Crypto Hedge Fund Looks for $50M to Buy DeFi Tokens Amid Market Pullback

Sep 23, 2020 at 08:00 UTC.Panxora is raising money for a hedge fund focused on DeFi tokens.

The cryptocurrency money manager Panxora seeks to raise up to $50 million for a new hedge fund to buy digital tokens associated with the fast-growing decentralized finance sector.

Dollar-linked tokens known as stablecoins can fetch annualized rates up to 20% through Yearn.

Collateral locked into DeFi projects surged to $13 billion earlier this month, according to DeFi Pulse, a 20-fold increase since the start of the year.

Big cryptocurrency exchanges like Binance and Coinbase have rushed to cash in on the trend, listing DeFi tokens while acknowledging that a growing share of market volumes might eventually migrate to decentralized trading platforms.

As prices tumbled for bitcoin, the largest cryptocurrency, and ether, the native token of the Ethereum blockchain, DeFi-affiliated tokens fell even harder.

Aave, a decentralized lender, saw its LEND tokens fall by 12% during the seven days through Tuesday, according to Messari, a cryptocurrency data firm.

Finance's YFI tokens are down 29%.It's been "An absolute bloodbath," Messari analysts wrote Tuesday in their daily newsletter.

Cryptocurrency analysts say DeFi systems are likely to grow over the long term, though short-term risks are high in the nascent market, and many of the digital tokens are so new that they can be difficult or even impossible to value using anything resembling traditional financial analysis.

Panxora's new hedge fund, based in the Cayman Islands and scheduled to start trading on Nov. 2, will primarily buy tokens listed on big centralized cryptocurrency exchanges rather than from the roster of decentralized, automated exchanges like assembled by DeFi developers.