This article takes an in-depth look at decentralized finance, some of the best DeFi coins on the market and the role DeFi plays in how people go about their financial activities.
Most importantly, it would find answers to the question, what top DeFi cryptocurrencies to invest in 2023?
Decentralized Finance (DeFi) has a trade volume of $14 billion and a market capitalization of $157 billion. After coming out of the market crash brought forth by the coronavirus pandemic, DeFi gained enormous traction in the world of crypto.
This was the first time several people who call themselves financial gurus heard names such as Uniswap and Yearn Finance. At the time, these DeFi tokens were recording great daily volumes. They were reaching prices which saw them record new all-time highs in the process.
With a new passive income on the line, several questions have started cropping on the internet. Most of these questions are best DeFi coins to invest in, what are the risks of DeFi and how much money is locked in DeFi projects?
It may come as a surprise to several traders and investors that several DeFi coins have relatively higher prices than cryptocurrencies. What drives the price of these tokens? What functions do they provide users?
Most importantly, for novice traders and investors - what top cryptocurrencies should you invest in to bring you gains in the future?
What Top 10 DeFi Cryptocurrencies To Invest In 2023?
Here are the top 10 DeFi coins to invest in 2023, their pros as well as what analysts are saying about them which makes them a good investment.
- Maker (MKR)
- Uniswap (UNI)
- Compound (COMP)
- Chainlink (LINK)
- Aave (AAVE)
- Yearn Finance (YFI)
- Curve Finance (CURVE)
- PancakeSwap (CAKE)
- Synthetix (SNX)
- Terra Luna (LUNA)
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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Decentralized Finance At A Glance
In the last year, DeFi has been trending across social media platforms (Twitter, Facebook and Reddit). Search engines have also seen a huge rise in the number of people searching for information about the new category of blockchain technology.
Unfortunately, several articles found online do not conduct an extensive review of decentralized finance. More importantly, most articles fail to hammer on the importance of DeFi and why it could give centralized banks a relatively stronger competition in the near future. Let us take an in-depth look about all the components which make up decentralized finance.
What is Decentralized Finance (DeFi)?
Decentralized Finance is a term which encompasses the vision of having a financial system that functions without centralized intermediaries such as traditional banks, exchanges and brokerages to offer traditional financial instruments.
Instead, DeFi utilizes the possibilities of blockchain through smart contracts to allow people to earn interest in savings-like accounts, insure against risks and trade cryptocurrencies. Additionally, DeFi allows people to speculate on price movements on a range of assets using derivatives and borrow or lend funds from others.
What Are The Components Of DeFi?
Components of a DeFi system belong to a software stack. Each layer component has a specific function it performs. One of the characteristics in defining a stack is “composability.” This is important because each layer has components which must be merged together to create a DeFi app. The four layers which comprise a DeFi stack are Settlement, Protocol, Application and Aggregation Layer.
The settlement layer is the base layer upon which other decentralized transactions are built. It is normally referred to as Layer 0. It comprises a public blockchain and its novel token (cryptocurrency or digital currency). This novel token is used to settle transactions which occur on the DeFi applications and could be traded in public markets such as crypto exchanges.
The protocol layer comprises a set of rules and standards which are written to govern specific activities or tasks. Since DeFi protocols are interoperable and can be used by several entities at the same time to build applications, the protocol layer has a primary function of providing liquidity to the DeFi ecosystem.
The application layer hosts consumer-facing applications. These applications break underlying protocols into understandable consumer-focused services. This layer host decentralized lending services and cryptocurrency exchanges.
The aggregation layer comprises aggregators which ensure there is connection between various applications from the application layer. A technological framework simplifies the rails of investment which allows traders to switch between different services in a quick manner. Borrowing and lending, crypto wallets and banking services are examples of services which exist on the aggregation layer.
Read More: A Brief Guide To DeFi
How Much Money Is Locked Up in Decentralized Finance?
As per data retrieved from DeFi Pulse, Total Value Locked in DeFi is $98.7 billion.
