First Bridge Between DeFi and Traditional Funds Nears Launch

Despite the recent pullback in digital asset values, DeFi is alive and well. One of the first funds that will allow investors to get exposure to DeFi through a traditional hedge fund structure is ready to go and is hoping to close its first round on July 31, its co-founder told Blockworks in an interview. 

One of Blockforce Capital’s recent offerings involves offering its investors exposure to the yield opportunities Vesper makes available through its pools. The fund will not just passively hold the Vesper (VSP) token, but rather participate in the growth pools which involve routing funds to yield-generating protocols selected by Vesper, such as Compound. For Blockforce Capital’s investors, this will be no different than subscribing to a regular fund offering — no technical knowledge required. 

While the market for bitcoin has been hostile to investors during the most recent quarter, DeFi is a different story. 

“Recently we’ve had this massive pullback in crypto, and it was kind of a good test, if you will, for the uncertainty around crypto. ‘Is it just a fad? Will everything break?’ I think if anything, this has been a perfect test for a lot of investors who might have been otherwise a little nervous or cautious about the asset class,” Blockforce Capital co-founder Eric Ervin told Blockworks.

Although some DeFi protocols didn’t fare well during the challenging last quarter, vanishing as their underlying assets experienced a rapid drop in value, Vesper and its Vespernauts — a name given to its token holders —  are both still here. Ervin said this durability is one of the reasons why his firm picked the protocol to invest other people’s money in. 

“It’s a protocol we feel comfortable working with. It’s got its belt and suspenders. There’s transparency in management, and the founding team has the ability to put their faces on something…their reputation is on the line,” Ervin said. “This was important to us instead of just working with some anonymous Twitter account.”

Are funds the future of DeFi?

DeFi has a total locked-in value just north of $55 billion, according to DeFi pulse. This might seem like a lot, but it’s pale in comparison to the size of the funds under management in, say, the Fidelity 500 Index Fund ($274 billion) or Vanguard’s Federal Money Market Fund ($200 billion). 

“40-60% of stocks are owned through funds,” Ervin said. “Most people do it through a fund, because they are easy to understand and straightforward.”

Ervin believes that in the near future the ‘Goldmans of the world’ will be launching DeFi funds as a gateway to give people access to the asset class. 

After all, he said, there are trillions of dollars sitting in the money markets earning 0% interest.