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7 Indicators Every DeFi Investor Should Know

Decentralized finance (DeFi) has been one of the hottest topics in the cryptocurrency space in recent times. With DeFi, investors can earn high returns on their investments without relying on traditional financial institutions. However, investing in DeFi can be risky, and investors need to be aware of various indicators to make informed investment decisions. In this tutorial, we will discuss seven key indicators that every DeFi investor should know.

  • Total Value Locked (TVL):

Total value locked (TVL) is one of the most important indicators to measure the success of a DeFi protocol. It represents the total amount of assets locked in a particular protocol. TVL can help investors understand how much money is flowing into a particular DeFi protocol and how much liquidity is available. Investors should keep an eye on TVL to gauge the popularity and success of a protocol.

  • Daily Active Addresses:

Daily active addresses (DAA) is another important metric that investors should consider. It measures the number of unique addresses that interact with a particular DeFi protocol on a daily basis. DAA can help investors understand the adoption and usage of a protocol. A high number of daily active addresses indicates that a DeFi protocol is gaining popularity and is being widely used.

  • Liquidity:

Liquidity is the availability of assets that can be easily bought or sold in a market without causing significant price changes. In the case of DeFi, liquidity refers to the availability of assets on a particular protocol that can be easily traded. Investors should consider the liquidity of a protocol before investing in it. A high level of liquidity ensures that investors can easily buy or sell assets without experiencing significant price slippage.

  • Volatility:

Volatility is the degree of variation of an asset’s price over time. Investors should consider the volatility of a DeFi asset before investing in it. High volatility can lead to significant gains or losses for investors. Investors should have a high-risk tolerance before investing in DeFi assets with high volatility.

  • Market Capitalization:

Market capitalization is the total value of a cryptocurrency. It is calculated by multiplying the total number of coins in circulation by the current market price of the cryptocurrency. Market capitalization can help investors understand the popularity and success of a particular cryptocurrency.

  • Transaction Fees:

Transaction fees are the fees paid by users to execute transactions on a particular blockchain network. Investors should consider the transaction fees of a DeFi protocol before investing in it. High transaction fees can make it expensive for investors to enter or exit a particular protocol, reducing the potential returns on their investment.

  • Governance Tokens:

Governance tokens are tokens that give holders the right to vote on changes to a DeFi protocol. Governance tokens can be used to make decisions on the future of the protocol, such as changing the fee structure or adding new features. Investors should consider the governance tokens of a DeFi protocol before investing in it. The governance tokens can indicate the level of decentralization of the protocol and the degree of control that users have over the protocol.


DeFi has the potential to revolutionize the financial industry, but it is still in its early stages. Investors should be aware of the risks involved in investing in DeFi and should consider the indicators discussed above before making any investment decisions. By understanding these indicators, investors can make informed decisions and take advantage of the opportunities presented by DeFi.

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