Step into the dynamic realm of Decentralised Finance (DeFi) with Kriptomat’s specialised DeFi strategy. As a standout feature of our Intelligent Portfolios, this strategy is precisely crafted for investors looking to harness the potential of DeFi, a sector known for its rapid growth and innovation in the cryptocurrency world.

In this guide, we will navigate through the core aspects of Kriptomat’s DeFi strategy. From its fundamental principles and rebalancing process to its specific advantages and limitations, we aim to provide a comprehensive understanding of how this strategy operates.

Ideal for both DeFi newcomers and seasoned crypto enthusiasts, our strategy offers a clear path to navigate and profit from the world of decentralised finance. Focusing on top DeFi coins and tokens, it leverages Kriptomat’s expertise, enabling investors to strategically engage with key players in this advanced sector.

Intelligent Portfolios and DeFi

Intelligent Portfolios represent a sophisticated approach in the world of cryptocurrency investing. Automatically managed and rebalanced, these portfolios are designed using advanced algorithms and market analysis to make informed investment decisions.

A key feature of Intelligent Portfolios is their ability to focus on sector-specific investing, allowing investors to target specific areas of the crypto market that show promise or align with their investment goals. This targeted approach is particularly effective in navigating sectors like Decentralised Finance (DeFi), which have distinct dynamics and growth potentials.

DeFi, a pivotal innovation within the blockchain space, stands for Decentralised Finance. It refers to financial services that operate on blockchain technology, independent of traditional financial intermediaries like banks. DeFi platforms offer services such as lending, borrowing, and trading through smart contracts on the blockchain.

The significance of DeFi lies in its potential to democratise finance, making it more accessible, efficient, and transparent. By leveraging blockchain technology, DeFi is poised to revolutionise various aspects of the financial sector, offering alternatives to conventional banking and investment services. The rise of DeFi marks a significant shift in the way financial transactions and services are accessed and executed, highlighting the transformative power of blockchain technology in reshaping the financial landscape.

Key principles of the DeFi strategy

The DeFi strategy employed by Kriptomat is characterised by a rule-based, transparent approach, ensuring clarity and consistency in its implementation. This methodology is designed to provide a reliable and predictable investment framework for all parties involved.

The strategy is grounded in a set of key principles:

• Targeted focus on DeFi market leaders: The strategy is specifically designed to track and replicate the performance of the top DeFi assets. This involves a careful selection process based on market capitalization, ensuring that the portfolio includes the most significant and influential DeFi projects. The idea is to provide investors with exposure to the coins and tokens that are leading the DeFi space, thereby potentially offering higher growth opportunities.
• Rule-based approach: The DeFi strategy strictly adheres to a set of well-defined guidelines. These rules dictate the selection and management of assets within the portfolio, ensuring that the strategy operates systematically and without bias. This approach is key to maintaining the integrity and focus of the investment strategy.
• Criteria for inclusion: To qualify for inclusion in the DeFi index, a cryptocurrency must meet certain criteria. These include having sufficient market value, liquidity, and security. Additionally, the data feed from exchanges must be reliable. These criteria ensure that only the most stable and viable DeFi coins and tokens are selected, reflecting the true state of the market.
• Rebalancing methodology: The DeFi strategy includes an efficient rebalancing process, which is crucial for keeping the portfolio aligned with the rapidly changing DeFi market. This rebalancing is conducted based on the categorization from coinmarketcap.com and daily closing prices and circulating supply information from coingecko.com.

Through this meticulously crafted mechanics and rebalancing methodology, Kriptomat’s DeFi strategy offers a comprehensive, rule-based approach to investing in the DeFi sector, tailored for those seeking exposure to its unique opportunities while maintaining a clear and transparent investment process.

Benefits and limitations of the DeFi strategy

Kriptomat’s DeFi strategy offers distinct advantages for investors looking to delve into the burgeoning world of decentralised finance, while also presenting certain limitations that need to be considered.

Benefits:

• Exposure to groundbreaking DeFi applications: This strategy provides investors with direct exposure to leading DeFi platforms, which are at the forefront of blockchain-based financial innovation.
• Potential for high growth: DeFi coins and tokens often represent cutting-edge financial technologies, offering potential for significant growth as these technologies gain adoption and maturity.
• Automated, rule-based approach: The strategy’s systematic approach allows for a disciplined and unbiased investment in the DeFi sector.
• Ease of Use: This strategy is noted for its simplicity, making it perfect for investors seeking a straightforward, no-hassle approach by eliminating the need to choose from a vast array of cryptocurrencies.

Limitations:

• Limited diversification: Given its focus solely on DeFi assets, the strategy offers limited diversification within the broader cryptocurrency market.
• Sector-specific risks: Investing primarily in DeFi assets can expose the portfolio to sector-specific risks, including regulatory changes and technological vulnerabilities unique to DeFi.
• Market volatility: The DeFi market can be particularly volatile, with rapid price changes that can affect the portfolio’s performance.

Understanding these benefits and limitations is crucial for investors considering the DeFi strategy. While it offers a focused approach to one of the most innovative areas of crypto, it also necessitates careful consideration of the inherent risks associated with such a targeted investment.

