Many quant funds have similar “gap to zero” risks like DeFi. Many swaps desks at bulge bracket banks have “gap to zero” risk. Many derivatives strategies actual

Many quant funds have similar “gap to zero” risks like DeFi. Many swaps desks at bulge bracket banks have “gap to zero” risk. Many derivatives strategies actually have “gap beyond zero” risk, as in you can lose more than 100% of your investment. All of these systems are complex black boxes, for which the full risk profile can never be fully known let alone eliminated. Yet all of these asset classes continue to reach record size. For the foreseeable future, risk is not a meaningful constraint on financial activity or the growth of any otherwise profitable sector. Global capital is insanely hungry for yield. It’s willing to accept very large, outsized risks as long as returns are attractive. DeFi continues to grow because it offers significantly higher top-line returns than traditional products. As long as that continues to be true, investors will stomach, and in many cases outright ignore, the risks.