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Based on their YTD price activity, the following DeFi tokens – SUSHI, AAVE, UNI, COMP, and MKR – are poised for double-digit growth in the near term among the market’s top-50 altcoins. Indeed, the 24-hour trading rate for these tokens seemed to be representative of the rise in liquidity as well.
According to CryptoCompare’s top-tier exchange volume results, DeFi protocols accounted for more than half of the altcoins that have made double-digit gains in the last few trading sessions. However, investing directly in protocols may not be as beneficial as investing in ETFs in terms of measures such as valuation and dividends.
The investment inflows into DeFi protocols and ETFs have been growing, but the rise in overall AUM has been slower than it was in January or February 2021.
Trader interest in DeFi protocols and ETFs has increased, especially after Elon Musk’s tweet about DeFi less than a week ago. It is important to remember here that the uncertainty of returns on DeFi protocols is a two-edged sword for the retail investor. Returns will either drive an asset up by double digits or lower it below its previous ATH within a week or even less.
Investing in ETFs is the most successful way to handle this uncertainty and its effects on unrealised gains and losses. The efficiency of the top DeFi ETFs is determined by the following metrics:
The top three DeFi indices’ output is reflective of the 10x rise in DeFi that is anticipated in the coming weeks as fund inflows increase and Bitcoin stays rangebound below $60,000.
Furthermore, Ethereum’s growing association with Bitcoin, which has recently surpassed 80%, is conducive to both assets’ rangebound market behaviour and helps DeFi protocols and ETFs to deliver higher returns with high uncertainty. There is actually $204M in AUM in DeFi for over 14 DeFi index tokens. Furthermore, the above statistic reflects just 0.5 percent of the TVL.
The main metrics are valuation, fund costs, and fee composition, according to the sector barometer and data from the top three indices. Despite the fact that the DeFi market cap has increased by over 5000 percent in the last year, not all traders are interested in keeping an eye on their portfolio at all times. For an ETF like DEFI5, the passive DeFi investing approach, which involves investing in a fund rather than the protocols, is comparatively less expensive.
When exposed to DeFi Blue chips, it is cheaper and more efficient to purchase Uniswap rather than mint it, and the same is true for other investments in DEFI5. These common DeFi ETFs are likely to burst if the action in high volume markets on spot exchanges proceeds on its current path.