We reached out to experienced traders and founders of venture funds for their top tips and basic research strategies. We’ll be speaking with ParaFi Capital managing partner Ben Foreman in this article.
ParaFi Capital is a San Francisco-based fund that invests in blockchain technology and decentralized financing markets. Ben Foreman serves as the managing partner. After ten years working in traditional finance, Foreman founded ParaFi Capital in 2018. He has a special focus on credit markets and private equity at large companies like KKR and TPG. He says that DeFi, aside from Bitcoin’s non-sovereign value, is a key area of blockchain technology with real market relevance, real users and real traction. We are focusing on uncensored, non-sovereign financial service.
Take a long-term view
Foreman suggests that you only invest what you can afford, especially in bitcoin, and not trying to adapt to the market. He says that it is not wise to try and predict the price of bitcoin in a week or month. “I have been investing cryptocurrency since 2013, through many bullish and bear cycles. Virtual assets can be a part of any portfolio. The only problem is how much.
The DeFi Myths Unmasked
DeFi offers financial products like term loans and cross-border value transfers at a fraction of the cost. Foreman believes DeFi’s core business — which are faster, cheaper, and more accessible — will allow her to transform the financial sector. He says that all financial verbs are what DeFi is looking at. “Lending, borrowing, hedging, exchange, indexation, robo-consulting. All of these activities have friction and fees charged by intermediaries in traditional capital markets.
The best teacher is available to you
Some cryptographic concepts can be difficult to comprehend abstractly. Foreman suggests setting aside small amounts to try out DeFi apps. He suggests downloading MetaMask (a browser-based cryptocurrency wallet) and sending some funds from your account to your MetaMask address. Then, you can start using apps. You can feel it when you swap tokens on the [decentralized Exchange] Uniswap. It’s also possible to invest in stablecoins and earn dollar-denominated income with no counterparty risk. This is when the lightbulb goes off.
Accept the Rabbit Hole
All crypto investors have access to a lot of information. Foreman recommends visiting DeFi Pulse to view the list of protocols ranked by how much capital they have at the moment. Click on the projects you are interested in to find out more. He says that he has about 20 tabs open in my browser, each one containing articles. “Each message leads into another message, and so on until you reach the end of understanding.
Immerse yourself in data
DeFi’s transparency is one of its benefits (at least to technology-oriented investors). Foreman states that apps can be viewed in real-time and can show how many people use them and how much. You can also see the volume of traffic each day, and measure usage and adoption if it is a decentralized exchange.
This is just the beginning of a story.
Foreman sees great opportunities for cryptocurrency to make financing more affordable and easier. He calls it “amazon experience with money”. These tools do not require specialized knowledge, he says. He says, “When you send an e-mail, you don’t need to know how SMTP works.” Or, if you are browsing a website, HTTP is not something you think about. It’s all abstract. Blockchains will be the future of financial and capital markets. They didn’t think of blockchains.