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What is DeFi and Crypto Investing?
DeFi (decentralized finance) is a new form of financial technology built on the blockchain. It enables users to access a wide range of financial services such as loans, savings, and investments, without having to rely on a centralized third party. It is often referred to as “open finance” because anyone with access to the internet can use it.
Cryptocurrency, on the other hand, is digital money that is not issued by a government or central bank. Instead, it is created and managed by its users via a decentralized, open-source blockchain network. Bitcoin is the most popular cryptocurrency, but there are also thousands of other coins and tokens out there.
Crypto and DeFi investing are the process of buying and selling these digital assets in the hope of generating a return on your investment. It is a high-risk, high-reward venture, and it requires a lot of research and analysis before one can make informed decisions.
Understanding the Crypto Market Cycles.
One of the first things you need to understand when investing in crypto is that the market works in cycles. Historically a crypto cycle lasts around 4 years, it consists of two main phases, the “bull run” and the “bear market”.
A bull run, or bull market, is defined as a period of time where the majority of investors are buying, demand outweighs supply, market confidence is at a high, and prices are rising.
A bear market is a period of time when the prices of cryptocurrencies are declining. This happens when there is a lack of demand or a drop in investor confidence.
It’s important to understand these cycles to time investments accordingly, to maximize returns and minimize losses.
The crypto market is currently at the end of the bear phase of the cycle. After months of continued decline, the market is experiencing a rebound since the beginning of this year with mostly institutional money (re)entering their positions. This indicates the possible start of a new bull run.
Crypto Adoption.
The global crypto market has seen tremendous growth in recent years. The total market capitalization of all cryptocurrencies has increased from approximately $20 billion in early 2017 to over $2 trillion in April 2021. However, that’s only 2.5% of the global stock market capitalization, it shows room for growth as many institutions (pension funds etc) are waiting on more regulation to enter the crypto market.
That said, today 55% of the world’s top 100 banks are investing in crypto and blockchain space. Companies like Mastercard have started programs to help crypto adoption by helping financial institutions offer cryptocurrency trading to their clients.
Since 2020, Paypal allows its US users to buy and sell crypto on their app. Twitter is looking to integrate crypto exchanges to the platform very soon.
Some of the biggest companies in the world (Starbucks, Adidas, Coca-Cola, Adobe, Instagram, Disney etc…) have recently made a partnership with the blockchain Polygon to build their own crypto project or release an NFT collection. These are a few examples of what’s happening on ONE chain, there are dozens of blockchains.
For years crypto was a niche investment for tech-savvy people but the rate of adoption has been exponential in recent years. Now mainstream adoption seems just around the corner.
NFTS
NFTs (Non-Fungible Tokens) are digital assets that are verified using blockchain technology. They are unique digital assets that are designed to represent ownership of a particular piece of content or media.
NFTs are different from other digital files because they have a unique identity that is stored on a blockchain. The blockchain is a decentralized digital ledger that records the ownership and transaction history of the NFT. This makes it possible for NFTs to be bought, sold, and traded, just like physical assets.
The future utilities of NFTs are still evolving, but some potential uses include:
- Digital collectibles: NFTs can be used to create unique and collectible digital items, such as trading cards, virtual pets, and other types of in-game or virtual items.
- Royalties and licensing: NFTs can be used to manage royalties and licensing for digital content, allowing artists and creators to earn revenue from their work even after it has been sold.
- Identity verification: NFTs can be used for identity verification, authentication, and digital signatures, as they provide a secure and tamper-proof way to verify ownership and authenticity of digital assets.
- Real estate and property rights: NFTs can be used to represent ownership and transfer of real estate and other types of property rights, providing a secure and transparent way to manage transactions.
- Virtual events and experiences: NFTs can be used to create unique and exclusive access to virtual events and experiences, such as concerts, festivals, and other types of online gatherings.
- Gaming and esports: NFTs can be used to create rare and valuable in-game items and virtual assets, as well as to manage transactions and ownership in the rapidly growing gaming and esports industries.
Overall, the potential utilities of NFTs are wide-ranging and diverse, and their use cases are likely to continue to expand and evolve as the technology develops and matures.