Decentralized Finance, hereafter shorted in DeFi, is moving at such a high pace that it's challenging to keep up with the latest developments & news. Below a summarized overview of 4 indicators to remember when keeping track of the latest DeFi updates.
1. Total Value Locked - TVL
TVL is the total amount of funds locked in a particular DeFi protocol. You could see it as the liquidity in a liquidity pool of particular ''money'' marketplace. The TVL Key-Point-Indicator gives you a useful overview of the interest in DeFi.
2. Price to Sales ratio - P/S ratio
Also used in traditional businesses, the P/S ratio compares the value of the companies stock with its revenues. The outcome is then a ratio which determines whether the value is over- or undervalued. DeFi protocols also have a value (circulating supply x price per coin) and revenue, so; the P/S ratio can also be used for DeFi projects. The primary idea is that the higher the value, the more the DeFi protocol is overvalued. And the lower the ratio, the lower it's undervalued.
3. Address count
An increasing amount of addresses holding a token or coin could point to increased usage. A general assumption could be that more addresses correlate with more users, and thus; growing adoption. A counter-argument could be that it is easy for someone to create multiple addresses. Therefore it is essential to involve other variables, such as minimum holding per address.
4. Inflation Rate
''Nice, a token with a low supply! Isn't that a mega bullish sign?'' No, it isn't. An essential indicator is to keep a close watch on the inflation rate. A low supply doesn't guarantee a low supply forever. Inflation
isn't necessarily wrong or bad, but too much new coins entering the market could reduce the rate. There is no standard percentage which is good or bad, but it is good to understand the inflation before considering an investment.
The cryptocurrency markets are hard to predict, irrational and highly volatile; doing your own research is critical to success.
Examples of DeFi coins available at Coinmerce are:
- Buy LINK at Coinmerce
Aave - Buy LEND at Coinmerce
Maker - Buy MKR at Coinmerce
UniSwap - Buy UNI at Coinmerce