DeFi
Did you miss Ethereum? Discover supervised loans now
Ethereum’s strong DeFi ecosystem presents many high-yield opportunities with lower economic risks, such as real-world assets. [RWA] tokenization and Liquid Staking token [LST] growth. Ethereum and its derivatives are the main assets offering high-yield opportunities, with other major cryptocurrencies such as BTC or LINK largely left behind. For those who want to make money with cryptocurrencies, InToTheBlock shed shed light on what we call “supervised loans”.
With RWA tokenization and the growth of LST/LRT, there are many high TVL markets where users can deploy capital with almost no ephemeral losses (IL) and very little to no liquidation risks. However, the market is currently exceptionally unbalanced in the distribution of asset types that generate high returns. Stablecoins, ETH, and ETH derivatives have been the primary assets used in the high yield opportunities currently available.
This strategy allows you to use your cryptocurrencies, such as Bitcoin or Ethereum, as collateral to borrow other cryptocurrencies. These borrowed assets can then be invested in high-yielding opportunities to make even more money. Here’s how it works.
Ethereum: the power of DeFi lending
For example, a user locks Bitcoin on a lending platform as collateral, much like a digital pawnshop. Then they can borrow other assets with the locked BTC. Market experts recommend borrowing digital currencies with higher earning potential. The final step is to invest these borrowed assets in platforms such as Automated Market Maker. [AMM] pools, where users can earn interest by providing liquidity.
However, like traditional trading, there are risks:
- Liquidation risk: If the value of your guarantee [BTC] falls quickly, the platform could sell it to cover the loan.
- Recall risk: Borrowed assets can be recovered quickly to avoid losses.
- Risk of depeg: If the borrowed assets lose their value, there could be losses.
- Pool distribution risk: An imbalance in where money is invested can result in additional fees.
- Risk of concentration of depositors: If most of the money in a pool comes from a few big players, it can be difficult to withdraw funds.
- Available liquidity risk: If everyone borrows at the same time, it’s also possible that there won’t be enough money left to withdraw.
Although supervised loans may appear complex to new investors, they offer the opportunity to earn high returns on users’ blue-chip securities. assets in DeFi. With good risk management and smart decisions, one can achieve attractive returns while minimizing potential risks.