DeFi Newbies: There are approaches that allow newcomers to get involved and succeed, says James Wang, Head of Tokens at Amun.
There is no shortage of options when it comes to investing in cryptocurrencies. With new projects launched literally every day. Investors who might otherwise jump into this arena are kept at bay due to this complexity, not to mention the complications and risks that come with buying and storing these assets. However, new services and products are becoming available that offer professional-grade portfolio management to everyday investors without them having to become experts in the field first.
Surviving the Crypto Markets
As appealing as cryptocurrency can be, navigating commerce and storing assets securely can be daunting at best and dangerous at worst. Signing up for a platform, setting up a crypto wallet, securing your seed phrase, and transferring funds correctly can expose users to errors, leading to potential loss of funds. Things get even more complicated when you enter the world of decentralized finance (DeFi), with a dizzying array of options for services and assets that aren’t always legit or easy to use.
There are also issues such as legal clarity surrounding cryptocurrencies to contend with. Not all platforms are legal in all jurisdictions. Even the world’s largest exchange, Binance, is banned in many first-world countries, confusing users as local variants of the service, such as Binance US, are rolled out to try to cover so many places. as possible. . It’s hardly intuitive and puts users in a precarious position before they can even start exploring.
To top it off, there are also scams and hackers. Bad actors constantly create look-alike websites and knock-off plays, all to trick newcomers into accidentally giving them their money. Worse, even a well-meaning service can lose user funds due to an error or exploit in the code, as was the case in Axie’s recent $600 million Ronin network exploit. Infinity.
DeFi Beginners: Let’s Make It Simple
Ideally, investors shouldn’t have to navigate all the subtlety and complexity of these markets to achieve institutional-grade results. To stimulate broader investment, we need to foster approaches that enable the relatively new to engage and succeed. Fortunately, there are now a variety of strategies and products that offer exactly this type of exposure.
To follow the lead of the traditional investment industry, investors would often turn to vehicles like mutual funds and ETFs. With these tools, investors can gain exposure to a diversified portfolio through a single asset, providing improved risk management and flexibility. For investors who lack experience, these types of methods can provide a level of expertise that they would otherwise not have access to.
DeFi Beginners and Index Tokens
However, perhaps the easiest and most accessible option for many investors would be the growing availability of so-called “index tokens”. As their name suggests, these tokens are a single asset that aggregates investments focused on specific market segments, such as DeFi or Layer 1 blockchains. Again, the underlying correlated projects are professionally managed , but all the user has to do is buy the index token, and they’re all set.
Some attractive products are already available from Amun, which offers indexes for Polygon, Solana, and the broader DeFi ecosystem. These “baskets” of assets are rebalanced regularly, taking into account recent price movements and overall market capitalization. This represents the most hands-free approach, as there’s nothing to sign up or configure, and users don’t need to micromanage their portfolio to get maximum returns. Once the tokens are purchased, investors can simply sit back and let them appreciate with the market.
New capital is coming into cryptocurrency all the time, but many are wary of anything more complex than buying a bit of Bitcoin or Ethereum. The much more diverse world of DeFi is too complicated and dangerous for them to exploit the opportunities for return.
Fortunately, by taking advantage of these techniques that make the barrier to entry much more accessible, it is now possible to offer diversified cryptocurrency portfolios to almost anyone.
About the Author:
James Wang is Head of Tokens at Amun, providing clients with diversified crypto exposure through indexed token products. Prior to joining Amun, James was a principal analyst at ARK’s next-generation internet fund, ARKW. Asset growth from $10 million to over $6 billion AUM.
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