A former Morgan Stanley executive has launched a DeFi protocol. With this, the DeFi ecosystem has won another victory against traditional finance (TradFi).
Kevin Lepsoe, the former head of structuring at Morgan Stanley, wants to offer an institutional system with fixed and floating interest rates with his new project Infinity Exchange.
According to Lepsoe, via his new project, DeFi traders can “arbitrage, draw liquidity from other protocols, and hedge their futures basis risk positions.”
The DeFi market is known for its volatility and risk when trading digital assets. By trading multiple options, one can hedge against risks and speculate over an entire maturity curve. With more investment options to trade along said curve, users can more easily switch between risky and low-risk assets.
Lepsoe told Cointelegraph that the introduction of a crypto yield curve is important for the growth of DeFi trading because it reduces volatility.
“If there were a crypto yield curve, a more robust suite of products around stablecoins, and a way to unify TradFi and DeFi rates, crypto volatility would be significantly lower.”
Institutional traders and investors could further enter this area with such an offer. According to a recent survey by Bitstamp, institutional interest is still high. 80 percent of the institutional investors surveyed believe that cryptocurrencies will overtake traditional forms of investment in the next decade.
Lepsoe says that if the industry wants more institutional investors to feel safe in the market, using mechanisms that already work in known markets would be a good place to start. "In TradFi, institutional investors are more active in fixed income markets than in equity markets," Lepsoe said.
The CEO stressed that institutional acceptance will come as fixed income markets play a bigger role in the DeFi space.
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