Graphic illustration of the market performance of four DeFi funds: Is diversified investment a better strategy?

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All four funds have achieved performance within the scope of related assets, and have provided protection for the downturn of individual performance.

Original title: “DeFi 丨 Is diversified investment a better investment strategy? 》
Written by: Overanalyser
Translation: Li Hanbo

In the past 6 months, four different funds have been established to track the DeFi sector on Ethereum. I have been paying attention to the relative performance of these funds and how they diversify to resist the losses caused by the wrong investment projects.

From September 14, 2020: $DPI and sDeFi.

$DPI is an index that tracks 11 governance tokens with the market value of 100% mortgages launched on September 14. After the launch, the DeFi sector experienced an overall decline, causing the $DPI price to fall -47%. Figure 1 shows the overall trend of $DPI and its components. $MKR performed best at +2%, and $YFI had the biggest drop at -70%. $UNI Token was launched on September 16, but we adjusted its initial price to September 25, because the initial price does not reflect its value well.

Figure 1: Since September 14, 2020, the performance of $DPI and component tokens

sDeFi is a synthetic fund created by Synthetix. As a synthetic product, it does not hold any tracked Token as collateral. The fund is based on the constant weight of the selected token determined by the Synthetix governance layer. Figure 2 shows the performance of sDeFi compared to its current component Token. In 7 weeks, $LINK was the best-performing component token, up 4%, and $CRV was the worst component token, down 79%. Please note that $sDeFi was frozen for a few days in mid-October.

Graphic illustration of the market performance of four DeFi funds: Is diversified investment a better strategy?Figure 2: Since September 14, 2020, the performance of $sDeFi and component tokens

Table 1 lists the performance of a single Token and two funds from September 14 to October 31.

Graphic illustration of the market performance of four DeFi funds: Is diversified investment a better strategy?Table 1: DPI and sDeFI and each part from September 14 to October 31, 2020

Comparing these two funds with $ETH and $BTC, the results show that, like DeFi, these two funds lag behind the two mainstream cryptocurrencies (Figure 3). As expected, the two funds produced similar profiles.

Graphic illustration of the market performance of four DeFi funds: Is diversified investment a better strategy?Figure 3: The performance of $ETH, $BTC, $DPI and $sDeFI from September 14 to October 31, 2020.

October 11 to October 31, 2020: $DeFi+L and $DeFi+S.

In October 2020, PieDAO launched two funds for the DeFi industry. Both of these funds are based on the Balancer pool and have 100% collateralized Tokens. Since the market price data of Coingecko used in this evaluation takes several days to settle, I will use October 11 as the starting date for comparison. Obviously, the time period considered is relatively short, and it is difficult to make any definite conclusions at this time.

Figure 4 shows the performance of $DeFi+L and related components. It shows that $LINK increased (+4%), while $AAVE had the largest decline (-49%). Overall, the index has fallen by 23% in this short period of time.

Graphic illustration of the market performance of four DeFi funds: Is diversified investment a better strategy?Figure 4: The performance of $DeFi+L and component tokens since October 11, 2020

Figure 5 shows the performance of $DeFi+S and its component Token. $PNT is the worst performer (-7%) among the relatively small DeFi component Tokens, and $LPR has the largest drop of -38%. Overall, the index has fallen by 26% in this short period of time.

Graphic illustration of the market performance of four DeFi funds: Is diversified investment a better strategy?Figure 5: The performance of $DeFi+S and component tokens since October 11, 2020

Figure 6 shows the overall performance of all four funds and $ETH and $BTC over the three weeks. These funds show a similar situation, with losses of 19% to 26% reflecting the overall performance of the DeFi industry.

Graphic illustration of the market performance of four DeFi funds: Is diversified investment a better strategy?Figure 6: Performance of ETC, BTC and DeFi Index Funds from October 11 to October 31, 2020

Table 2 lists the performance of each component Token in the 4 index funds and their current weights. $DeFi+L is slightly better than other indexes due to the large proportion of $LINK. It seems that during this period, the performance of $sDeFi improved because it was frozen in the first 9 days ($DPI fell by 9% at the time).

Graphic illustration of the market performance of four DeFi funds: Is diversified investment a better strategy?Table 2: The performance of $DPI, sDeFI, $DeFi+L and DeFi+S and component tokens from October 11 to 31, 2020

Final thoughts

All four funds try to get people exposed to the average performance of the DeFi sector. All funds have successfully achieved performance within the scope of relevant assets and provided protection for the downturn of individual performance (this is the expectation of a diversified fund). I hope that when I re-examine these numbers next time, there will be some “green” in DeFi.

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