DeFi has in recent months exploded rising to the tune of billions of dollars.
In a new industry, there are lessons to be learnt all along and new solutions emerging.
The last few weeks have been a turbulent time for many cryptocurrency holders, with the average cryptocurrency losing more than a quarter of its value in the last month alone.
During this time, the great majority of traders have begun exploring ways to either protect their portfolio or point their assets toward less risky revenue streams. In this case, those with the broadest knowledge of the latest DeFi platforms and protocols tend to perform the best. Here, we take a look at three of the platforms the experts leverage during tumultuous periods like this.
Decentralized options markets
Unfortunately, many DEX traders have been relegated to either holding through the correction or selling at a loss, since most traders aren’t yet aware that there are now ways to short the market using only DeFi platforms.
Premia, a decentralized options AMM, represents perhaps the most capable platform users can use to short specific cryptocurrencies when the market is on its way down. Through Premia, users can trade a range of call and put options for more than a dozen different DeFi coins — including Aave, Uniswap (UNI), Yearn Finance (YFI), and more.
But more than this, if a specific option isn’t available, Premia lets users create their own custom options contracts through its simple mint feature. This can be used to create options for a specific token with a specified strike price and expiration — allowing users to easily long or short the token they want while sourcing liquidity from the Premia marketplace.
With decentralized options markets like Premia, users can now easily hedge their positions and even turn a profit when the market falters — which can spell the difference between an accomplished vs a struggling trader.
Smart Contract Insurance
As always, DeFi is widely known as a “use at your own risk” affair, with many DeFi tools and services openly stating that they are still experimental or operating in beta. Nonetheless, many of these platforms have gone on to become extremely popular, and have potentially tens of millions or more worth of assets controlled by their smart contracts.
Unsurprisingly then, some of these platforms fall victim to exploits that can affect user funds. In the last month alone, there have been several such examples of this, including both xToken and PancakeBunny — both of which were hacked to the tune of $25M and $200M respectively this month.
But thanks to the advent of decentralized insurance platforms like Nexus Mutual, using DeFi protocols doesn’t have to come with any risk. Through Nexus Mutual, and other platforms like it, it’s possible to take out insurance plans that protect against a range of potential issues — such as smart contract exploits, network attacks, consensus failures, and more.
For example, it’s possible to get insured against a Uniswap V3 breach for a 6.75% premium per year, while protection on most centralized platforms (like Binance, Coinbase, and Kraken) costs as little as 2.6% per year — a small price to pay for peace of mind.
When the market is down, cryptocurrency investors invariably begin looking for ways to turn a more stable or risk-free profit on their underutilized assets.
Inevitably, many of these investors stumble upon DeFi yield farms and staking platforms, which can be used to generate a yield on a variety of assets — such as ether (ETH) and ERC-20 tokens.
However, due to the dramatic uptick in transaction fees due to rising network activity and demand, many yield farms have become all but uneconomical for smaller-scale investors, who struggle to generate a return when taking the transaction fees into account.
As a result, some of the more savvy investors have instead begun using yield aggregation platforms like Roseon to manage their DeFi and CeFi investments. This is more economical in most cases because Roseon aggregates liquidity from a variety of platforms to maximize yields for the end-user while cutting transaction fees down to a bare minimum.
With Roseon’s range of savings products, farms, and index funds, investors can benefit from the best in DeFi without having to manually transfer their funds between protocols every other day.
Other platforms, including Yearn Finance offer similar functionality and have also seen a surge in activity during the recent adverse market conditions. Nonetheless, the vast majority of DeFi investors continue to go it alone — paying far more than they need to in fees