
May 2, 2023
Decentralized finance (DeFi) is one of the most popular cryptocurrency trends. It enables customers to gain access to financial services and products without the use of intermediaries like banks.
The DeFi Pulse Index (DPI) is a one-of-a-kind investment strategy that provides investors with exposure to a portfolio of leading DeFi initiatives. We'll look at what the DPI is, how it works, and how you can invest in it in this article.
The DeFi Pulse Index is a token that tracks the performance of the cryptocurrency's top DeFi projects. It is a weighted index made up of cryptocurrencies such as Uniswap (UNI), Aave (AAVE), Compound (COMP), Maker (MKR), Synthetix (SNX) and others related to DeFi.
Investing in the DPI allows investors to have exposure to a diverse portfolio of the top DeFi tokens without having to choose individual projects.
The DPI offers investors a straightforward and convenient way to engage in the DeFi market without requiring substantial knowledge or study.
It acts in a similar way to ETFs, it’s a way of simplifying investment for everyone, making it simpler and more accessible.
The total value locked (TVL) of each DeFi project is used to weight the DeFi Pulse Index. The TVL is a measure of how much value is locked into a specific DeFi protocol.
The greater a project's TVL, the greater its weighting in the DPI. Monthly rebalancing of the DPI ensures that it appropriately represents the performance of the top DeFi projects.
No token has more than 25% weight so that the concentration risk is decreased.
These are the steps you need to take to invest in the DeFi Pulse Index:
To invest in the DPI, you must first create an account with a cryptocurrency exchange. Binance, KuCoin or Kraken are a few popular exchanges.
The DPI is an ERC-20 token that runs on the Ethereum blockchain. To invest in the DPI, you must first purchase Ethereum or stablecoins. You can do this by depositing fiat money or another cryptocurrency into your exchange account and swapping it for Ethereum or stablecoins.
Create a decentralized wallet, some popular options are Metamask, Uniswap wallet or 1inch wallet.
Send Ethereum to your wallet, you will need it to pay the gas fees associated with the transactions in the blockchain.
At the same time also send stablecoins to exchange for the DPI token.
You can now go to indexcoop, in there you need to connect your wallet (top right corner) and follow the instructions.
Some DeFi wallets now let you buy and sell tokens directly from the wallet app. In this case just send Ethereum and stablecoins to the wallet and choose the option of buy & sell tokens and search for DPI token. Follow the instructions and you are set.
If you are not comfortable in dealing with DeFi wallets, just open an account with Lympid, deposit EUR and buy DPI, as simple as that.
Investing in the DeFi Pulse Index entails a number of risks and considerations. Here are a few to remember:
The DeFi market is still in its infancy, and there is no assurance that it will continue to expand at its current rate.
Cryptocurrencies can be extremely volatile, with prices fluctuating rapidly. This means that the DeFi Pulse Index's value can fluctuate quickly and severely.
There is a risk that DeFi products can be hacked and drained out of their funds
The DeFi Pulse Index is an intriguing investment opportunity that provides exposure to some of the market's leading DeFi projects. Investors can acquire exposure to a diverse range of DeFi initiatives by investing in the DPI rather than picking individual projects.
However, before investing, it is critical to conduct research and understand the risks involved.
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