Even in a bull market, the crypto world can still be a rocky upward path. There are normal pullbacks and corrections and sideways trends that can have investors on the ropes. These periods present opportunities. The new digital age Bernadette M. Santos is an attentive observer of the blockchain space. From dodging obstacles at market stalls to flipping them into cash cows, she explores Decentralized Finance (DeFi) to discover how it all works.

Bernadette’s work—one of many great pieces appearing on Friend of Token—aims to make sense of buzzwordy concepts such as blockchain scaling and DeFi innovations. She is convinced that anyone, from any background, can confidently operate in the crypto space once properly informed. Whether riding on the bull or when his lanai time begins with a more cautious touch. Her work promotes clarity and connection, making incisive the space between technical speak and on-the-ground use.

In this article, we’ll look at four ways you can profit when these times occur. It will present you with actionable strategies and illustrate what good risk management across disciplines is important. Bernadette will take readers on a journey through the DeFi ecosystem, explaining concepts from staking and stablecoin yields to lending and airdrop farming. She’ll dive deeper into the importance of Web3 wallets, explaining how they protect and manage your digital assets.

DeFi Opportunities During Market Corrections

Staking

Cryptocurrency staking provides a lucrative opportunity to earn passive income directly by taking part in the new validation process of Proof-of-Stake (PoS) blockchains. This allows holders to lock up assets for a fixed term. In exchange, they serve as validators and are compensated with additional cryptocurrencies as rewards for their work. Rewards are typically listed as Annual Percentage Yield (APY). Each token has its own separate and distinct reward architecture.

For long-term investors, compounding these rewards can be a powerful strategy, resulting in significant passive income over time. Staking has the potential to be a profitable undertaking, particularly for people who are in possession of larger quantities of cryptocurrencies. Typical annualized returns range from 5% to 15%, with higher returns for riskier blockchains and assets. This makes it a solid source of passive income. Investors are able to accrue rewards without having to buy and sell the market on a daily basis.

Bernadette wants to spread the word about the benefits of staking. It provides investors with a predictable flow of passive income, enabling them to earn rewards without actively trading or monitoring the market daily. This strategy truly excels in a market pull-back. It offers a reliable performance when other investment strategies are faced with higher volatility.

Stablecoin Strategies

First and foremost, stablecoins are extremely important in the crypto ecosystem. They allow units of value to be transferred between individuals with relative ease and low cost — both within the crypto ecosystem and outside of it. These digital assets attempt to maintain a fixed value. They are typically redeemable one-to-one for a specific fiat currency, in most cases the US dollar. Their stability comes in handy during market downturns, acting as a safe haven for investors who want to exit the volatility.

This is a concern that many have raised about stablecoins. In fact, many critics worry that the collateral asset reserves will lack transparency. To address this risk, stablecoin issuers maintain a full reserve of highly liquid assets. These assets are bank deposits, reverse repos, and U.S. government securities. Because they’re holding highly liquid, safe assets, these can be quickly converted to cash to meet any redemption requests, so the value of the stablecoin is assured.

Stablecoins can provide liquidity and stability across the entire decentralized finance (DeFi) ecosystem. They act as an on-ramp to mainstream financial services. That connection makes it possible for money to flow much more smoothly in both directions between the two worlds. In downturns, investors are able to protect their capital faster by being able to convert volatile crypto assets into stablecoins immediately. This strategy protects their existing investments and enables them to earn additional interest through other DeFi platforms.

Lending and Yield Farming

As lending and yield farming become increasingly popular DeFi strategies. They can provide a more stable income stream, which comes in handy during market corrections. With crypto lending, you can loan your crypto assets to borrowers—and get paid interest in return. Or, you could add liquidity to decentralized exchanges and get compensated for doing so.

  • Earning Interest on Deposits: Lenders can deposit their cryptocurrencies into a platform and earn interest. Interest rates can vary, ranging from 3% to 7%, or even as high as 17% for stablecoins.
  • Lending and Borrowing Platforms: Crypto lending platforms allow users to lend out their cryptocurrencies and earn interest. Borrowers can take out loans with interest rates that vary based on factors such as Loan-to-Value (LTV) ratios, asset types, and loan terms.

DeFi protocols such as Aave, Compound and Unchained enable users to borrow and lend crypto assets in a decentralized banking-like environment. This gives them space in which to profit with interest earnings and algorithmic interest rate changes. Apps such as CoinRabbit provide instant, no-credit-check loans in more than 70 different cryptocurrencies such as Bitcoin, Ethereum, and various stablecoins. This in turn creates a range of new opportunities for borrowers and lenders alike to enter into mutually beneficial transactions that generate both profit.

Airdrop Farming

Airdrop farming requires being first to the new and emerging DeFi projects. Your wish is their command. To get free tokens or rewards from airdrops! When markets are at a low, airdrops can be a very profiting route to gaining assets. There are no guarantees, but these projects get momentum and their tokens tend to appreciate in value.

Bernadette warns that airdrop farming is demanding work and that one needs to be comfortable interacting with new and unproven projects. So before getting too deep into any planning project, it’s important to screen for legitimacy and potential.

  1. Research upcoming DeFi projects and identify potential airdrop opportunities.
  2. Engage with the projects by following them on social media, joining their communities, and participating in their testnets or early access programs.
  3. Complete specific tasks, such as providing liquidity, staking tokens, or using the project's platform, to increase their chances of receiving an airdrop.

Whatever strategy you pursue, risk management should be your top priority. Diversification, as always, is key. By diversifying investments among different DeFi assets and protocols, it’s possible to reduce losses in the event of a correction to the broader market. Invest only what you can afford to lose. As always, do your own research before participating in any DeFi activity.

Risk Management and Security

Securing your Web3 wallet is essential. As Bernadette makes clear in her post, creating strong, unique passwords is a critical line of defense against prying eyes.

By better implementing risk management practices, investors can dive into DeFi with more confidence. By doing the right risk management, they can still make money even when the bull market sits on the sidelines. Bernadette's insights, shared through Friend of Token, aim to empower individuals to make informed decisions and participate in the exciting world of decentralized finance.

  • Use strong, unique passwords: A strong, unique password is the first line of defense against unauthorized access to your Web3 wallet.
  • Store seed phrases offline: Keep your seed phrase (the backup key to your wallet) offline in a secure location. Never share it with anyone.
  • Be wary of phishing scams: Be cautious of phishing scams that attempt to trick you into revealing your private keys or seed phrase.
  • Use a hardware wallet: Consider using a hardware wallet for an extra layer of security. Hardware wallets store your private keys offline, making them less vulnerable to hacking.

By understanding the risks involved and taking appropriate precautions, investors can navigate the DeFi landscape with greater confidence and potentially profit even when the bull market takes a pause. Bernadette's insights, shared through Friend of Token, aim to empower individuals to make informed decisions and participate in the exciting world of decentralized finance.