DeFi Investments in reached $200 bln. in June 2024, doubling from 2023. Analyzing the risks and opportunities for investors
DeFi — or decentralized finance — offers to invest your digital currency (crypto) directly into assets without transferring them to an intermediary for management, thus mitigating the risk of fraud.
According to a DapRadar report, DeFi investments reached $200 billion in June, doubling the amount invested at the end of the previous year. However, this market still lags significantly behind the traditional finance market, managed by intermediates (CeFi).
Binance reported a $2.13 trillion trading volume for derivative contracts on June 24, excluding margin trading with leverage. Binance, OKX, and Bybit make up almost $2–3 trillion monthly perpetual volume. The decentralized finance market is orders of magnitude smaller than the traditional market.
So why are investors interested in DeFi, as evidenced by the multifold increase in investment volume?
It’s conceivable that crypto investors are increasingly gravitating towards DeFi to mitigate the risks associated with CeFi fraud, which has resulted in losses exceeding $10 billion in 2021–2022 alone, as evidenced by the collapse of CeFi exchanges such as FTX, Celsius, Voyager Digital, and BlockFi.
Other advantages attracting investors:
- Lower fees than traditional financial institutions, which often charge 1–2% of AUM annually and additional costs.
- Better yields on deposits and loans, with DeFi platforms offering an average annual yield of 5–10% on stablecoins, far above the US average deposit rate.
- Increased transparency and audibility, allowing users to track their funds management.
But what’s preventing investors from fully embracing DeFi instruments over traditional ones? Why is the DeFi market still lagging behind the traditional one significantly?
- Complexity. There are 200 blockchains, 1,600 DeFi protocols, and complex 25+ yield mechanisms — building a DeFi yield portfolio requires a high degree of understanding and is a full-time job. It is far too complex, daunting, and inaccessible for everybody.
- Risks of attacks. Despite decentralization, DeFi smart contracts are vulnerable.
Have you ever tried DeFi instruments?
Would you invest in cryptocurrency if a simple tool manages your funds, and returns stable yield, without intermediaries and the complexity of DeFi?
We’re researching to develop a 1-click decentralized investment platform to easily invest and generate lending returns in either USD or ETH, with the lowest risk profiles without digging into the complexity of DeFi and spending time managing your assets.
We invite 15 people who have previously invested in crypto but encountered losses, or would like to try crypto investments but haven’t due to the complexities of DeFi and the risks of centralized instruments.
We would like to discuss your experience with crypto in an online interview. This will help us improve our platform according to your insights.
Participants in the interview will receive a reward of 30 USDT and an NFT titled “Early Adopters” as a gratitude for their contribution to the platform’s development.
To receive an interview invitation and participate in our survey, feel free to answer the four questions and share your contact details in the form below: