Crypto Index targets “blue-chip” DeFi Assets
Decentralized crypto index platform Phuture has launched its first product as the organization appears satisfy investor’s demand for “blue-chip” DeFi digital assets.
The Phuture DeFi Index (PDI), offered on the Phuture app and Bancor swimming pools, is designed for investors who have dabbled in Bitcoin and Ethereum and are now looking to make investments past Cryptocurrency’s two largest assets.
Phuture’s Head of Growth, Charles Storry called the crypto index idea at a niche phase with no clear winners yet. Although approximately 18% of the global stock market is held in indices, he added, lower than 1% of the decentralized finance (DeFi) total value is locked in index products.
“We believe that the next million, or the next tens of millions, of users coming into the space will want to do so via simple exposure and won’t be looking to manage that themselves,” Storry told Blockworks. “We think that’s insane.”
Phuture DeFi index considers a specific set of token traits when selecting the index constituents, similar to its usefulness, its function inside crypto infrastructure, how long it has been operational and its liquidity and listing on major crypto exchange platforms like coinbase crypto exchange, kraken digital asset exchange and Binance Exchange.
Managed by code, the index is rebalanced automatically every month and no single digital asset/currency can account for greater than 30% of the index.
PDI initially invests in seven Digital Assets, with the largest allocations — about 30% each — going to Uniswap (UNI) and Aave (AAVE), followed by Lido DAO Token (LDO) and Compound (COMP). Other assets include Yearn.finance (YFI), SushiSwap (SUSHI) and Alchemix (ALCX).
The launch comes because DeFi customers from all walks of life have grown about 25 times in the last 2 years, according to crypto data firm Dune Analytics, reaching more than 4.7 million. Total value locked (TVL) in the space stands at $112 billion, according to Defi Llama data.
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The main DeFi Index by marketcap is the DeFi Pulse Index (DPI), with $47 million in total value locked. The index, which launched in September 2020, currently has Uniswap (UNI), Aave (AAVE), Maker (MKR), Loopring (LRC) and Synthetix (SNX), as its top assets, making up about 76% of the total assets.
The crash of algorithmic stablecoin TerraUSD, also known as UST earlier this month has shifted investor mindsets, according to Phuture Head of Product Oliver Mehr, saying “safety assets are turning cool once more”.
“There’s a fight to high quality,” Mehr stated. “They’re looking for assets that have stood the test of time, that are non-experimental, that have revenue and users and are real businesses.”
Because of this, Phuture has excluded governance tokens of algorithmic stablecoins till the company sees more evidence that they can survive a certain amount of market cycles of investor apathy and distress, he stated.
Regardless of the expansion of DeFi, the index launch comes when token prices have fallen in last couple of months. UNI traded at $5.52 on Wednesday afternoon — down about 37% n the final month and 78% in last twelve months.
“We think it’s an even better time to be investing into these blue-chip assets due to the dislocation between the underlying business models and the price,” Mehr said.
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Founded in 2019, Phuture intends for PDI to be the first in a suite of index products, expecting continued growth in DeFi and GameFi within the next couple of years.
The company said in April that it was partnering with Colonylab to launch the Colony Avalanche Ecosystem Index, which will follow the PDI launch.
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