Post-crash altcoin prices give investors an opportunity to diversify their portfolios
If you want to build a diversified crypto portfolio, DeFi, stablecoins, and oracles are three basic areas to consider.
The concept of cross-sector investing has long been advocated in traditional finance as a conventional approach to building a balanced portfolio. Typical allocations include stocks, government bonds, corporate bonds, commodities, and real estate.
As the crypto marketplace has evolved into a multi-million dollar ecosystem with many emerging assets, areas are clearly taking shape. At the same time, the savvy investor who also wants to diversify his holdings should pay attention to it.
Total market capitalization for cryptocurrencies | Source: CoinMarketCap
Some of the top Layer 1 coins and solutions like Polkadot (DOT), Cosmos (ATOM) and Solana (SOL) have grown in prominence over the past year, but these projects could also fall under the same large-cap investment range – well-known assets like Bitcoin, ETH and ADA.
Once investors have adequate representation of blue-chip projects, other emerging areas like decentralized finance (DeFi), Oracle, and stablecoins can be considered.
DeFi: Uniswap, Aave and PancakeSwap
Decentralized funding is on the rise in the summer of 2020 and the sector has helped fuel the current bull market by bringing new excitement to the crypto ecosystem, which is in dire need of more major innovation.
One of the best metrics used to demonstrate the growing success of DeFi in general is the Total Value Locked Rating (TVL). TVL hit an all-time high of $ 157.63 billion on May 14, according to Defi Llama, and at press time of $ 107.25 billion.
total locked value | Source: CoinMarketCap
Uniswap’s (Decentralized Exchange, DEX) front-end release event, which allowed new projects to be launched immediately and tokens made available to the public, helped spark a wave of growth and innovation in the market. The school continues to expand today.
In less than a year, Uniswap has grown to become the leading DEX for the crypto community, hitting an all-time record of $ 5.74 billion in 24-hour trading volume and $ 5.37 billion during the May 19 sell-off Total volume blocked on the platform.
Daily DEX volume | Source: Dune Analytics
This makes a large number of liquidity pools very attractive in the eyes of investors who want to diversify their portfolio. These pools enable stakers to generate profits by providing liquidity to the exchange in exchange for a portion of the transaction fees. Some pools offer staking returns of 25% to 2,000%, and traders can choose a pool based on a variety of factors, including their risk needs.
While Uniswap leads the DEX market, there are other options like Aave’s lending platform, which at the time of writing is the highest rated DeFi protocol by total value with over $ 13.8 billion TVL.
Aave’s recent decision to provide Layer 2 access on Polygon has powered the AAVE ecosystem with renewable energy as traders and liquidity stand ready to move to a lower fee environment. This resulted in a significant increase in TVL for both Polygon’s native AAVE and MATIC tokens, currently the second tier protocol in terms of TVL, with $ 11.08 billion tied to the protocol.
Any balanced portfolio also has a small allocation of 1% to 5% for higher risk investments, and the crypto market has no shortage of high risk investments with growth potential.
For token holders who take slightly higher risks in return for more returns, the Binance Smart Chain-based PancakeSwap with a TVL of $ 7.67 billion and an annual percentage (APR) of up to 482.54% is one option worth considering is the project’s website, with all rewards paid in the protocol’s native token CAKE.
Stablecoins are the new “savings account”
While a fixed-value token might not seem like the most attractive opportunity for an investor, stablecoins are evolving to play an important role in the functioning of the broader crypto ecosystem.
Stablecoins are often viewed as the backbone of centralized and decentralized exchange trading pairs and offer traders an easy way to secure profits.
The two best-known stablecoins are USDT and USDC, with a circulation volume of $ 60.9 billion and $ 21.6 billion, respectively. USDT is currently the most traded crypto token with a 24-hour trading volume of $ 100 billion to $ 290 billion.
Circulating supply of USDT, USDC and DAI | Source: CoinGecko
Other popular stablecoins are BUSD – created for use within the Binance Smart Chain ecosystem, as well as the algorithmically controlled stablecoin DAI, which is minted via a collateral commitment on the maker protocol.
For those who want a little extra profit while staying safe with stablecoins there are options like depositing tokens into a credit protocol like AAVE for a deposit of up to 5% or an unstable stablecoin exchange% for some stablecoin Pools.
Other popular options include providing liquidity for a decentralized exchange like PancakeSwap with a return of 8.64% for a DAI-BUSD liquidity pool, or QuickSwap, which offers a bonus plus fee of a percentage return in a range% for its DAI – USDC pool.
In a world increasingly dominated by digital data, no crypto portfolio would be complete without access to an oracle provider. These companies are heavyweights in the industry and facilitate the secure exchange of data and information within the crypto ecosystem as well as the broader financial markets.
Currently, Chainlink is one of the most dominant Oracle projects and a key player made up of a thriving open source community of data providers, node operators, smart contract developers and developers, researchers, and security auditors.
Has a Twitter account praise on May 19th:
“We were there in mid-May and Chainlink has 35 integrations! I see the record number of integrations this month has been easily broken. With Chainlink you win in every respect. “
While the Chainlink network does not currently offer a direct way to benefit from simplified governance or staking, token holders can easily use their coins in DEX liquidity pools and the DeFi protocol such as Aave.
For investors unwilling to trust decentralized exchanges and DeFi platforms, centralized profitable companies like Nexo, Celsius, and BlockFi are also available for those looking to capitalize on assets.
Centralized exchanges like Coinbase and Binance also offer direct staking. For example, investors can use BAND with an APR of up to 11.7% on major stock exchanges.
After the May sell-off that threw more than $ 1.2 trillion off the crypto market, many of the top projects are now well below their all-time highs and trading at currently unknown levels in what some investors call “bargains” ” .
While market participants are uncertain about the short-term price direction, it is advisable to check these opportunities early on, as the notoriously volatile cryptocurrency market could suddenly realign itself.
According to Cointelegraph