With that said, DeFi tokens are providing a full range of services. They range from loans and mortgages to complicated contractual relationships and asset trading. All these financial processes are completed without the usual centralized process which deals with documentation to complete transactions.
Top DeFi Cryptocurrencies To Invest In 2023:
1. Maker (MKR) - from the first DeFi App to being valued at more than $5,000.
Maker is the pioneer of all decentralized applications (DAPPS). Created by Rune Christensen in 2015 but fully launched in 2017, Maker is the governance token of the Maker Protocol and Maker DAO.
Maker DAO is a decentralized autonomous organization while Maker Protocol is a software platform. Maker is based on the blockchain of Ethereum. Maker grants users permission to issue and manage the DAI stablecoin which is pegged to the United States dollar.
Currently, $18.48 billion has been locked in Maker. Maker trades under the ticker symbol, MKR. At the time of writing, MKR has a price of $2,430 and market capitalization of $2.4 billion. The digital asset reached an all-time high of $6,339.02 on 3rd May 2021.
As a lending platform, MakerDAO’s success from 2020 up to May 2021 has been its decentralization. Anyone with an internet connection and fiat currency which is ready to be converted into cryptocurrency can access Maker.
Unlike traditional banking institutions where users are summoned to identity checks through the provision of government-issued cards, Maker forgoes this bureaucratic process. The Knowing Your Customer (KYC) phase is cut off. Instead, Maker uses cryptocurrencies as the primary collateral users need to borrow money.
Since the protocol runs on Ethereum’s blockchain, the native token of the blockchain Ether (ETH) becomes the collateral cryptocurrency. Others such as BAT (an ERC-20 token) can also be employed as collateral.
Maker Price Performance
Maker has crossed several milestones in 2021. MKR opened on 1st January 2021 at a price of $587.02. The crypto trading asset tested $1,000 for the first time on 6th January and reached a high of $1,244.73 towards the end of the month.
The digital asset surpassed the $2,000 price milestone on 4th February 2021 and closed the day at $2,088.43. What followed were several corrections in price due to huge sell-off by investors who had reached their investment goals.
MKR traded for a coin above $3,000 for the first time on 15th April 2021 and settled at $3,770.80. Six days later on 21st April, the crypto trading asset tested $4,000 for the first time and closed the day by exchanging hands for $4,020.19. MKR surpassed $5,000 in price on 2nd May. On Monday, 3rd May 2021, Maker crossed $6,000 with trade volumes above $1 billion.
Maker fell down to $2000 at the end of June but then climbed to above $3,800 in September. The cryptocurrency experienced some ups and downs through the following months and it's currently trading at $2,430.
Experts at Wallet Investors predict bullish sentiments about Maker.
According to experts at Wallet Investor, Maker (MKR) could have an average trading price of $5,080 by the end of 2023.
The experts further forecast the price of Maker to trade for a coin at an average price of $7,377 by the close of 2023.
Experts at Wallet Investor think Maker can continue to soar in the long term if it continues to make headlines like Maker DAO bringing real estate to Decentralized finance in April 2021.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
2. Uniswap (UNI) - Can Uniswap Challenge Binance’s Status as the largest cryptocurrency exchange globally?
Uniswap is one of the most popular decentralized trading protocols as well as one of the oldest. Hayden Adams created Uniswap and launched the decentralized exchange (DEX) in November 2018.
Uniswap has made great gains in 2021 thanks to the craze for digital assets of all forms. Uniswap created its governance token UNI in September 2020 to long term users of the protocol.
Uniswap is also known for solving the liquidity problems that earlier slowed the progress of decentralized exchanges. Uniswap facilitates automated trading of DeFi tokens. Since Uniswap runs on the blockchain of Ethereum, ERC20-based tokens are traded.
Users are rewarded with fee income as a result of their status as Market Maker. Market Maker simply means the users provide liquidity services to enable token swapping. Unlike centralized exchanges which demand documentation, Uniswap allows users to make transactions with no bureaucracies in the process.
