The cryptocurrency market experiences wild swings and extreme volatility at unexpected times. This extreme volatility keeps many new investors and risk-averse investors away from this market. A close look at the crypto market in January will further illustrate this point, as the total crypto market cap dropped by as much as 45% from its highs in November last year. Despite the huge volatility in the crypto market capitalization, there exist multiple ways to make your capital work in the cryptocurrency market today.
Notably, we look at the booming decentralized finance (DeFi) ecosystem and the various ways you could increase your profits despite the bear market. It is important to note that investors with a longer time frame have a greater opportunity to make money in comparison with shorter time frame investors. Options such as mining, leveraged short trading, and receiving airdrops may not be ideal for investors either with small capital or newcomers in the field. Below we discuss how you can use DeFi to make money in a bear market.
Making your money work for you
Cryptocurrencies and blockchain technology were built on the premise of total decentralization. To this respect, the decentralized finance ecosystem has grown massively over the past two years as decentralized exchanges (DEs) came to life. These DEXs allow users to run trading venues on top of a blockchain, incentivizing their users to provide liquidity and make their own markets. All this is done via a smart contract meaning there is no central party facilitating the trades.
DEXs such as Uniswap, Sushiswap, and 1inch utilize automated market makers, or AMMs, an underlying protocol that powers all decentralized exchanges (DEXs). These AMMs remove the need for a centralized party or related market techniques, automizing the trading mechanisms on the DEXs. With the rise of liquidity provision, new innovations such as staking and yield farming have been built to ensure DEXs have constant liquidity.
Simply, users stake their tokens on the platform to receive an incentive (mostly paid in the platform’s native token). Unlike other platforms that offer a single reward token, Pangolin, an Avalanche-based DEX, is aiming to improve its incentive system in a bid to boost liquidity on the platform.
The introduction of ‘Super Farms’
While DeFi has grown to a $95 billion ecosystem, DEXs leading the line, most of them are still inefficient and some of them lack liquidity on pairs listed. In an aim to improve liquidity and improve investors’ rewards, Pangolin DEX announced the introduction of its ‘Super Farm’ program, which allows projects to add their tokens as rewards on staked assets.
Starting Wednesday, farms on Pangolin will be able to offer users rewards beyond its standard $PNG token. Unlike other DEXs that offer a single token as a reward, Pangolin’s Super Farm program allows farms to accommodate incentivizing farms with more than one or two tokens. The Super Farms payout anywhere between 2-10 reward tokens at the same time. This offers users a higher APR/APY with more tokens available as rewards.
Once the Super Farm program goes live, projects can add their tokens as rewards on any of the selected pools to boost overall liquidity provision and participation on the platform.
“Super farms are going to explode TVL and volume by compounding the ecosystem’s incentive program with the full strength of all of Pangolin’s partners.” -Stephen, Pangolin Head of Strategy said in a statement.
Tango with the developers
The question that remains is what does the project aim to gain by giving out free tokens in a pool that does not improve their liquidity? Well, the evolution of DEXs has historically been only thought of as a platform attracting trading fees and liquidity. Recently, however, DEXs are turning into marketing machines that offer a lot of value to new unknown projects by presenting them to a large, established community.
For a new project launching on Avalanche, providing token rewards in a popular pool could freely advertise your token to the pool members. Imagine you’re a new project and you add 25k worth of your token to the farm rewards for AVAX-USDC (a well-known pool/assets). You’ll get your name added to the token rewards of that pool while the rewards are running letting people know that you exist.
Super Farms eclipse their single/dual token rewards counterparts by providing an opportunity for both investors and developers to gain, whether it is a bull market or not.
The rise of DeFi and the resulting features such as staking, yield farming, and permissionless borrowing and lending is the first step to revolutionizing finance. With the cryptocurrency market having bled for the past fortnight, having safe, multiple rewards, and a high APR farm may lessen the blow from the bearish crypto market.
If you have HODL’d cryptos, and believe the crypto market will recover as the year goes by, it is best you put them to work as you await the bull market. You could very well hit a jackpot with the many token rewards you will receive.