Cryptocurrency News

Post-crash prices give investors the opportunity to build a diversified portfolio


Welcome to Cointelegraph Markets’ Altcoin Roundup, an in-depth newsletter that focuses on investing from the standpoint of fundamental analysis and seeks to identify emerging blockchain projects and tokens that meet specific demands within the growing cryptocurrency market .

The concept of multi-sector investing has long been advocated in traditional finance as a traditional approach to building a balanced portfolio. Typical allocations include representation of stocks, government and corporate bonds, commodities and real estate.

Now that the cryptocurrency is in the market Grown into a multitrillion-dollar ecosystem With many emerging properties, clear areas are beginning to emerge. Knowledgeable crypto investors should start paying attention to implementing portfolio diversification practices in their holdings.

Total cryptocurrency market capitalization. Source: CoinMarketCap

Previous Altcoin Roundup Discussed some top layer-one solutions and coins like polkadot/dot, cosmos/.atom and Solana/SOL which have been gaining prominence over the past year, but these projects could also fall under the large-cap investment umbrella alongside high-profile assets like bitcoin (B T c), ether (ETH) and Cardano’s ada.

Once an investor has an adequate representation of blue-chip projects, other emerging sectors such as decentralized finance (DFI), oracles and stablecoins can be considered.

DeFi: Uniswap, Aave and PancakeSwap

Decentralized finance emerged during the DeFi summer in 2020, and the sector helped kick-start the current bull market by bringing a new level of excitement to the crypto ecosystem that needed the next big innovation.

According to data from DeFi Lama, one of the best metrics used to reflect the growing success of DeFi as a whole is the Total Value Locked (TVL) rankings, which collectively hit an all-time high of $157.63 billion on May 14. level reached, and Stand $116.62 billion at the time of writing.

Total cryptocurrency market capitalization. Source: CoinMarketCap

The release of Uniswap’s decentralized exchange (DEX) interface – which enabled new projects to be launched instantly and tokens available to the general public – helped ignite a wave of growth and innovation across the market that continues to this day. .

In less than a year, Uniswap has grown into the top DEX serving the crypto community, posting an all-time record $5.74 billion in 24-hour trading volume and $5.37 billion in total volume during the market selloff on May 19. Record viewed. Forum.

Daily DEX Vol. Source: Dune Analytics

The vast array of liquidity pools is the primary attraction for investors looking to diversify their crypto portfolio. Through these pools, stakers have the ability to earn returns by providing liquidity to the exchange in exchange for a portion of the trading fee. Many pools offer staking returns ranging from 25% to 2,000%, and traders are able to select a pool based on a variety of factors, including their appetite for risk.

While Uniswap has paved the way for DEXs, there are other alternatives such as Aave’s lending platform which has emerged as the highest ranking DeFi protocol by total value lock, with over $14.1 billion in TVL at the time of writing.

Away’s recent decision Give layer-two (L2) access to the polygon AAVE has brought renewable energy into the ecosystem, as traders and liquidity have happily moved to the low-fee environment offered on Polygon. This resulted in a significant increase in TVL for both AAVE and Polygon’s native token, MATIC, which is now second only to TVL, with $11.08 billion locked on the protocol.

Each balanced portfolio also has a 1% to 5% allocation reserved for high-risk assets, and there is no shortage of high-risk, high-growth assets in the crypto market.

For tokenholders who are open to slightly higher risk in exchange for higher yields, the Binance Smart Chain-based PancakeSwap has a TVL of $7.67 billion, and proposals Annual Percentage Rate (APR) up to 482.54% according to the project’s website, with all rewards paid in the protocol’s native Cake tokens.

Stablecoins are the new “savings account”

While a token that is held at a fixed price may not seem like the most attractive opportunity for investors, stablecoins have evolved to play a vital role in the functioning of the broader cryptocurrency ecosystem.

Stablecoins often serve as the backbone of trading pairs on centralized and decentralized exchanges, as well as providing an easy way for traders to lock in profits.

The two most prominent stablecoins are Tether (USDT) and usd coin (USDC), which have $60.9 billion and $21.6 billion in token supplies, respectively. Tether is currently the most traded crypto token, with a 24-hour trading volume that ranges from $100 billion to $290 billion.

Tether (USDT) vs USD Coin (USDC) vs DAI Circulating Supply. Source: coingeco

Other popular stablecoins include Binance USD (BUSD), a stablecoin created for use within the Binance Smart Chain ecosystem, as well as the algorithmically controlled stablecoin DAI, which is pledged on the Maker protocol.

For those looking to earn a little extra yield in the security of stablecoins, there are a number of options available such as depositing into a lending protocol such as AAVE or the decentralized stablecoin exchange curve, which provides the returns of certain stablecoin pools. Offered up to 50% off.

Other popular options include supplying liquidity to various decentralized exchanges such as Pancake Swap, which provides 8.64% for its DAI-BUSD liquidity pool, or QuickSwap, which provides an annual percentage yield of 15.01% for its USDT-USDC pool. Offers a reward plus fee of 26.75% for its DAI-USDC pool.

oracle

In a world where digital data continues to dominate, no cryptocurrency portfolio would be complete without access to an oracle provider. These units are industry veterans who facilitate Secure exchange of data and information within the cryptocurrency ecosystem as well as the broader financial markets.

Currently, Chainlink is one of the most prominent oracle projects and a major player that includes a thriving open-source community of data providers, node operators, smart contract developers, researchers, and security auditors.

While the Chainlink network does not currently offer a direct way to earn rewards through a simplified staking or governance mechanism, it is easy for tokenholders to operate within DeFi protocols such as DEX liquidity pools and Aave.

For investors who are not ready to rely on decentralized exchanges and DeFi platforms, centralized yield companies such as Nexo, Celsius and BlockFi are also available for crypto investors looking to earn returns on their holdings.

Centralized exchanges such as Coinbase and Binance also offer the ability to place direct bets. For example, investors can bet bands up to 11.7% APR on major exchanges.

As a result of the May selloff, which wiped more than $1.2 trillion in value from the cryptocurrency market, many top projects are now well below their all-time highs and trading in what some investors described as “bargain bin” prices.

while Market participants remain uncertain Depending on which way prices are headed in the short term, it would be wise to investigate these opportunities as soon as possible, as the notoriously volatile crypto market could make significant moves at the drop of the cap.

Want to know more about diversification in above mentioned projects?

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, so you should do your own research when making a decision.