After 6 months of continuous decline, the cryptocurrency market is showing the first signs of recovery. At the end of July, the US Federal Reserve raised interest rates by 75 basis points. Top cryptocurrencies immediately reacted by raising rates. In total, over the month, Bitcoin has risen in price by 12% (from $20.28 thousand to $22.91 thousand), Ethereum – by 52.8% ($1.06 thousand to $1.62 thousand). The total market capitalization increased by 8.5% (from $921 billion to $1 trillion), and one of its main sectors – DeFi – grew by 21.9% (from $79.22 billion to $96.57 billion).
The decentralized finance industry continues to multiply. Participants in the traditional market are showing interest in DeFi projects. However, it is not easy for beginners to understand the various protocols and trends. To eliminate risks, investors buy DeFi indices, similar to ETFs.
In essence, this is a diversified portfolio of carefully selected assets. Unlike traditional indices, decentralized indices rebalance and re-weigh coins automatically using smart contracts. This increases the chance of making a profit. Even if one token falls in price, the rest will maintain the index value.
In July 2022, the DeFi index segment occupies only 10% of the decentralized finance market ($94.5 million). However, the growth of this indicator is a matter of time.
DPI was created by the DeFi Pulse and Set Protocol analytics project teams. The index evaluates tokens according to many criteria, choosing the most reliable and promising ones. The DeFi Pulse Index is weighted based on the value of the circulating supply of each asset. In July 2022, the native DPI token is trading at $109.08.
In second place is Index Coop – ETH 2x Flexible Leverage Index. In July, the capitalization of the native token of the EHT2x-FLI basket was $19.72 million (20.8% of the segment).
Index Coop – ETH 2x Flexible Leverage Index simplifies the use of leverage in the Ethereum ecosystem. The index allows leveraging with minimal fees and collateral exposure, reduces rebalancing needs, and significantly reduces the number of liquidations. The current price of the EHT2x-FLI is $14.47.
The third largest DeFi index by capitalization was the Interest Compounding ETH Index. In July, the current ICETH offer is estimated at $11.72 million (12.4% of the market), and the rate is $1.56 thousand.
The index provides enhanced returns on investments in Ethereum by using liquid rates with leverage in the Set and Aave protocols. ICETH features include automatic debt management, rebalancing, and liquidation protection.
The top 5 most extensive DeFi indices by capitalization also included:
- Metaverse Index (MVI) — $8.02 million (8.4% of the segment). The index is trading at $43.10.
- BTC 2x Flexible Leverage Index (BTC2X-FLI) – $2.24 million (2.3% of total circulating supply). The index can be bought for $6.67.