It is very difficult to say which cryptocurrencies might be worth investing in right now.
However, it is possible to identify trends that can generate increases in value or Actual speculative bubbles.
To tell the truth during bear markets it is a bit difficult for all of this to happen, but at the same time in theory bear markets can be The best times to invest in undervalued cryptocurrencies.
At this specific time for example decentralized finance, or DeFimay seem like a downtrend, given what happened in May withecosystem collapse Land DeFi.
However, there are those who do not think so. In fact, the co-founder and CEO of Binance, Changpeng chow chowJust yesterday, he wrote a tweet indicating the possibility of a new positive trend emerging in the DeFi sector.
Binance is investing heavily in DeFi.
(not financial advice)
– Czechoslovakia 🔶 Binance (cz_binance) October 23, 2022
The fact that Binance, as CZ reveals, is investing heavily in DeFi seems to mean that it has detected some sort of revival of the trend.
Crypto and DeFi risks
However, we must not forget that DeFi is not the same at all.
For example, the Avalanche project was born in 2020, grew a lot in 2021, and in 2022 suffered a sharp decline in interest. After peaking in November 2021, the price of the native cryptocurrency is AVAX decreased by 89%. Despite this, it is a project that is still very much alive and active.
Instead, Project Terra was born in 2019, grew a lot in 2021, but in 2022 it virtually collapsed.
They are two similar projects in many ways, but with a story that this year took two very different directions. Until May, it developed almost in parallel, but in May Terra exploded, while Avalanche sharply contracted.
Suffice it to say that the current price of AVAX is five times higher than it was before Bullrun 2021, while the price of Luna Classic (the Terra project cryptocurrency) is more than two thousand times lower.
How to invest in the cryptocurrency market while avoiding risks
In fact, risk cannot be avoided when investing in DeFi, but you can at least try to minimize it.
For example, by studying the Earth Project long before the implosion, it was possible to realize that there was a fundamental problem. In reality, it was all based on a cryptocurrency stablecoin cryptocurrency which, however, did not have sufficient hedges. On top of that, it had a management system based on the volatile value of LUNC (Luna Classic), thus once this started to decline rapidly the UST lost its peg to the dollar and caused the entire ecosystem to collapse.
Project study AvalancheHowever, it can be seen that this problem did not exist. So, although the risk of investing in AVAX was still high, it was definitely lower than investing in LUNC (then just called Luna).
Indeed, investing in these ventures is tantamount to betting on their future success, however, without sufficient information to develop reasonable certainty that they will.
As always, when you bet, you should only invest the amounts you are willing to lose, because the risk of losing is really high. Once you realize that they are essentially bets, with a relatively small chance of success, you can take a more reasonable and perhaps more conservative approach.
However, sometimes these bets pay off, for example, who bought AVAX in 2020.
Something vaguely similar also happened in 2019, when news started circulating that DeFi was circulating. Who then bought ETH, given that Ethereum Is the foundation of decentralized finance, he could have paid for it Less than $400and if he had stopped it now, it would have gone up by over 250%.
Certainly ETH is a less risky investment than AVAX or LUNC, but it is still a relatively high risk investment.
Now, after Ethereum and BNB Seriesthe only other blockchains that have it Over a billion unlocked tokens In DeFi protocols are Tron, Avalanche, and ribbed. followed by Arbitrum, optimism, Solana And the Chronos.
Note that Polygon, Arbitrum, and Optimism are Layer 2 of Ethereum.
Interesting fact about this blockchain The ratio between the original cryptocurrency capitalization (Mcap) and TVL.
Solana has a very high Mcap/TVL ratio above 11. This indicates that the market capitalization of SOL may be a bit high.
The one with the lowest percentage is optimistic, with a staggering 0.19 indicating a very low market value. Tron also has a very low Mcap/TVL ratio, just over 1.
Just to be clear, Ethereum has just over 5, or rather, not by chance, more or less in the middle between Solana’s 11 and Tron’s 1. Ethereum is absolute The main benchmark for the DeFi sector.