fastest-growing pieces in crypto and in Fintech more broadly,” said Michael Bucella, partner at BlockTower. “It is an emerging space that we have focused on for a while.” 

Investor interest in DeFi platforms has boomed this year. Uniswap, the fourth-largest DeFi platform, is up more than 560% year-to-date. 

“You’re seeing some really talented, forward-thinking decentralized finance companies emerging, and not just thinking about the traditional, what I would call ‘circular’ DeFi industry,” Bucella told Blockworks. “There are folks building risk models, building decentralized credit scores, building things that will allow traditional players to underwrite risk better in these protocols, and that’s exciting, and it’s going to take time.” 

Bucella thinks January’s Reddit/Gamestop narrative has contributed to DeFi’s rally. Many of the concerns that WallStreetBets helped to highlight are the same areas DeFi seeks to improve. 

“The WallStreetBets social revolution of January pulled DeFi forward,” said Bucella. “In the same way that the pandemic and central bank actions have accelerated the bitcoin conversation, I think the WallStreetBets social movement pulled forward the DeFi conversation.”  

BlockTower was co-founded in 2017 by Matthew Goetz, a former investment manager at Goldman Sachs, and Ari Paul, who previously oversaw risk at the University of Chicago’s endowment investment office. 

Billionaire hedge-fund manager Marc Lasry and former U.S. Commodity Futures Trading Commission Chairman Christopher Giancarlo are among BlockTower’s most noteworthy investors. 

Bucella is also a Goldman Sachs veteran. He worked in the securities division before leaving in 2017 to join BlockTower. He said the decision was difficult, but has paid off. 

“Matthew [Goetz] and I have been back to Goldman on a number of occasions to speak with different groups, whether it be the trading desk or the banking team,” said Bucella. “Bitcoin has always come up in these conversations, DeFi has really come up in conversations in the last 18 months or so.” 

While DeFi, and digital assets more broadly, are certainly making their way into the mainstream, there is still a long way to go in terms of investor education, Bucella said. 

“I still think there is a significant knowledge gap between everyone looking at the space and people within the space,” said Bucella. “There is going to have to be a continuous education cycle, because the reality is that there are some defined use cases, but all of them are evolving.”