Current portfolio allocation (November 2023)

The composition of the portfolio is determined by taking into account 10 biggest crypto assets by market capitalization categorised as “DeFi tokens” on coinmarketcap.com. DeFi strategy includes only DeFi coins and tokens, regardless of their role (fee, governance, utility or rabate coins). Stablecoins, wrapped tokens and liquid staking tokens are excluded from the index.

As of November 2023, here is the current allocation of Kriptomat’s DeFi portfolio:

Cryptocurrency	Allocation (%)
Chainlink (LINK)	30.44%
Avalanche (AVAX)	19.66%
Uniswap (UNI)	16.19%
Internet Computer (ICP)	8.16%
Aave (AAVE)	5.85%
The Graph (GRT)	5.33%
Stacks (STX)	4.11%
Theta Network (THETA)	3.55%
Tezos (XTZ)	3.42%
Fantom (FTM)	3.31%

This table reflects the strategic focus of Kriptomat’s DeFi strategy on a diverse range of leading DeFi assets. The percentages represent how much each cryptocurrency contributes to the overall DeFi strategy portfolio, showcasing a balanced approach towards top-performing DeFi assets. This allocation is carefully curated to capture the essence of the DeFi market, keeping in tune with its latest developments and potential growth areas. The index is updated every first day of the month.

Strategy performance

The performance of Kriptomat’s DeFi strategy, while showing some correlation with Bitcoin, generally surpasses it. As of the most recent data up to November 2023, the performance statistics are as follows:

• 6 Months: +27.94%
• 1 Year: +36.03%
• 3 Years: -0.56%
• 5 Years: +456.81%

These results reflect the strategy’s effectiveness in leveraging the growth potential within the DeFi sector, highlighting its ability to generate significant returns, particularly over the longer term. It’s important to note that past performance is not a definitive predictor of future outcomes, especially in a field as dynamic and rapidly evolving as decentralised finance.

Who is this strategy for?

Kriptomat’s DeFi strategy is tailored for a specific investor profile, particularly those looking to delve into and gain exposure to the burgeoning DeFi sector. This strategy is ideal for:

• Investors seeking DeFi exposure: It’s perfect for those who are specifically interested in the decentralised finance sector. Whether you’re intrigued by the innovation DeFi brings to finance or seeking to capitalise on its growth potential, this strategy aligns well with such investment goals.
• Tech-savvy investors: This strategy suits those who have a good understanding of blockchain technology and are comfortable investing in digital assets that are more technologically advanced and potentially complex than traditional cryptocurrencies.
• Risk-tolerant investors: Given the inherent volatility and rapid evolution within the DeFi space, this strategy is best suited for investors who are willing to tolerate higher levels of risk in exchange for the potential of higher returns.
• Diversification seekers within crypto: For investors who already hold a diverse crypto portfolio, this strategy offers a focused approach to diversify further within the DeFi space, adding a layer of specialisation to their investments.
• Long-term investors: Those who are in it for the long haul and are less concerned with short-term market fluctuations may find this strategy aligns with their approach, considering the potential for DeFi’s long-term growth and adoption.

Overall, the DeFi strategy by Kriptomat is for investors who want to be at the forefront of financial technology innovation, leveraging the potential of DeFi while being cognizant of the risks and complexities involved in this emerging sector.

Discover how to begin your investment journey with Kriptomat’s DeFi strategy by exploring our comprehensive guide “Kriptomat’s Byte-Sized Guide to Intelligent Portfolios: Navigating the Future of Crypto Investments”.

Zooming out

Kriptomat’s DeFi strategy within its Intelligent Portfolios represents a focused and strategic approach to investing in the rapidly growing Decentralised Finance sector. By highlighting the key principles, the benefits, risks and the current allocation, we’ve shown how this strategy offers a unique opportunity for investors to gain exposure to leading DeFi assets.

For investors intrigued by the innovative potential of DeFi and willing to navigate its complexities, Kriptomat’s DeFi strategy offers a comprehensive, transparent, and adaptable solution. Whether you are new to DeFi or an experienced investor in the crypto market, this strategy provides a structured pathway to explore the forefront of financial technology innovation. Sign up for a Kriptomat account and take your crypto investing to the next level with our Intelligent Portfolios – begin your journey now.

Further reading

Learn more about Kriptomat’s Intelligent Portfolios and discover other strategies in the following articles:

• Invest Smarter: How to Optimise Your Crypto Assets with Kriptomat’s Intelligent Portfolios
• Leverage the Power of Smart Contracts with Kriptomat’s Intelligent Portfolios
• Profit from Momentum with Intelligent Portfolios: Inside Kriptomat’s Capture Movers Strategy
• Maximise Investment Efficiency with Kriptomat’s Equal Weight Intelligent Strategy
• Measured Moves: Guide to Kriptomat’s Risk Adjusted Strategy for Intelligent Portfolios
• The Big Ten: Kriptomat’s Intelligent Portfolio Strategy for Top Market Cap Cryptocurrencies