HashKey Capital publishes optimistic report on DeFi as crypto winter weakens case for CeFi

Rick Steves

HashKey Capital has published its annual 2022 DeFi Ecosystem Landscape Report, digging into the current state of the decentralized finance industry. 

The report by the prominent Asian crypto fund concluded that, despite the crypto winter, the digital asset market remains one that’s both thriving and bursting with potential.

“While the wider crypto industry has been depressed throughout 2022, there are good reasons to be optimistic about the future of a still-nascent DeFi industry that continues to attract a staggering amount of venture capital”, said HashKey, pointing to more than $14 billion invested into a total of 725 crypto projects in the first half of 2022 alone.

Besides VC money, the DeFi sector has attracted a significant number of new users too, with user growth averaging 44% quarter-over-quarter in 2022. Wallets have surpassed 5 million user in Q3 of 2022.

When comparing to traditional finance, DeFi’s market capitalization is now bigger than that of Santander Bank, and poised to approach that of many other tier-1 banks, the report found, highlighting that around 25% of the 400 fastest-growing companies in Fintech today are actually crypto/blockchain focused businesses.

DeFi emerges as centralized systems failed this year

Jupiter Zheng, Research Director at HashKey Capital, commented: “Many centralized financial systems failed this year, the market realized that DeFi, which is entirely on-chain based and extremely transparent, might be the answer to the innovation dilemma of non-compliant financials.”

The DeFi is dominated by Ethereum, hosting 58% of all activity, with the market’s top six segments  being DEXs, Lending, Asset Management, CDPs, Derivatives, Insurance, and Staking – generating a total of $8.2 billion in fees.

There have been some encouraging signs for institutional exploration in DeFi too, with Huntingdon Valley Bank, a Pennsylvania Chartered Bank, having secured loan approval in MakerDAO with an initial debt ceiling of $100 million and a 12-month goal of $1 billion.

Societe Generale has also applied for a $30 million loan from MakerDAO and is currently being evaluated. Elsewhere, J.P. Morgan recently completed a pilot transaction on the Aave protocol, and ING has been exploring the use of Aave loans, the report found.

Other promising signs for DeFi include the emergence of new segments this year, including the area of uncollateralized lending to TradFi institutions.

HashKey Capital is an asset manager with over US$1 billion in client assets operating in Hong Kong and Singapore and investing exclusively in blockchain technology and digital assets. The firm has strong connections in Japan and the U.S., and has invested in over 200 projects from public chains, protocols, DeFi, CeFi, Web3 infrastructure, NFT to Metaverse since 2015.

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