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26 November 2021 11:23, UTC
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Why buying tokens of popular decentralized platforms is the least risky and what you need to know before purchasing little-known altcoins
Decentralized finance (DeFi) has grown in popularity over the past year. This is indicated by an increase in the number of search queries, according to Google Trends. This may be due to the high profitability of some DeFi projects. For example, the price of the UFO Gaming token has grown more than 100 times in four months. However, investing in decentralized finance comes with increased risk. RBC-Crypto experts explained how to reduce risks when choosing promising DeFi tokens.
Strategy for beginners
The safest and easiest way to start investing in DeFi is to buy management and native tokens of decentralized platforms, for example, Uniswap, PancakeSwap, Maker, Compound and others, on centralized exchanges, Nikita Zuborev, a senior analyst at Bestchange.ru, 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.
With a more conservative approach, Zuborev advised allocating no more than 10-15% for investments in DeFi projects. If risk tolerance is higher, then this share can be doubled, the analyst noted.
When buying little-known tokens on decentralized exchanges, it will be more profitable to purchase a large number of digital coins with the expectation of multiple growth of several of them, Zuborev says. According to him, if you buy tokens of already popular projects, then you should concentrate on 1-2 of the most promising coins.
Portfolio formation
When creating an investment portfolio from DeFi tokens, it is necessary to ensure a minimum correlation of assets, says Maria Stankevich, Development Director of the EXMO crypto exchange. In her opinion, the cryptocurrencies in such a portfolio can be divided according to the level of capitalization:
- high (over $ 5 billion);
- medium (from $ 250 million to $ 5 billion);
- low (less than $ 250 million).
With a conservative approach, 50-60% of the portfolio should be assets with a high capitalization, added Stankevich. According to her, in total, no more than 10% of the capital should be allocated to the formation of the DeFi portfolio. Since there is generally very little information about projects, it’s worth investing only in understandable ecosystems and not counting on “xes”, the expert explained.
“It is better to choose the more famous and high-profile stories, because in this case, even in the event of a break-in, there is a chance of getting your own funds back,” Stankevich summed up.
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