New DeFi Index Targets ‘Proven’ Blue-chip Assets

Blockworks Exclusive: Investors seeking “flight to quality” after crash of Terra’s algorithmic stablecoin, Phuture’s head of product says

article-image

Source: phuture.finance

share

key takeaways

  • Phuture’s head of growth expects the next tens of millions of crypto users to want “simple exposure” to decentralized finance
  • Top assets in the index include Uniswap, Aave, Lido DAO Token and Compound

Decentralized crypto index platform Phuture has launched its first product as the company looks to satisfy demand from investors seeking exposure to “blue-chip” DeFi assets.

The Phuture DeFi Index (PDI), available on the Phuture app and Bancor pools, is designed for those who have dabbled in bitcoin and ethereum and are now looking to invest beyond crypto’s two largest assets.

Phuture Head of Growth Charles Storry called the crypto index space a nascent segment with no clear winner. Though roughly 18% of the global stock market is held in indices, he added, less than 1% of the total value locked in decentralized finance (DeFi) are held in index products today. 

“We believe that the next million, or the next tens of millions, of users coming into the space will want to do so via simple exposure and won’t be looking to manage that themselves,” Storry told Blockworks. “We think that’s insane.”

The company considers a range of token characteristics when choosing the index constituents, such as its usefulness, its role within crypto infrastructure, how long it’s been operational and its liquidity. 

Managed by code, the index is automatically rebalanced monthly. No one asset can account for more than 30% of the index.

PDI initially invests in seven assets, with the largest allocations — about 30% each — going to Uniswap (UNI) and Aave (AAVE), followed by Lido DAO Token (LDO) and Compound (COMP). Other assets include Yearn.finance (YFI), SushiSwap (SUSHI) and Alchemix (ALCX).

The launch comes as the number of DeFi users has grown about 25 times from two years ago, according to crypto data firm Dune Analytics, reaching more than 4.7 million. Total value locked (TVL) in the space stands at $112 billion, Defi Llama data show.

The leading DeFi Index by marketcap is the DeFi Pulse Index (DPI), with $47 million in TVL. The index, which launched in September 2020, currently has as its top assets, Uniswap (UNI), Aave (AAVE), Maker (MKR), Loopring (LRC) and Synthetix (SNX), making up about 76% of overall assets.

The crash of algorithmic stablecoin TerraUSD (UST) earlier this month has shifted investor mindsets, according to Phuture Head of Product Oliver Mehr, saying “safety is becoming cool again.”

“There is a flight to quality,” Mehr said. “They’re looking for assets that have stood the test of time, that are non-experimental, that have revenue and users and are real businesses.”

As a result, Phuture has excluded governance tokens of algorithmic stablecoins until the firm sees more evidence that they can survive multiple cycles of investor apathy and distress, he said. 

Despite the growth of DeFi, the index launch comes as token prices have declined in recent months. UNI traded at $5.52 on Wednesday afternoon — down about 37% in the last month and 78% from a year ago.

“We think it’s an even better time to be investing into these blue-chip assets due to the dislocation between the underlying business models and the price,” Mehr said. 

Founded in 2019, Phuture intends for PDI to be the first in a suite of index products, expecting continued growth in DeFi and GameFi within the next couple of years.

The company said in April that it was partnering with Colonylab to launch the Colony Avalanche Ecosystem Index, which will follow the PDI launch.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

HYATT REGENCY SALT LAKE CITY

TUES, OCT. 8, 2024

Guided by the expertise of Blockworks Research Analysts team, this one day event will feature senior leaders, entrepreneurs, and developers from across the crypto industry. Attendees will have the opportunity to participate in an immersive experience to explore the latest trends, […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

hivemapper.jpeg

Research

We believe crypto market participants overlook Hivemapper’s fundamental potential due to a poor understanding of both the niche map data market and Hivemapper’s positioning relative to incumbents. Hivemapper’s token model catalyzes both a cost and product advantage via unmatched map freshness and near real-time accuracy, which is its wedge into a market characterized by stale data and high data collection costs. Its current and potential future product suite may represent one of the strongest possibilities for PMF in crypto today.

article-image

Exploit shows centralization can sometimes be an asset

article-image

The Fidelity Ethereum Fund, like other proposed ETH ETFs, seeks to stake a portion of its assets, according to the firm’s Wednesday registration statement

article-image

The DAO first voted on enabling SAFE transfers over a year ago

article-image

The final Bitcoin halving, where the mining reward becomes smaller than one satoshi, is expected to occur in 2140

article-image

The Department of Justice and Commodity Futures Trading Commission announced back-to-back lawsuits against KuCoin Tuesday

article-image

Judge Failla found that Coinbase didn’t operate as an unregistered broker in offering its wallet service