BTC$19 241.67


ETH$1 059.15




USD Coin


Binance Coin


Binance USD


Investing in DeFi? Bet on diversification, not short-term gains

14 Sep 2020


Several cases show us that while there are amazing opportunities for gains in the DeFi space, there are also many risks that must be considered.

The decentralized finance space has grown exponentially over the last few months, to the point where more than $9 billion worth of crypto assets were locked in its protocols before crypto prices started dropping. The space had a little over $500 million locked in back in September 2019.

This exponential growth in the last few months appears to be mainly related to a yield farming trend that started when lending protocol Compound began distributing its COMP governance token to users who interacted with the protocol.

Put simply, yield farming — or liquidity mining — allows DeFi users to generate rewards with their cryptocurrency holdings by interacting with protocols that distribute governance tokens. Farming yield can be a profitable venture on its own, but the tokens being farmed often see their price surge as well.

One of many examples of this is YFI, the governance token of, a site that helps users find the best yields in DeFi protocols. Over the last 30 days, YFI is up more than 400%.

The risks of chasing short-term gains

Yield farming isn’t simple, however, and rewards rarely go up in a straight line. It’s also not a practice that’s suitable for all crypto holders since it generally requires holders to pledge large amounts of capital in order to earn more rewards. Moreover, in the decentralized finance space, there are various risks that aren’t immediately clear.

One risk associated with yield farming that most people seem to neglect is the very nature of smart contracts. Popular DeFi protocols are developed by small teams with limited resources, which can increase the risk of smart contract bugs and vulnerabilities. Even well-known audited protocols have been hacked.

The smart contract risk is very real and could end up costing a lot of people money. One famous case is that of Yam Finance (YAM), a DeFi project that saw users lock in over $500 million worth of crypto assets on it before a bug that was discovered made it impossible for the community to reach a quorum.

While the creators of Yam Finance did warn users that their smart contract was unaudited, the pursuit of short-term gains saw users lock in over half a billion dollars in it — even though the protocol’s token was not listed on top exchanges — before tragedy struck.

As data shows, after the YAM token hit its high, it crashed from around $100 to $1 in a single day. And now, the tokens are now worth $0.02.

Other risks are related to the inherent volatility of cryptocurrencies and to the intentions of those behind DeFi protocols. SushiSwap, a popular decentralized exchange modeled after leading DEX Uniswap, is a clear example here.

SushiSwap is an exchange that does not work with an order book but with an automated market-making, or AMM, model. This model sees liquidity providers add funds to liquidity pools. It differs from Uniswap thanks to the SUSHI token, which entitles holders to the project’s governance and rewards them with a portion of the fees traders pay.

It was created by the pseudonymous developer Chef Nomi and in just over a week, saw users lock over $1.27 billion worth of crypto assets in Sushi contracts. Chef Nomi, however, decided to cash out a stake of SUSHI tokens for over 38,000 Ether (ETH), leading some to believe it was an exit scam.

The result was a price drop of over 70% for SUSHI, which fell from over $5.3 to $2.3 in less than 20 hours.

Our responsibility to DeFi’s sustainable growth

Chef Nomi ended up giving his admin keys to FTX CEO and Sushi investor Sam Bankman-Fried, who worked on the protocol before announcing he was transferring it to a multi-signature format so no single entity can control the platform. I offered to help in a bid to support the development of the DeFi space.

There is also a better, more sustainable way of gaining exposure to the wonders of DeFi while ensuring you don’t lose all your money to a bug or human error.

Diversification is key

Diversification is very often recommended by investors because not “putting all your eggs in one basket” helps ensure you don’t lose everything to scams, unexpected market moves or technical issues, and invest in potential gems while it’s still early.

The components of a DeFi portfolio are up to individual investors. Doing your own research is highly recommended before investing in any crypto asset — or any asset for that matter. A portfolio that invested only in some of the biggest DeFi projects and Ethereum would have likely been affected by YAM’s collapse and the SushiSwap situation but would also benefit from YFI’s growth.

To help you create a portfolio that will let you gain exposure to DeFi, OKEx has created a DeFi tokens tab where you can now access 35 different tokens related to different protocols.

