DeFi: How to safely invest in the field

Over the past year, the field of decentralized finance (DeFi) has grown significantly in popularity. This is indicated by an increase in the number of search queries, according to Google Trends. This may be due to the fact that some DeFi projects have high profitability. For example, the price of the UFO Gaming token increased by more than 100 times in four months. However, investing in decentralized finance is associated with increased risk. RBC-Crypto experts explained how to mitigate risks when choosing promising DeFi tokens.

A strategy for beginners

The safest and easiest way to start investing in DeFi is to buy management and native tokens from decentralized platforms like Uniswap, PancakeSwap, Maker, Compound and others on centralized exchanges, Bestchange.ru senior analyst Nikita Zuborev explained. According to him, the growing popularity of the industry has a positive effect on the value of such tokens, so you can count on speculative income.

Zuborev advised to allocate no more than 10-15% to investments in DeFi projects with a more conservative approach. If your tolerance for risk is higher, then this share can be doubled, the analyst said.

When buying little-known tokens on decentralized exchanges, it will be more profitable to buy a large number of digital coins with the expectation of multiple growth of a few of them, said Zuborev. According to him, if you buy tokens of already popular projects – then you should focus on 1-2 most promising coins.

Forming a portfolio of DeFi tokens

When creating an investment portfolio of DeFi tokens, it is necessary to ensure a minimum correlation of assets, says Maria Stankevich, Development Director of EXMO Crypto Exchange. In her opinion, cryptocurrencies in such a portfolio can be divided by the level of capitalization:

• high (more than $5 billion);
• medium (from $250 million to $5 billion);
• low (less than $250 million).

With a conservative approach, 50-60% of the portfolio should consist of assets with high capitalization, Stankevich added. According to her, not more than 10% of capital should be set aside for DeFi-portfolio. Since in general there is very little information about the projects, it is worth investing only in well-known ecosystems and not counting on “X”, the expert explained.

“It is better to choose more famous and high-profile stories, because in this case, even in the case of hacking, there are chances to return their own funds,” Stankevich summarized.