Everything You Need to Know Before Investing in DeFi Part III- The Don’ts

by | Nov 19, 2020 | Industry | 0 comments

In Part I of this series, we discussed the basics of DeFi investment opportunities, specifically decentralized lending and borrowing. We also touched on yield farming, the trending DeFi investment opportunity in the decentralized world right now. Section II discussed the Do’s of investing in DeFi. Now, in this section will discuss the don’ts of investing in DeFi 

The Don’ts of Investing in DeFi 

Since we have discussed what DeFi investment entails and what you should do, here is what you should avoid doing to protect your assets. 

Don’t Invest More than you what you can’t Afford to Lose

Perhaps the most significant don’t, which we have shared now and again, is: DO NOT invest more than what you can’t afford to lose in DeFi crypto investments. While it is easy to get lost in the space of novel and fascinating inventions emerging from DeFi ecosystem, always remember who they are designed to serve. Currently, decentralization is more about serving people who want or benefit from privacy than those who simply find it interesting. 

Decentralized products are undeniably great investment opportunities, but individuals who do not see their privacy-related functions should cautiously approach them. 

Don’t Go to a Deep Slumber with your DeFi Investment  

Let us assume you managed to buy that second-hand car. You wouldn’t just leave your car keys or other valuable documents lying in your car, would you? Likewise, if you venture into DeFi, you should take the issue of self-custody seriously. 

Order a hardware wallet directly from a reputable company, like KeepKey or Ledger, to keep your cryptocurrencies and place it in a safe place. Consider it as your “crypto savings account.” Desktop, mobile, and web-based wallets are suitable for spending digital assets but should not be trusted for long-term storage. 

Don’t Ignore Pumps and Dumps

Since cryptocurrency exchanges remain unregulated in many parts of the world, it is relatively easy for the ‘big boys’ to sway the market by rapidly buying out the liquidity. Once other investors enter the market, they sell their investments leading to a sudden drop in price.

Remember, not every sudden increase in price is always a pump and dump case.

Trade history: study the price pattern for the past six months and see if there has been any sudden increase and decrease scenarios.

Small market capitalization: compare the asset market cap with significant assets to confirm whether it would manage to sustain the rise.

Technology updates: check whether there has been any big update released by the team behind the project.

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Post tags: De-Fi investment


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