Users can also margin and swap trade a variety of DeFi tokens on the OKEx platform, enabling them to execute strategies to maximize profits while hedging their trading risks. All these different tools allow traders and investors to take advantage of the gains to be had in this growing space while ensuring that any unforeseen event doesn’t see them getting wrecked.



MultiBank Group Leverages Its Power to Increase Global Crypto Adoption
MultiBank Group Leverages Its Power to Increase Global Crypto Adoption
Bitcoin and Ether reached two of three bears' targets
Bitcoin and Ether reached two of three bears' targets
Ethereum double Doji pattern hints at a 50% ETH price rally by September
Ethereum double Doji pattern hints at a 50% ETH price rally by September
Flight of cryptocurrencies interrupted
Flight of cryptocurrencies interrupted
ETH/USD trading pair attracts more traders in the first quarter of 2022
ETH/USD trading pair attracts more traders in the first quarter of 2022
Is The Virtual Land Market Becoming a Bubble?
Is The Virtual Land Market Becoming a Bubble?
MultiBank Group reveals new crypto brand,
MultiBank Group reveals new crypto brand,
Two key Ethereum price metrics suggest traders will struggle to hold the $2K support level
Two key Ethereum price metrics suggest traders will struggle to hold the $2K support level
Join Blablagame presale right now
Join Blablagame presale right now

Top Cryptocurrencies with Price Predictions

# Crypto Prediction Accuracy CVIX Price 24h 7d Market Cap 7d price change
1 Bitcoin (BTC) BTC Bitcoin predictions 56% 93 $19 241.67 -5.61% -9.67% $367 181 795 784 BTC 7 days price change
2 Ethereum (ETH) ETH Ethereum predictions 54.4% 92 $1 059.15 -3.18% -13.28% $128 553 316 172 ETH 7 days price change
3 Tether (USDT) USDT Tether predictions 94.4% 1 $0.998955 0% -0.04% $66 163 024 576 USDT 7 days price change
4 USD Coin (USDC) USDC USD Coin predictions 94.4% 1 $1.000391 -0.02% 0.04% $55 824 445 752 USDC 7 days price change
5 Binance Coin (BNB) BNB Binance Coin predictions 58% 83 $215.34 -4.45% -10.63% $35 160 747 810 BNB 7 days price change
6 Binance USD (BUSD) BUSD Binance USD predictions 95.6% 1 $1.000088 0.10% 0.04% $17 548 760 052 BUSD 7 days price change
7 Cardano (ADA) ADA Cardano predictions 64.4% 77 $0.450635 -3.60% -10.37% $15 210 103 811 ADA 7 days price change
8 XRP (XRP) XRP XRP predictions 65.6% 69 $0.312867 -5.44% -15.56% $15 124 962 063 XRP 7 days price change
9 Solana (SOL) SOL Solana predictions 63.2% 76 $32.75 -6.27% -22.31% $11 242 411 042 SOL 7 days price change
10 Dogecoin (DOGE) DOGE Dogecoin predictions 66.8% 71 $0.067391 -0.30% -0.20% $8 940 786 353 DOGE 7 days price change
11 Dai (DAI) DAI Dai predictions 96% 1 $0.999784 -0.09% -0.03% $6 859 368 442 DAI 7 days price change
12 Polkadot (DOT) DOT Polkadot predictions 67.6% 67 $6.72 -5.60% -18.62% $6 637 336 409 DOT 7 days price change
13 TRON (TRX) TRX TRON predictions 56.8% 88 $0.065207 -0.60% -1.36% $6 030 956 222 TRX 7 days price change
14 UNUS SED LEO (LEO) LEO UNUS SED LEO predictions 67.6% 60 $5.77 -0.04% -1.82% $5 499 921 297 LEO 7 days price change
15 SHIBA INU (SHIB) SHIB SHIBA INU predictions 66.4% 66 $0.000010 -3.90% -8.85% $5 489 974 219 SHIB 7 days price change

Be the first to receive Cryptocurrency Price Predictions and Forecasts daily

Get cryptocurrency price predictions, forecasts with analysis and news right to your inbox.

© 2015-2022

The usage of this website constitutes acceptance of the following legal information. Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website, including information about the cryptocurrencies and bitcoin is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Crypto Rating shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about cryptocurrencies. The entire responsibility for the contents rests with the authors. Reprint of the materials is available only with the permission of the editorial staff.