5 Things You Need to Know Before Entering DeFi

DeFi explosion which started in 2020 has continued well into 2021, with no signs of stopping.

There are now plenty of new investors seeking to enter the sector and use it to switch to decentralized finance.

Before they do, there are things they need to be aware of about DeFi.

Ever since the DeFi sector of the crypto industry exploded in June 2020, it has been growing almost non-stop, with massive developments happening over the past 9 months. DeFi now holds more money than ever; it is overflowing with projects, protocols, developers, and of course — users.

And, since a lot of these users are new, freshly drawn to the crypto industry thanks to DeFi growth, as well as crypto price surges, there are certain things that they should know before they enter DeFi, such as:

1. DeFi can generate passive income

One thing that makes DeFi so attractive is the fact that it offers banking services, only in a decentralized way. Another reason for its popularity is passive income.

DeFi offers a number of different activities, such as staking, money lending, yield farming, providing liquidity, and more, all of which require users’ to lock up their funds and offer it to others. In exchange, they get rewards. So, if you have money that you are not using, you can lock it up, make it available to your peers, and get regular inflow as a result.

2. It is extremely disruptive

Due to the fact that DeFi offers the same services as the banks — and more — it is seen as very disruptive in terms of traditional finance. Even the Bank of America, which recently bashed Bitcoin saying that there is no good reason for holding BTC seems to be intrigued by DeFi. It said it itself, noting that DeFi is potentially more disruptive than BTC and that it represents a radical change to mainstream capital markets.

DeFi still has a long way to go before it can reach this potential, but the potential is there, nonetheless.

3. It has attracted accredited investors

Another report recently revealed that 72% of US accredited investors are not only aware of DeFi, but plan to invest in this sector throughout 2021. The figure comes from a survey conducted by Xangle, which questioned 379 accredited investors. 67% had knowledge about DeFi, while 72% have plans to invest, or are at least ‘very likely to.’

The figures have also shown that 70% of accredited investors that were questioned have already had experience with cryptocurrencies, primarily Bitcoin, which they view as a store of value that will yield high returns.

4. Whales are HODLing ETH as it flows into DeFi

Crypto whales — people and entities that hold large amounts of coins — have stopped selling their Ethereum recently, as ETH starts increasingly flowing into the DeFi sector. Whales are undeniably rich individuals and entities, and their primary goal is to make more money. With ETH going into DeFi, whales seemingly believe that Etheruem price will skyrocket as a result, likely because its use in DeFi represents a massive use case.

As a result, whales seem to be sticking to their ETH coins, which also contributes to the coin’s scarcity, and will eventually truly help its price go up.

5. DeFi is just getting started

In 2020, DeFi exploded into a massively popular sector of the crypto world, and as such, it attracted money, developers, users, and attention. It is now being written about daily by pretty much all technology or finance-oriented media sources, but while it did go big in 2020 — it did not remain there.

A lot of trends go big one year, and when the year ends and the next trend arrives, it’s like they never existed. Not DeFi. DeFi may have exploded in 2020, but in 2021, the sector is taking the center stage, which is quite an achievement, given that this is the year when Bitcoin already went beyond $60k per coin.

About DAOventures

DAOventures is a DeFi robo-advisor and automated money manager platform. Imagine “Robinhood for DeFi”. It is our mission to make DeFi simpler, accessible & inclusive. We believe in creating a simpler, more accessible, and more open world that is permissionless, inclusive and guided by our DNA of continuous learning, integrity and transparency.

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DeFi ETF Index Fund, basket of auto-compounding LPs