- The price of cryptocurrency ethereum has surged in recent weeks.
- It still has “significant” upside, says FalconX’s Aya Kantorovich.
- She shared nine digital tokens to take advantage of ethereum’s tailwinds.
- See more stories on Insider’s business page.
A revolution in the financial world is brewing, and quickly.
The digital asset space is driving the movement toward Decentralized Finance, or DeFi, by allowing people to do things like securely borrow money from other individuals instead of banks and provide to financial markets in exchange for fees.
In short, banks, brokerages, and even asset management firms — at least in their current forms — could one day be outdated.
“If I were a bank, I’d be pretty worried,” Aya Kantorovich, the head of institutional coverage at crypto trading platform FalconX, told Insider.
“Banks are actively working on this and trying to keep up with the different pieces of DeFi. I would say a lot of these DeFi applications are working with banks as well,” she continued. “So the conversation is happening on both sides, which should tell you that banks are definitely worried about becoming obsolete.”
However, some bank executives have narrowed the actual use cases of DeFi in traditional finance. Cathy Bessant, Bank of America’s chief operations and technology officer, said at a recent roundtable that the firm had not yet found a “solid use case” for distributed-ledger technology for its financial services. A separate report from the bank noted that decentralized products are unable to scale and create credit at the same rates as traditional financial institutions.
Kantorovich, who works with institutional investors, said interest in the DeFi space has especially picked up speed over the last eight months, moving from interest only in pure blockchain technology like bitcoin.
She expects growth in the sphere to continue. One way to assess the progress of the DeFi space is to look at “total locked value,” or the value of currency people are sitting on that they can borrow and lend. It’s currently at $50 billion, but Kantorovich said she “wouldn’t be surprised” if it reaches $100 billion by the end of 2021.
The recent surge into DeFi assets has also been part of the reason why ethereum has surged past $4,000 in recent days, up more than 50% in less than two weeks. This is because most DeFi assets run on the ethereum network.
Ethereum, then, has big upside as institutions continue to allocate money to the space, Kantorovich said.
“I definitely don’t think that we have even begun to see the rally in ethereum in the way that we have in bitcoin, and so there is significant upside in the price. And a lot of that is institutions have just started getting their feet wet with bitcoin,” she said.
“They’ve just started understanding: what are the payment rails, the on and off ramps, the custody solutions, how do we make sure everything is compliant with our trading partners, who are the trading partners. And they just finished that with bitcoin. Now doing that with ethereum is going to be really easy because the infrastructure’s already set up,” she added.
Kantorovich said that future upgrades to the code-based Ethereum network will also boost its attractiveness.
While she didn’t have a specific price prediction for ethereum, Kantorovich highlighted that some traders are buying options contracts for ethereum on the Chicago Mercantile Exchange (CME) for $10,000. The cryptocurrency hit a record high above $4,358 on Wednesday, up 495% so far this year.
9 tokens to take advantage of the DeFi revolution and ethereum surge
As DeFi and ethereum adoption pick up, investors can take advantage of upside through DeFi coins, Kantorovich said.
She said her most preferred assets in the DeFi space are blue chip tokens, or those with a market cap of at least $2 billion.
These include Uniswap (UNI), Flow (FLOW), Aave (AAVE), Synthetic Network Token (SNX), Maker (MKR), Yearn Finance (YFI), Compound (COMP), SushiSwap (SUSHI), Universal Market Access (UMA), Kantorovich said.
Each of these are tokens created for specific services — for example, Uniswap is a platform that allows users to provide “liquidity pools” for traders, and Compound and lending and borrowing platform, she said.
“I personally always like coins with application,” Kantorovich said. “So I think I’ve always been very bullish on the DeFi blue chips, primarily because what they do is really look at how can we take out the middleman in any transaction — whether it is lending, whether it is asset management, whether it is token listing, whether it is creating liquidity in a marketplace for people to easily trade those tokens — borrow, lend, earn some yield.”