Overall, Uniswap has features such as high liquidity, external wallet integration, user-friendly operations, full control over user’s private keys and low fees.
At the time of writing, UNI has a trading price of $15 and market capitalization of $9.3 billion. The total value locked in Uniswap DeFi is $8.29 billion.
Uniswap Price Performance
UNI opened on 1st January 2021 at a price of $4.14 and closed at $5.17. The crypto trading asset closed 31st January at an improved price of $17.53. In a 30-day period, UNI gained 323.43%. Uniswap opened 1st February at $17.70 and by the end of March was exchanging hands for $27.99. UNI reached an all-time high of $44.97 on 3rd May. The price of Uniswap dropped to $14.6 in July, then hit $31.3 in September. UNI has returned 200% year-to-date.
Such gain in price is what has propelled analyst Arslan Butt of FX Leaders to make bullish predictions about the crypto token.
According to Arslan Butt of FX Leaders, Uniswap could have a trading price of $25 by the end of 2023.
Due to the growing adoption and the market recovery FX Leaders foresees a long term potential in the token and thinks Uniswap could reach as high as $50 in the next three years (2024).
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
3. Compound (COMP) - from $0 to a high of $878.14 in less than 3 years
Compound was founded by Geoffrey Hayes and Robert Leshner in 2017 to provide an open lending platform where users who make deposits in the form of ERC-20 tokens can easily take out secured loans. By creating such an innovative product, the founders provided an answer to an important question, how do I borrow from DeFi?
Additionally, users can also earn interest on their idle balance. The team behind the development of the Compound Protocol is Compound Labs, Inc.
Compound like several decentralized applications run on the blockchain of Ethereum. After three years of using Ether as the primary medium of making deposits, Compound launched its novel token called COMP in June 2020.
The primary driving force behind the excitement within the Compound Community has been attributed to a series of governance votes to effect changes in the protocol. You can be a part of the governance if you hold 10,000 (1%) of total COMP supply.
Additionally, there is the approval for the second batch of development grant recipients. This is to help communities govern projects they care about. Through this, Compound Grants will be able to more effectively poll token holders about what project should be funded next.
At the time of writing, COMP has a trading price of $195, $10.4 billion in total value locked in DeFi and market capitalization of $1.2 billion.
Price Performance of Compound
COMP opened on 1st January 2021 at a price of $149.92 and closed the day at $145.39. Compound tested $200 for the first time on 13th January and settled at $211.21. The crypto trading asset surpassed $300 on 29th January trading at a day high of $300.80.
On 4th February, Compound followed the crypto boom of the month and rallied to test the $400 price milestone. COMP reached a new all-time high of $496.21 to close out the day. This was followed by a sharp rise in price on 5th February to reach a new high of $549.88 leaving predictions of a $500 price in the dust.
A huge sell-off followed the huge gains made by COMP by investors as the digital asset corrected to $398.39 to close March. A recovery ensued in the month of April as COMP crossed $600 for the first time on 23rd April to close the day at $622.52.
COMP surpassed predictions by various experts and analysts and tested $700 on the last day of April. It settled at $742.87. COMP reached an all-time high of $878.14 on Sunday, 2nd May.
According to the experts at Digitalcoin, Compound could trade for above $340 in 2023. Experts estimate COMP to reach trading prices of $411 and $488 by the end of 2023 and 2024 respectively.
If the crypto trading asset carries on updating its protocol, positive crypto market sentiment for DeFi and favourable technical indicators could see COMP exchange hands for $582 in 2025.
Read More: Will Compound Make Me Rich in 10 Years?
4. Chainlink - Will Chainlink be a Millionaire Maker in the Future?
Founded by technology entrepreneur Sergey Nazarov and technology officer Steve Ellis in 2017, Chainlink came into the saturated market of blockchain technology with a unique feature. The technology provides real-time data which helps several individuals and businesses.
