Top Analysis Tools for the Decentralized Finance (DeFi) Investors
Hello everyone and welcome to a new Bitget Academy article. Today we are going to talk about tools that can help you not only invest in cryptocurrency or take positions in Decentralized finance (DeFi) but also secure your cryptocurrencies. A list of different tools is quite long so let's attack directly with the first tool.
We are going to talk about DeFi tools and cryptocurrency tools. Thus, we are obliged to talk about hardware wallets. Why? Because before presenting analysis tools, yield optimization and making money, we think it is necessary, before thinking about gains, to focus on avoiding losses. Unfortunately, every day people have their funds siphoned from their Metamask or other non-custodial portfolios. This happens because these people do not use hardware wallets. A comparison can help you understand a little bit: we could think that a wallet is like a mailbox where you have the slot to put the letters. In the blockchain world this slot is your public address that you can communicate to everyone. But then to access the mails, like in the blockchain world to access your cryptocurrencies, it is necessary to have the key of the mailbox and therefore the private key.
Ledger keys will allow you to protect your private key since it will not be stored on your computer whereas if you use a wallet like Metamask without importing a key from a hardware wallet like Ledger or other, viruses and other keyloggers could recover this private key.
We have to remind you that if you don't use a hardware wallet yet, even when this article is not dedicated to hardware wallets, we invite you to inquire in order to potentially get one.
You can imagine that we cannot talk about DeFi tools without mentioning DeFi Llama. This site will be indispensable if you are a DeFi user.
Source: DeFi Llama
You can find several helpful metrics on this site. The first basic use of the site would be for example to get the URLs of the DeFi protocols, since it is necessary to be very careful if you use a search engine such as Google because there may be at the top of the results of your search a small link advertisement and unfortunately, very often, it could be a scam, which means that if you connect to these sites and sign transactions then you risk having your wallet siphoned off.
One way to find the URLs is to type the name of the protocol in the search bar. Let's take the example of PancakeSwap:
Once the search is done and the protocol found, scroll down to find a link named "website":
Even if you go through DeFi Llama, check if the URL is correct and if there is not an extra letter or something else hidden that would indicate that the site is not official but a scam:
DeFi Llama will be very useful to know the TVL (Total Value Locked) metric:
This metric is often expressed in USD and it represents the amount of crypto locked up on DeFi protocol smart contracts. We can therefore follow the "health" of DeFi. Recently and following the big crash related to Terra, we can therefore notice that the TVL has dropped. Moreover, it is logical that the TVL is also decreasing due to the decrease in the price of cryptos. Indeed, as the TVL is valued in US dollars, when the price of cryptos drops, then it is logical that the TVL also drops.
The classification proposed by DeFi Llama of all the protocols according to the TVL allows us to filter for example only the Ethereum protocols:
You will also see the evolution of the TVL for this blockchain:
So this can give an indicator about this blockchain and if you want to focus on chains, you can click on "chains":
You will see the distribution of TVL per blockchain with a graph representing the % of TVL on the different blockchains:
We see, for example, that today Ethereum represents a little over 58% of the TVL of the value locked on smart-contracts, Tron 9.69%, the BSC 9.03% and Avalanche 3.12%, etc…
A little further down in the menu you will find an "airdrop" tab:
You will find here all the protocols that do not have tokens yet and that could potentially assign a token to the people who interacted with them:
Regarding this tab there are several important things to note.
Firstly, the presence of a protocol on this page is in no way a guarantee to get an airdrop in the future. If you are hunting for airdrops, we recommend that you use a wallet dedicated to this hunt because we remind you that interacting with smart-contracts is risky.
Here you have very well known protocols filtered by TVL so they are supposed to be very low risk but if you go down the list you will also find smaller protocols where you should be careful not to get a crypto wallet siphoned off because you wanted to hunt some airdrops:
The fork tab can be interesting because it will give us the protocols and their fork quantities. The fork tab can be interesting because it will give us the protocols and their fork quantities.
A fork, as a reminder, is defined variously as:
"what happens when a blockchain diverges into two potential paths forward"
"a change in protocol", or
a situation that "occurs when two or more blocks have the same block height"
For example, the decentralized Uniswap exchange has experienced 305 forks at the time of writing this article:
One of the goals of these forks was to be deployed on other blockchains. We could think of PancakeSwap on the BSC, VVS Finance on the Chronos blockchain or Quickswap on the Polygon blockchain.
A new tab that is very cool is the stablecoins tab:
We all know that stablecoins have been in the news a lot lately, so you can find a graph that represents the amount of stablecoin in circulation and their distribution.
It is an interesting metric and we notice in particular that the UST, following the crash of Luna, has almost completely disappeared. It is interesting to compare the volume of USDT available before the Luna crash, which represented more or less 83 billion, to the one today, which is more or less 67 billion. So we notice that there are about 15 billion USDT that have left the total circulation of available stablecoins. On the other hand, we notice that there has been more USDC and BUSD issued and now in circulation.
We have finished with DeFi Llama and we are going to approach another tool less known by the general public.
Let's talk about a site that you probably don't know yet and it is called Bubblemaps. This site allows you to see who controls the outstanding tokens of a project by focusing on the 150 wallets that have the most tokens. The easiest way to present this tool is to use examples.
