🧘‍♂️ALERT: Big Profit Strategy

Market Meditations | January 27, 2022

Even in Bearish Markets!

Dear Meditators

Opportunity exists in more bearish markets. You need only know where to look.

Read, enjoy and share with your network. Let’s all build wealth together.

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Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool. 

? Bear Down On DeFi

DeFi offers more than just yield farming opportunities. Lending, borrowing, arbitrage, exchanges: they all fall under the purview of decentralised finance.

So how much do most investors value these options?

Yields for stablecoin deposits have always been attractive, drawing significant portions of most investors’ portfolios. Couple the inherent benefits of comparatively low risk returns with the TVL in DeFi ranging from about $20 billion to a over $250 billion over the past year and the data speaks for itself.

More recently, DeFi TVL has remained relatively sideways from November to present, only recently taking another small step downward. Even with this slight correction, an overwhelming majority of the money that flowed into decentralised finance since the beginning of 2021 remains present.

TIP! Total Value Locked (TVL) refers to the total of all cryptocurrencies staked, loaned, deposited, or used for other financial actions across all of DeFi.

The recent downturn in the overall market capitalization of crypto assets was severe. Beginning in November, wealth present in the area has been cut in half, dropping from just under $3 trillion to slightly over $1.5 trillion on Monday. 

TIP! Market capitalization (market cap) represents the total dollar value of coins or tokens in circulation. Generally speaking, the lower a protocol’s market cap, the greater potential for volatility.

Crypto’s total market cap has clearly trended downward much more acutely than the TVL of DeFi over the past three months. As money seems to be exiting the market, it is primarily being pulled from areas outside the scope of decentralised finance. 

This data rather convincingly supports the conclusion that decentralised finance does not share a strong correlation with the total crypto market cap. 

Ways to take advantage of strong DeFi wealth retention:

MakerDAO is a decentralised credit platform on the Ethereum network. It supports Dai, a stablecoin pegged to the United States Dollar. It also currently claims over $16 billion in locked value.

  • MakerDAO supports lending platforms like OASIS, which offer earning and collateralised lending opportunities attracting billions of dollars in volume.

TIP! Interested in MakerDAO? Get started with their video tutorial here.

Curve is a decentralised exchange (DEX) designed for trading crypto assets. Its main goal is to let users and other decentralised protocols exchange stablecoins (like DAI and USDC) while enjoying low fees and slippage. 

  • Curve uses liquidity pools and rewards liquidity providers with various tokens. When trades occur on Curve, a portion of the fees is allocated to the liquidity providers as a reward or incentive for their provision. 

TIP! Want a head start understanding what it is and how to use it? Check out Curve’s beginner’s guide here.

It’s easy to see that opportunities exist, even in downtrends and bear markets. We’re here to provide the data that helps to identify them.

? Meta Out of the Stablecoin Game 

You may recall the stablecoin–Diem– that Meta (previously Facebook) has been trying to roll out for quite some time. A source recently told the Wall Street Journal that Meta is selling their stablecoin technology. So after working for over 3 years on their stablecoin, it looks like they’re out! 

About the stablecoin and what is going on:

  • Meta started this stablecoin project back in 2019. Back then, the stablecoin was called Libra

  • Libra was intended to be a stablecoin backed by multiple fiat currencies that could as a result be used worldwide. They faced a lot of regulatory backlash

  • They then rebranded as Diem to distance themselves from previous goals and consequently regulatory backlash. Meta said they would partner with Silvergate Bank so that they could launch a U.S dollar-pegged stablecoin. 

  • They are reportedly selling the intellectual technology to Silvergate Capital for $200 million

  • Why are they selling? Reportedly, they are selling so that they can return money to their investors

Did they sell because of the recent dip? Are they now skeptical of cryptocurrency as a whole? These are questions that some will be asking, but it is important to take a step back and remember that after all, they did rebrand their whole company to be named Meta! 

? Can the Growth in DeFi Continue? 

In the last two years, we have seen a shift towards Web3 as users want greater privacy, ownership of their data and incentives for using products. Protocols with real use cases have begun to emerge fueling the growth particularly in decentralised finance (DeFi). 

  • According to DeFi Llama, the total value locked (TVL) across all layer-1 protocols has increased from $18.71 billion at the start of 2021 to around $230 billion a year later. An increase of 1130%! 

  • The majority of TVL can be found in decentralised exchanges (DEXs) or lending and borrowing protocols.

  • The most notable DEX is Uniswap which has had $782 billion volume traded from 86 million all-time trades according to their official website. 

As user experience and barriers to entry continue to improve, the positive growth of DeFi platforms is expected to continue. 

This is because these platforms offer far better returns than traditional finance and often reward early users in the form of token airdrops.

To learn more about DeFi and the opportunities it can present, check out our Ultimate Crypto Wealth Guide. 

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??‍♂️✍️ Stories in this newsletter were written by Kyle F, Misael Calleja, Kai.A, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Ellen B.

Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.

Disclosure. Some of the links we’ve included are affiliate, they give you rewards and discounts and earn us a commission. Additionally, the Market Meditator writers hold crypto assets. See our investment disclosures here.