DeFi Trends That Continue Regardless of The Market

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18 Sept 2024

DeFi Is Seasonal
DeFi is like an ice cream business on the beach that only operates in Summer! That’s the reality that decimates new DeFi investors. Newcomers believe they can continue generating yield during a bear market. As a long-term HODLer, you can grow your stack during a bear market. However, as someone looking to generate yield as an income source, it’s another story. Understanding and planning around this reality is key.
During a bear market, altcoins suffer, and DeFi-based altcoins tend to suffer the most. DeFi works phenomenally during a bull market as yields expand alongside the increase in token valuations. It’s all relative and works in favor of income-generative ideas. However, one must close shop and shift to alternative income-generative ideas when Winter arrives. This dynamic is why I have been such a strong advocate of WEB3, specifically SocialFi.
The creation of content and value extraction in WEB3 are dynamics that exist outside of speculation and make excellent opportunities for year-round income. I have addressed this concept rather extensively in recent months. However, certain aspects of DeFi can remain profitable even in a bear market. A recent article, “Hedging Your Crypto Portfolio With Real-World Assets” points investors in the right direction.
DeFi Shuffle
Shifting from Crypto-based DeFi projects to RWA-based DeFi projects is what traditional DeFi investors should be doing at the close of a bull market. During a bull market, these RWA investments act as a hedge and are marginal relative to the entire portfolio. However, come the end of the season… a complete shift is required. These RWA-based DeFi protocols are conducive to both bull and bear markets.
The RWA sector will explode in the final half of the decade. DeFi opportunities within this niche will likely become even more profitable. If they are profitable now, including in a bear market, imagine the years to come. Diversification and capital rotation are key. If you were paying attention during the formative stages of this bull market, you would have noticed how capital rotated within the market.
We saw this occur regarding Solana, memecoins, AI, and RWA. Furthermore, capital rotation was evident regarding the layer 1 effect. Strong moves in a particular layer 1 eventually triggered outflows of capital into smaller projects in the ecosystem. There is a predictable flow of capital, and DeFi is no different. When the time arrives, shrewd DeFi investors begin shifting and preparing a very different phase regarding their DeFi income.
For instance, holding HBD and earning a yield of 15% per year is always an attractive opportunity. Buying altcoins at a bear market bottom with the yield earned over 2 years is viable. Even dollar-cost averaging near a bottom can be lucrative. Essentially, an investor could utilize this strategy indefinitely, regardless of the market, and still be a winner.

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Final Thoughts
It’s important not to underestimate the power of compounding and buying at rock-bottom prices. You will be amazed at what is possible, especially over the longer term. Set up these mechanisms and let them run. It’s a simple yet effective strategy with reduced risk. It’s also great to be relieved of the stress of what would happen, were an unexpected crash to be triggered. All the best, stay strong and I will see you in the next one!

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Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.