Aussie cryptocurrency fund Apollo Capital bets big on DeFi, as it invests in on-chain derivatives and cross-chains

The local crypto investment firm returned 50 per cent in the September quarter and nearly 400 per cent return for the 2021 financial year.

NFTs have fueled crypto’s push into the mainstream but DeFi shows the most promise, according to Apollo Capital.

Leading Aussie crypto investment firm Apollo Capital, whose flagship fund returned 392 per cent for the 2021 financial year, is betting big on the “enormous potential” of decentralised finance (DeFi), as it ramps up its investments in on-chain derivatives and cross-chain protocols.

While non-fungible tokens, or NFTs, have fuelled crypto’s push into the mainstream, DeFi is the next big wave, Apollo’s chief investment officer Henrik Andersson said on Thursday.

“DeFi is much less of a consumer-oriented market. It’s more like a new financial infrastructure, so less exciting perhaps for the mainstream.

“But it will grow tremendously from here. It’s only basically 18 months old and it’s already at $200bn. And within DeFi, so far we’ve seen most of the growth in the lending and decentralised exchange space.

“On-chain derivatives could overtake both the lending and exchange space. So there’s enormous potential there.”

Crypto derivatives operate in a similar way to traditional derivatives, with contracts traded on exchanges. But with the use of smart contracts, there’s no need for brokers. Cross-chain protocols connect different blockchains and allow them to communicate with each other.

Fresh from its near-400 per cent 12-month return, the Melbourne-based firm’s main fund returned a further 50 per cent in the three months through September 30. It has made a number of recent investments to capture the burgeoning derivative and cross-chain segments of the market, Mr Andersson said.

“In September, we made an investment into a really exciting protocol called Strips Finance. This is an interest rate derivative platform. And it falls in the category of on-chain derivatives,” Mr Andersson said.

The crypto world is moving to a multi-chain future, where different blockchains communicate with each other, he said.

“We’ve been investing in things like cross chain swap functionality in DeFi. One project we invested in is Chainflip. One of the founders is actually from Melbourne and we think that‘s really a promising project in that space.”

Fintechs will soon latch on to the burgeoning DeFi market, he predicted.

“That‘s another big trend, I think. We’ll see the likes of Revolut and others tapping into the yields that you can achieve in DeFi.

“I have a hard time seeing that not happening. I think the opportunities are too big for them to ignore. And that could bring the mass market in to DeFi through consumer oriented apps.”