There are a lot of ways to answer this question but one of my choosing would be that Wall Street is already in DeFi, just not in the way people expect.
The problem is that most people do not consider basic actions like buying a decentralized asset like Bitcoin as an act of investing in decentralized finance because to them DeFi is all about staking, yield farming, or lending and borrowing.
The problem? Wall Street is more likely to directly buy Bitcoin and Ethereum than they are to provide liquidity in some random liquidity pool of a high interest-bearing token on Binance smart chain.
However, the average crypto folks does not consider any capital inflow as a plus for decentralized finance where there are no explicit reports of investment in very specific DeFi protocols.
Of course, this is flawed understanding of what DeFi is, but you cannot blame any of them because the media has framed DeFi as primarily being yield farming, ignoring the fact that the financial habit of the average person involves earning and spending and not investment for yield or smart positioned borrowing or lending.
Ethereum co-founder: Wall Street will ‘go deep’ into DeFi and Ethereum
In a recent post, Lubin highlighted the increasing demand for Bitcoin and Ethereum coming from institutional investors. He believes that the spike in corporations that stock up on ETH and BTC by adopting a digital asset treasury strategy is a big indicator that the financial system is shifting to DeFi.
Therefore, he predicts that Wall Street will soon dive into decentralized protocols and digital assets as more and more companies join the race. This is because he believes Wall Street figureheads care about financial instruments that are consistently climbing higher in value. And right now, crypto is on their watchlist.
“They will be motivated to deep dive and learn what’s up with these strategies. They will have to deeply understand the details of Bitcoin and Ethereum and the strategies of MSTR and SBET. They will have do go deep on DeFi on Ethereum,” said Lubin. — Crypto.news reports
This is an accurate assessment and prediction because the focus here, generally is that “deeper engagement” is to be expected from Wall Street.
This means that Lubin understands that Wall Street already is in decentralized finance, however, their rate of involvement is expected to increase.
As noted in the report, lots of institutions are going to be looking at what Strategy is doing with MSTR and SBET for its Bitcoin investment and try to improve upon it.
Beyond this, however, institutions will be exploring the other side of DeFi. Which will initially be protocol-level staking, in proof of stake networks, primarily Ethereum.
The rationale behind this conclusion is pretty simple: institutions will look at the potential upside of what's being built and also how their investment into this wouldn't only afford them a chance to grow their wealth but also give them influence in the emerging ecosystem.
Risks, reward and power, this is what Wall Street will weigh.
A lot of pooled capital will be flowing into Ethereum's ETH. Currently, it's terribly underperforming but this will not always be the case. In a rather recent report, we already see how companies will be getting involved with this ecosystem.
Sharplink bought nearly half a billion’s worth of ETH and over 95% of said purchase has already been staked, earning yield while contributing to Ethereum’s network security.
More traditional companies and Wall Street will be doing this. It's to be expected over the next 5 years.