The crypto markets have survived some of the toughest economic conditions in a generation, with a global pandemic, conflict, and record inflation crammed into three years. Led by Bitcoin and Ethereum, the crypto market is enjoying a strong recovery. A common analogy used by investors is, “a rising tide lifts all ships”. Amongst the fastest rising crypto sectors is DeFi.

Decentralised Finance (DeFi) is rewriting the book on financial services by reconstructing the entire financial system on decentralised blockchains. It transforms centralised, manual, inefficient financial services into automated blockchain-based programs called smart contracts. For the first time in history, markets don’t need a centralised financial intermediary (known as CeFi or Centralised Finance) to connect buyers and sellers. Smart contracts connect them directly.

The same financial services banks take weeks to approve happen at the click of a button, delivered on intuitive applications that are simple to use. This is the power of DeFi, and it’s changing finance as we know it.

If this is your first encounter with DeFi, we recommend reading this article first for an in-depth guide to decentralised finance.

The Value of DeFi Is Rising Fast

When you consider the nearly $500Tn value of the global financial institutions being disrupted, DeFi is just getting started. It’s one of the best use cases for blockchain technology — a natural fit for the world’s new financial needs. In the words of Zhu Su, a leading crypto investor, “you can safely bet on deglobalisation in the physical space and decentralisation in the digital space for the next five hundred years.”

How Do You Tell Good from Bad in DeFi?

DeFi exists to enable everyday people to efficiently manage their money without relying on financial intermediaries. So it stands to reason that DeFi projects with large amounts of money committed to them are successful. In traditional finance, assets under management (AUM) is a measure of the total value — in money and investments — that has been committed to a fund, bank, wealth manager or company. The higher the AUM, the more people believe in their respective investment proposition. The same applies to DeFi.

In crypto, the amount of money committed to a DeFi project is called “total value locked” (TVL). The TVL of a DeFi project tells you the total, current market value of all the digital assets committed to the project. However, TVL alone is not enough to tell you whether a DeFi project is a good investment. The real insight comes from comparing the total value locked, to the value of the cryptocurrency itself (the market capitalisation, or market cap).

The market cap to TVL ratio in crypto is the same as a price-to-earnings ratio in traditional finance, helping investors find the market value of a stock. It divides a project’s market cap by its TVL, allowing you to compare apples with apples.

Below you’ll see the TVL to market cap ratios for the DeFi cryptocurrencies that make up the new Altify DeFi Bundle. Low TVL ratios compared to market cap show projects with higher potential for long term value.

The rate at which the DeFi asset class has grown is dazzling. TVL grew from $700m in December 2019 to $20Bn a year later. In 2021 the digital assets assigned to DeFi were worth over $250Bn, with new highs on the horizon for 2022.

Being an early investor in disruption of this scale pays outsized dividends. To facilitate this early access, Altify (a Cape Town-based investment platform backed by JSE listed Sabvest) has built an easy to use and customer-friendly portal to all things crypto. On Friday, 25 March, Altify launched a new themed DeFi Bundle, offering users exposure to the cryptocurrencies building the future of finance.

The DeFi Crypto Bundle, which saw 137% growth in 2021, offers a selection of the world’s leading DeFi tokens in one convenient investment. Through the DeFi Crypto Bundle, you receive exposure to the world’s largest decentralised exchanges, lending platforms and payment platform’s cryptocurrencies. It’s a lot like buying property off-plan in a great neighbourhood — you know what the end product will look like, and you’re taking a calculated risk on its future value.

The DeFi Crypto Bundle automatically rebalances (meaning it makes slight changes to the weighting and assets in the Bundle) on the 1st of every month. It takes advantage of opportunities available from the most reputable DeFi cryptocurrencies through buying or selling each asset. This dynamic and fully automated approach makes investing effortless, maximising your returns and saving you time.