5 Essential Tips to Investing in DeFi Protocols

With triple and sometimes quadruple profits, decentralised finance is a potentially lucrative, highly volatile market that has captured the attention of cryptocurrency traders worldwide. Here are some simple tips to use when considering an investment in this vibrant market.

  1.    DISCRETIONARY CAPITAL ONLY
With some DeFi markets delivering triple or quadruple digit returns, these markets can be highly lucrative but just as volatile. Limit investment to ‘risk capital’ that can be put 100% at risk without major impact to entire portfolio’s returns.
2.     RESEARCH FIRST
Research in the DeFi space is not going to look like research of conventional markets. There is limited data and the industry has yet to attract professional analysts. Original research like meeting founding teams, careful community tracking, looking for pump and dump groups showing an interest in your selected investments all figure into a DeFi protocol assessment. Find out how reasonable the founding team is with their views about future government regulation. These are good indicators that the DeFi protocol will have longevity.
3.    KNOW WHO THE FOUNDERS ARE
Four billion dollars have flowed into the DeFi markets in 2020. Like any new, rapidly evolving market, this kind of interest can attract bad actors. Be vigilant about where you put your resources. Research the founders beyond a review of whether they have 500 connections on LinkedIn is a good idea.
4.    COUNTERPARTY RISK
At some point regulators will look hard at decentralized exchanges (DEX) that have no AML/KYC processes in place. Avoid this risk by trading on exchanges like Binance where risk of government shutdown is unlikely.
5.    TIMING IS EVERYTHING
When you trade is just as important as what you trade. Effective systematic strategies built around mathematical modelling do well in these markets where emotional trading causes big sweeping moves.

If you don’t have the resources to understand this specialist market talk to the founding partners at Panxora. Our deep learning models have been trading DeFi protocols since 2017. We are an asset manager licensed in the Bahamas and with the launch of Panxora’s DeFi Hedge Fund we can give you and your clients access to this potentially lucrative market. We could be at the beginnings of what an extensive bull run as this technology develops into one that disrupts the conventional markets creating new opportunities for profit worldwide.

Book a meeting to discuss investment with the managing team at Panxora.