While Bitcoin is continuing to make headlines in mainstream media, DeFi projects are steadily growing in TVL too. In the last twelve months alone, DeFi’s TVL has grown from $1 billion to $40 billion, with the same surging by nearly 3900 percent. Such explosive growth is perhaps the biggest missed opportunity for traders with a portfolio that is underexposed to DeFi.
Corresponding to the 20% hike in Bitcoin’s price, the value of DeFi projects hiked by 200% or higher too. This is evidenced by the rise in TVL and the weekly and 24-hour returns for many of the market’s DeFi projects. Since most investors are drawn to Bitcoin for its volatility and quicker returns, DeFi projects are the ideal ground for investments and make for ideal additions for double-digit and more consistent returns on a trading portfolio.
Since 18.5 million Bitcoins have already been mined, a saturation in Bitcoin would mean investment flows into altcoins and DeFi projects. Here, the focus might be on DeFi since the level of liquidity enjoyed by DeFi is nowhere close to that of Bitcoin, and this is good for the portfolio in the short run since this makes DeFi projects more susceptible to dramatic price swings in the short-term in both directions.
It should be noted, however, that there are hacks and exploits in DeFi like the recent Yearn.Finance exploit that resulted in the loss of $11 million worth of crypto. And yet, YFI’s price was up by 15.69 % in a 24-hour period. Exploits and hacks in DeFi projects do not overrule the ability to offer double-digit returns in the short-term, with a few top projects already attracting institutional investment flows.
Despite repeated examples of exploits, investment flows into the likes of Sushiswap and Uniswap have increased considerably over the past 2 months.
Further, it is also worth noting how Bitcoin’s price has more or less remained rangebound after hitting a new ATH, every time in this market cycle. However, for DeFi, this has not been the case.
The narrative remains the same, an increase in Bitcoin’s price leads to investment flows into DeFi and Ethereum. Further, owing to high volatility and limited liquidity, these projects offer double-digit or even higher returns.
In fact, in the past 30 days alone, the RoI on top DeFi projects is over double digits. More DeFi projects in one’s portfolio may give it the ability to sail over the corrections in Bitcoin and Ethereum’s prices since the latter are more cyclical in nature.