Fear the Risks of DeFi Investing? These Experts Weigh in On Safely Participating in This Booming Market

Published on: August 25, 2021
Author: NAI500

DEFI’s Growing Hype in the Market

Shank Tank celebrity Kevin O’Leary is warning financial intermediaries that they may want to dust off their resumes and start looking for new work – even suggesting shining shoes as an option – ahead of an imminent DeFi takeover.

Before becoming a reality TV star, O’Leary made his fortune in computer software and later founded O’Leary Funds and O’Leary Ventures. He has been famously quoted several times criticizing Bitcoin, but it would appear he has had a dramatic change of heart. Now the celebrity investor and entrepreneur thinks DeFi could potentially replace traditional centralized financial institutions – and soon.

In a recent interview with Insider, O’Leary commented that he likes DeFi because he’s tired of paying fees to financial intermediaries and “this whole move into stablecoins and cryptocurrencies is to get rid of those middlemen. And we’re going to do it in the next three, four years.”

On the other hand, regulators argue that financial intermediaries play an essential role in financial stability and security. Commodities Futures Trading Commission official Dan Berkovitz went as far as to say he believes as much as half of the DeFi world is probably illegal.

Are There Risks to DeFi Investing?

Investing in DeFi is not without its risks, and it’s not only due to unpredictable price volatility.

Hackers Take off with $600 Million in Crypto

The popularity of DeFi apps has exploded. In a little over a year, the total value locked in DeFi has grown 80X, from $1 billion in June 2020 to $85 billion in August 2021. However, this meteoric rise has made DeFi related protocols very attractive targets for hackers looking to exploit weaknesses.

According to crypto security company CipherTrace, more than 6 in 10 crypto hacks this year were DeFi-related, up from only 20% in 2020.

In a jaw-dropping attack earlier this month, hackers stole $600 million in cryptocurrency from PolyNetwork, a cross-chain protocol that facilitates token swaps between users.

While about $33 million of stolen stablecoin Tether was eventually frozen by Tether’s issuer and will likely get returned to the rightful owners, this feature is unique to certain tokens. It is not an option for many other cryptos, including the lifted Ether.

In another unexpected turn of events, the hackers have begun voluntarily returning some of the crypto they stole. As of Wednesday, nearly half of the $600 million had been sent back. This could mean that while the hackers were able to swipe the crypto, they were having trouble cashing it out.

US SEC Shuts Down DeFi Money Market in $30 Million Bust

In a first-of-its-kind fraud case, the US Securities and Exchange Commission has taken regulatory action against a DeFi market platform.

According to charges filed by the commission, executives at Blockchain Credit Partners participated in $30 million of unregistered securities sales while misleading investors about the profitability of their blockchain money market DeFi Money Market.

The DeFi company used smart contracts to sell two types of tokens: mTokens, which promised a 6.25% return, and DMG governance tokens which supposedly provided voting rights in addition to a share of excess profit.

Investigators claim that when ongoing price volatility made the returns promised to investors impossible to meet, DeFi Money Market executives Gregory Keough and Derek Acree concealed the information from investors. The two allegedly instead provided interest payment from personal funds as well as from other companies they owned.

This Company Will Help You Manage DeFi Investing Risks

Despite the challenges, there is still room within the DeFi market to invest while mitigating risk.

DeFi Technologies Inc. (NEO: DEFI) (GR: RMJR) (OTC: DEFTF) is a Canadian listed decentralized finance incubator and innovator. Their mission is to connect retail and institutional investors to previously unheard-of gains through participation in the DeFi market. The Company generates value by leveraging a highly experienced team of professionals to build and manage assets in this rapidly emerging sector.

Snapshot of DeFi Technologies Over the Last 3 Months

In July, DeFi Technologies released an update on its venture portfolio. In 6 months, the portfolio returned 255% and is now worth over US$1,693,000.

Shortly after, the Company announced that they had added Russel Starr to their board as Executive Chairman. Mr. Starr, who was serving as Head of Capital Markets, is an established CEO, entrepreneur, and financier with previous executive and board experience from roles with numerous TSX and TSV listed companies.

On August 9, 2021, DeFi Technologies revealed that they had entered into a letter of intent (LOI) to acquire 100% of issued and outstanding securities in the capital of DeFi Yield Technologies Inc. The DeFi Yield Technologies Inc. is responsible for developing a suite of proprietary automated yield generating products that allow for optimized yield while reducing risk exposure.

On August 12, 2021, DeFi Technologies announced that they had also entered into an LOI to acquire    100% of the issued and outstanding securities of Protos Asset Management GmbH.

Protos has been providing its clients with professionally managed digital assets portfolios since 2017.

Both LOI agreements are now set to enter negotiations before moving on to definitive contracts formalizing the terms of the respective deals.

Last week, DeFi Technologies provided an update on its financial performance. And despite challenge markets marred but extreme volatility, the results are very impressive.

In Q2, the Company achieved a record $107 million in assets under management in wholly-owned subsidiary Valour Inc. With total revenue for the quarter coming in at $2,586,742 there is the potential for $10.3 million in annualized reoccurring revenue.

The Company was also able to maintain a strong liquidity position with cash and liquid assets of CA$28.76 million and $0.9 million in crypto investments. However, with recent increases in some of the Company’s public investments, these values are expected to rise.

Disclaimer: The company described in this article is a customer of NAI Interactive Ltd. This material is for informational purposes only and is not intended as a recommendation or offer or solicitation for the purchase or sale of any securities or financial instruments, or for transactions involving any financial instrument or trading strategy.

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