Chainlink is an open-source technology which is collectively developed by a large community of researchers, users and developers. As a first mover in the decentralized oracle space, Chainlink has reached numerous milestones which has had a positive effect on the price of its native token (LINK).
Chainlink has surpassed 500 partnerships and integrations. It has at least 500,000 active wallets which have balances more than $0. To show you its strength in decentralized finance, Chainlink has forged partnerships with 213 DeFi projects using its technology to provide them with real-time solutions.
With more partnerships in the pipeline, activity on the novel token LINK is going to increase substantially in the future since it powers the protocol.
Chainlink has more than 144 developers creating new decentralized applications for its network. It constantly upgrades its network. The recent upgrade provides a ten-fold increase in the amount of real-world data which can be made available to smart contract applications.
At the time of writing, LINK has a price of around $20 and a market capitalization of $9.2 billion.
LINK Price Performance in 2021
LINK opened on 1st January 2021 at a price of $11.27. LINK tested $20 for the first time on 15th January and settled at $20.71 to close the day.
Chainlink surpassed $30 in February and crossed the $50 milestone for the first time in May reaching its all-time high of $52.88. In the process, LINK has returned 360% to traders and investors.
Experts at Digital Coin Price have weighed in on the possibilities of the DeFi coin on the market.
According to Experts at Digital Coin Price, Chainlink could reach a price of $38 in 2023.
Digital Coin Price further estimates LINK to reach $49 in July 2023 but then fall to $39.85 by the end of 2023.
Experts at the crypto news portal think more institutional investments such as that of Grayscale in March could take the price of LINK to average prices of $48 (2024), $58 (2025) and $69(2026).
With more trade volumes and long term holders expecting further increment in price, Experts at Digital Coin Price predict Chainlink to have trading prices of $77 and $86 by the end of 2027 and 2028 respectively. Such bullish predictions certify LINK as one of the best DeFi coins to invest in 2023.
Check Out: Is Chainlink a Good Investment?
5. Aave - with $10.82 billion Locked In, Is Aave on its way to $1,000?
Founded in 2017 as ETHLend in November 2017 and rebranded to Aave in September 2018, Stani Kulechov created the decentralized application.
After being frustrated with a lack of lending DAPPS on the blockchain of Ethereum, he built Aave before decentralized finance (DeFi) even existed. The Aave Protocol allows users to lend and borrow in approximately 20 cryptocurrencies.
This gives users a huge range of digital assets to choose from. What sets Aave apart from other lending protocols is its main product called FLASH LOANs.
Most lending applications running on Ethereum normally employ Ether (ETH) as collateral for loans. With Flash Loan, there is no need for collateral. This has seen Aave become the first DAPP in the space to make such provision. Such a unique feature has led to thousands of users on the platform.
Aave (AAVE) opened on 1st January with a modest price of $87.54. The digital asset was trading around $300 in February.
The DeFi token was insensitive to the announcement on the ban of cryptocurrencies as options of payments by Turkey in mid-April.
AAVE exchanged hands for $444.73 on 30th April. AAVE reached an all-time high of $666 on 18th May. In August Aave was trading around $400.
Current Aave has a price of around $180 and market capitalization of $2.4 billion.
Numerous experts and analysts have opined that AAVE is one of the best DeFi tokens on the market.
According to analysts at Coin Price Forecast, AAVE could exchange hands for $330 by the end of 2023.
Coin Price Forecast estimates Aave to exchange hands for $432 to close out 2023, $561 (2024), $686 (2025) and $930 (2027).
The analysts think that Aave’s plan to hold a token swap could see the token trade at a price of $1,014 by the end of 2031. It could potentially trade for as high as $1,096 by the close of 2032. The swap would reduce the total supply of AAVE from 1.3 billion DeFi coins to 16 million cryptocurrencies.
6. Yearn Finance - Will Yearn Finance Reach $100,000 before Bitcoin?
The next best DeFi token on the DeFi coin list of top cryptocurrencies to invest in 2021 is Yearn Finance. The decentralized application was created by Andre Cronje in February 2020. Yearn Finance is an aggregator service for investors of decentralized finance.
