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With centralized exchanges coming under increasing scrutiny, Henrik Andersson has touted the promise of decentralized derivatives.

On-chain derivatives are set to become the next big growth sector in the decentralized finance (DeFi) space, says Henrik Andersson, the chief investment officer of Australian crypto investment firm Apollo Capital.

In a wide-ranging interview with Cointelegraph, Andersson said he thinks the increasing popularity of decentralized spot trading will inevitably lead to outsized demand for decentralized derivatives.

“The first decentralized spot exchanges were launched roughly six years ago. Decentralized perpetuals and futures trading is much newer, so there is a high growth opportunity to be had with on-chain derivatives.”

Andersson explained decentralized spot exchanges have continuously gained market share from centralized exchanges — a trend that has only increased since the collapse of FTX in November last year.

During May’s memecoin frenzy, daily trading volume on decentralized exchanges (DEXs) such as Uniswap evenbriefly eclipsed that of mainstay centralized crypto exchanges like Coinbase.

Months later on June 7, trading volumes on DEXs again surged, going well over 400% following the SEC’s crackdown on Binance and Coinbase.

“In the last year we've seen Uniswap trade more daily volume than Coinbase and if you look at the overall market share [of DEXs], it's still small, but it's gaining ground,” Andersson said. “On a monthly basis, we're doing over $50 billion in spot volume on DEXs.”

In June, futures trading accounted for nearly 80% of the entire crypto market’s trading volume across centralized exchanges. Andersson said he sees this futures-heavy trend being replicated in DeFi as well, and lauded on-chain derivatives as the “best product-market fit” the DeFi space has seen in years.

“Most of the volume is in futures, so there's an even greater growth opportunity for on-chain derivatives.”

Outside of decentralized derivatives, Andersson also mentioned two emerging market sectors that have piqued his interest in recent weeks.

The first is NFTFi — blending nonfungible tokens (NFTs) and DeFi — that allows investors to rent, borrow and fractionalize NFTs as well as create derivative and prediction markets based on them.

Describing the nascent sector as having a “strong investment narrative,” he claimed DeFi investors will inevitably end up utilizing NFTs for a wider range of functions.

The second emerging theme is LSDFi, which bootstraps the utility of Liquid Staking Derivatives (LSD) tokens such as Lido staked ETH (stETH) and Rocket Pool staked ETH (rETH) by allowing investors to borrow, speculate and hedge against their LSD tokens.

In the wake of Ethereum’s Shapella upgrade the popularity of LSDs has grown rapidly, with LSD protocols as a category surpassing DEXs in terms of total value locked (TVL), according to data from DeFiLlama.

*The top ten protocol categories by TVL. Source: DeFiLlama*

“We have seen a growing number of protocols use staking derivatives as collateral in DeFi and I think we’ll see much more of that going forward,” Andersson explained.

With the LSD space gaining momentum, Andersson made it clear that the market will need to combat worrying levels of centralization among certain staking providers and create a more balanced array of protocols.

“Lido is a bit too dominant for Ethereum itself. We want to have a larger pool of potential stakers and protocols providing that service,” he said. “All of us in the space would like to see not just more protocols themselves, but a more diversified environment altogether.”

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Institutional investors headed for a tipping point on crypto — Apollo Capital

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Apollo Capital

Apollo Capital CIO Henrik Andersson said there will come a point when not investing in crypto will be a “career risk.”

Henrik Andersson, CIO of crypto asset fund manager Apollo Capital believes institutions may soon “flip” on their conservative stance towards crypto.

Speaking to Cointelegraph, the Melbourne-based crypto fund manager said that while institutional interest in crypto has been slow in picking up, particularly in Australia, there are a lot of players that are waiting for the right moment to strike.

Andersson admitted that major institutional investors in Australia, particularly retirement funds (or superannuation funds) have yet to warm up to the digital asset space.

“It’s still early days. So yes, speaking to a lot of family offices in Australia and smaller boutique institutions. The big industry super funds are not there yet.”

“From their point of view its still a lot of education going on. So it will still take some time, I believe,” he added.

Apollo Capital is a fund manager focused on providing family office and institutional investors access to crypto investment opportunities. One of its latest launched funds is the Apollo Capital Frontier Fund, which is focused on nonfungible token (NFT) infrastructure, decentralized finance (DeFi) and multi-chain infrastructure.

Asked what needs to happen for institutional sentiment to change, Andersson believes this will “flip” when big players start making more substantial moves in the space.

“No one wants to be the first into something like this. Because if you’re the first one and things go wrong, then there’s a career risk. That will flip at some point to the opposite,” explained Andersson.

“At some point, when prices go up, then people don’t want to miss out. And if others are making investments, then it will become a career risk not to be invested.”

In Australia, several large banking institutions such as ANZ, NAB and Commonwealth Bank (CBA) have already been making forays into the digital asset space.

“We’ve seen several of the major banks here in Australia, taking an interest in digital assets. So that’s really, really good to see,” he said.

CBA was notably the first major bank in the country to announce crypto services through its mobile banking app last year, but later put its plans on hold noting it was still waiting on regulatory clarity from the new government.

Others have pushed forward with stablecoin and tokenized asset trading.

Internationally, large banking conglomerates such as Singapore’s DBS Bank are continuing to grow its digital assets business despite the bear market, while major investment banks such as Goldman Sachs, Morgan Stanley, CitiGroup and JPMorgan have also been beefing up its coverage of the crypto space.

“You have all the major investment banks in the world writing research reports on the crypto space. Everyone from Goldman Sachs to Morgan Stanley, Citigroup, JP Morgan and others. So there’s definitely still a lot of interest in the space from those kind of institutional players.”

“So while it seems like its going very slowly now, you know, once the sentiment changes, we see the first players making investments that can change very, very quickly.”

Earlier this week, Irfan Ahmad, the Asia Pacific digital lead for the bank’s crypto unit State Street Digital told Sydney Morning Herald that despite the current crypto winter, institutional investors have maintained their interest in blockchain and digital assets.

Apollo Capital

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