Despite DeFi Regs Potentially Incoming, Aave Just Hit a 60-Day High
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Despite DeFi Regs Potentially Incoming, Aave Just Hit a 60-Day High

Are institutional investors protecting DeFi from regulatory FUD?
Neither the author, Kai Morris, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Aave, the token powering a popular DeFi lending platform, has just reached $362.72, the highest it has been since early June. This spike in price has likely been triggered by Bitwise’s recent release of its DeFi funds specifically for Aave and Uniswap.

What’s interesting is even in the midst of imminent SEC regulations targeting DeFi, Aave has still managed to soar. This is a sign of hope for the industry, and an indicator that many DeFi users are undeterred by SEC Chief Gary Gensler’s recent arguments against the field. 

Aave’s New Index Fund from Bitwise

On August 3rd, the crypto investment firm, Bitwise, announced the launch of its Aave index fund. The aim of the fund is to offer “investors a means of participating in the AAVE market while lowering logistical barriers to entry such as exchange access, custody, and execution costs”.

In its press release, the firm noted it will “invest directly in AAVE”. This is extremely bullish as it means not only will they be encouraging institutional investors to get involved, but Bitwise itself will also be entering the market (and likely in high quantities, too).

On the same day, Bitwise also launched its Uniswap fund, explaining these are “the two largest DeFi protocols in [their] DeFi index, and are the largest decentralized exchange and decentralized lending protocol in the world, respectively”. Uniswap’s token also responded positively, reaching $23.80, the highest its been since June 15th.

The fund is built to appeal directly to institutional investors, such as hedge funds, financial advisors, and businesses. This is far from the first time corporations have been eyeing DeFi, as the crypto investment firm, Grayscale, released its own DeFi fund in late July. PayPal’s CEO, Dan Schulman, has also indicated the company’s desire to expand into the industry

With Bitwise setting minimum investments into each fund at $10,000, this project is designed exclusively for corporate, or wealthy, figures. Note, however, this is a lower barrier of entry than their Ethereum fund, which is set at $25,000. This could mean they are trying to appeal to smaller firms and investors.

DeFi Industry is Unshaken By Upcoming Regulations

With DeFi being at the cutting-edge of FinTech, it is no surprise institutions are looking to enter the market. However, it is also unsurprising to find regulators struggling to grasp how it works.

The SEC, and other government officials, have constantly been ignorant of the crypto industry, and especially DeFi. It was suspected these misunderstandings would cause prices to drop, but it appears the opposite has happened. 

We’re at a crossroads– government is becoming warier of DeFi, and yet institutional investors are getting more excited. Retail investors may very well be getting nervous about upcoming regulations, but in a rare turn of events, wealthier investors may be saving the market right now by being consistently bullish on the tech. If so, this would not be the first time higher-income investors have protected prices

Note for Aave and Uniswap’s Bitwise funds, only accredited investors are eligible to participate. In the US, these are people, or companies, who are given exemptions by the SEC to invest in unregistered securities. This may be important, considering how Gensler has recently been examining whether certain crypto tokens are securities or not.

This is actually the norm for crypto investment funds, which may be a sign that while institutions are eager to get involved, they are still a little concerned about what the SEC has planned. This lack of certainty may not be harming prices just yet, but it still fosters confusion and in the future, it could steer investors of all wealth brackets away. For now, DeFi appears to be doing well, but that could still change if regulations become too harsh, or if the SEC takes too long on deciding a position.

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Do you think DeFi will be harmed by the SEC’s upcoming regulations? Let us know in the comments below. 

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