First example, here is Axie Infinity, a well known play-and-earn game and here you see the 150 points map. There may be less than 150 points because some addresses are not displayed. Why are some addresses not displayed? Because for example it is the address of the bridge:
Axie Infinity has a pretty healthy map because there are very few connections between the different holders. An important detail to mention: a connection means that there has been an exchange of ETH between the different wallets. Why ETH? Because we are on Ethereum and necessarily it is the ETH which is the gas token. If there is an exchange of gas tokens between different wallets then it is potentially the same people who own the wallet or people who know each other well enough to send ETH between their wallets. This could create clusters and as we will see later, it is not good for the health of a token if there are big clusters grouping the biggest holders because a cluster could represent for example half of the tokens in circulation. We do not want to invest in a project where one person or a group of people own half of the tokens in circulation. With Bubblemaps, you can do an analysis and this is going to be a very important tool especially if you are positioning yourself on smaller cryptocurrencies. If you see a big cluster regarding the token of a protocol it means that your investment is very risky.
Here is another project and you notice that the Bubblemap is much less healthy than the previous one:
It is not “healthy” that several people are holding 3% or more of the tokens. Also, you notice that the cluster in yellow has more than 10% of the total amount of chips in circulation. You can imagine that if there is one person or group of people who own 10% of the tokens in circulation, this represents a risk because selling 10% of the tokens in circulation directly could, especially on small cryptocurrencies, take the price very low.
Be careful, for some crypto-currencies, at first sight they may seem unhealthy but when we observe in detail we can see for example that a cluster is due to an exchange that holds a lot of liquidity or a bridge. A cluster is not always linked to a person because it is quite possible that a wallet of an exchange has come into contact with many other wallets and in these cases it is better not to display them.
That's it for the Bubblemaps tool and let's move on to the next tools.
Coindix Accrue Finance: Optimize your APY
These two tools will list the annual percentage yield (APY) of the different DeFi platforms.
First, let’s talk about Coindix. So if you are looking for yield on a certain crypto-currency you can for example type on Coindix in "Search symbols" the term "Ethereum":
So you're going to have access to all the vaults and farming positions involving Ethereum:
Here you can see that some returns are possible via liquidity pools and therefore sometimes involve other tokens. If you click on "Single Stake", then you will get the positions requiring only Ethereum:
Remember that Coindix gives you "a picture" of the yield at the moment and this is not the only information you need to take into account when looking to get into farming positions. The TVL can play an important role but also consider looking at the "7d ago" column which shows the average return over the last 7 days. Indeed, if you take a yield at the moment T maybe it is high but yesterday it was much lower and tomorrow it will be even lower. It is therefore a good tool to have an overview of the returns of the DeFi but then it will be necessary to dig into the potential position in question to know if it is really interesting or not.
As far as Accrue Finance is concerned, it's pretty much the same product but it's only going to be about some blockchains:
So you can choose if you want to make a return on USDC in Lending, that is to say a product in which you deposit your USDC tokens in order to obtain a return on them without complication. You will then obtain a graph of the evolution of the yield.
Thanks to Accrue Finance you get the history which is always important when you want to open a farming position or a lending position to look at the performance at the moment T which is obviously of interest to us but also the history.
Next, another tool you can use without moderation is DEX Screener:
It is a very powerful tool when we want the price graph. Indeed, if you analyze BTC or ETH you can obviously use tools such as TradingView, a tool that we can only recommend and that we use in the Bitget interface. However, for smaller crypto-currencies, we encourage you to use DEX Screener. You can type the name of a token and you will get the different liquidity pools of this token. To analyze the price, we use the liquidity pool where there are the most tokens because it is often the least volatile. Once the token is selected you have some basic trading tools and thus compare prices. If you want to do technical analysis on small DeFi cryptocurrencies, DEX Screener is going to be your ideal companion.
Bonus: Unlocks Calendar
It is very important to look at the token unlocking schedule since, we remind you, when there is a token launch, whether via ICO or via a private sale, there is often an unlocking schedule, not everyone has the tokens from day one and tokens are unlocked as they go.
Here is an example with the $ROSE token and an unlocking that had a huge impact on the price:
Source: @UnlocksCalendar - Twitter
We see that the unlocking has caused the price of the token to drop by about 50% in a few days.
So this underscores the importance of knowing the timeline for unlocking certain cryptocurrencies, this is going to be very important. These unlocking schedules are expressed in every documentation of serious projects but otherwise there is a very nice tool, it's paid if you want to have access to all the information, but on Twitter, the Unlocks Calendar account also offers free content and that's why we strongly invite you to follow them on Twitter because sometimes you will receive information about big unlocks. Of course this will be raw information and it will be your responsibility to analyze it in order to long or short for example.
That's it for this article, we hope to give you some good suggestions to get the most out of your investments in DeFi and cryptos. Of course this is not an exhaustive list, if you also use other tools, don't hesitate to share them with us, especially in our Telegram group. See you soon for more articles.
Disclaimer: All products and projects listed in this article are not endorsements and are provided for informational purposes only.
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