Galaxy Digital—the cryptocurrency-focused merchant bank founded by billionaire and former Goldman Sachs executive Michael Novogratz—has invested in decentralized finance (DeFi) asset management firm ParaFi Capital.
According to a Sept. 29 announcement, Galaxy Digital is now a minority stakeholder in ParaFi Capital, alongside Bain Capital Ventures and Henry Kravis, the co-CEO and co-founder of private equity company KKR. As of the end of August, the firm had more than $100 million in assets under management.
The two firms expect to jointly invest in projects by marrying ParaFi’s expertise in the DeFi field with Galaxy Digital’s institutional relationships.
Novogratz said he believes DeFi has ”transformative” potential, adding that ParaFi shares his views on the “urgency to help this space accelerate toward deeper product-market fit.”
ParaFi founder and managing partner Ben Forman added that “programmable finance is a ‘zero to one’ innovation enabled by blockchain, and DeFi represents the nascent architecture for a new, open financial network.”
Before founding the firm, Forman was an executive at private equity firms KKR and TPG.
He argued that “Bitcoin successfully demonstrated the market’s demand for a digitally native, decentralized store of value” and claimed that now “the time is right to establish a nimble investment framework into DeFi architecture more broadly.”
Capitalizing on the DeFi craze
The enthusiasm about DeFi’s potential is at stellar levels, with many believing that this nascent ecosystem could grow to be a trillion-dollar industry sooner than most could anticipate. Jay Hao—the CEO of top crypto derivatives exchange OKEx—told Modern Consensus in an exclusive interview he and his firm believe “that DeFi will continue to flourish and eventually grow up to be a viable alternative and supplement to the traditional financial system.”
Still, this enthusiasm may sometimes be a tad excessive. One example of overeager DeFi investors may be those crypto enthusiasts who invested last night in token distributions for smart contracts that were deployed for testing on a new protocol by Yearn.Finance developer Andre Cronje, before he was ready for funding.
The problem was that the smart contracts were still a work in progress and after deploying them to run some tests and going to sleep, the developer was woken up at 3 AM and learned that $15 million had been invested and stolen just hours after the deployment. Surprisingly, the hacker also returned $8 million to the Cronje’s address.