As a yield aggregator, it does all the work related to yield farming for users. Instead of searching through decentralized lending applications such as Compound and Aave, Yearn Finance automatically scans through DAPPS on the blockchain of Ethereum and finds the best yield return. It trades under the ticker symbol YFI.
At the time of writing, Yearn Finance has $4.08 billion locked in, has a price of $23,530 and market capitalization of $861 million.
Yearn Finance Price Performance
YFI opened on 1st January at a price of $22,731.77 and in February it was trading around at $30,000. In April YFI price reached above $50,000. Yearn Finance hit its all-time high of $93,435 in May.
According to experts at Gov.Capital , YFI is estimated to have a price of $116,153 on 31st December 2023. Experts at Gov.Capital further forecast Yearn Finance to have a trading price of $241,566 by the end of 2023. Such bullish predictions signals potential gains which makes YFI a strong buy.
7. Curve Finance - Can Curve retest its all-time high price of $60.50 in the near future?
Curve Finance was founded by Russian Scientist Michael Egorov in 2020. Curve is a decentralized exchange (DEX) and one of the most used decentralized applications (DAPPS) in the world. It uses automated liquidity pools.
The primary difference between Uniswap and Curve is that Curve was specifically designed to exchange stablecoins. Other Bitcoin-backed ERC 20 tokens such as Wrapped Bitcoin (WBTC) can also be traded.
It has a price of $3.94, market capitalization of $1.7 billion and has $14.20 billion locked in.
One of the pros of CURVE is that it caters to users who are involved in yield farming and liquidity mining. Additionally, users who look forward to maximizing returns without risk by holding notionally non-volatile stablecoins can also benefit from the possibilities of the decentralized exchange.
CURVE Price Performance
CRV had an opening price of $0.6275 on 1st January 2021 and reached $3.55 in February. In April to the mid-May CRV was trading between $3 and $4 and by the end of May it fell to $1.3.
In July the price of Curve started increasing slowly to reach a high of $5.8 in November.
With a low trading price and potential in the market, experts at Digital Coin Price estimates Curve to have a price of $7.25 by the end of 2023. With new features to be added in the near future, experts believe the digital asset could exchange hands for $9.22 to close out 2023, $10.71 (2024) and $11.25 (2025).
With positive market sentiments around the crypto market in the near future, CRV could trade for a coin at $15.26 to end 2026 and $17.41 (2028).
8. PancakeSwap - How much can CAKE trade for in the future after returning 2,853% year-to-date?
PancakeSwap was created by anonymous developers who had an intense passion for pancakes. It runs on Binance Smart Chain. PancakeSwap is an automated market maker which allows users to exchange tokens by providing liquidity by farming and earning fees in return.
One of the advantages of using PancakeSwap is that it allows its users to farm additional tokens such as SYRUP and CAKE.
Additionally, it allows users to trade BEP 20 tokens by providing liquidity to the exchange and earn from fees. Its novel token is CAKE. It has a price of $12.77, market capitalization of $3.18 billion and total value locked in stands at $5.5 billion.
CAKE Price Performance
CAKE opened on 1st January with a price of $0.6238 and climbed to $19 in February.
CAKE reached an all-time high of $44.18 on 30th April.
Walletinvestor forecasts CAKE to reach $30 by the end of 2023.
The analyst further predicts CAKE could trade for a coin at $100 by the end of 2026.
Such great volumes being recorded shows great investor interest in the asset. With more features to be added to the decentralized exchange, more users would employ CAKE to earn fees and other rewards. This would reflect positively in the overall valuation of the digital asset.
9. Synthetix – How far can SNX reach?
Kain Warwick created Synthetix as Havven (HAV) in September 2017. As a decentralized finance protocol, Synthetix provides on-chain exposure to a wide variety of crypto as well as non-crypto assets. It allows its users to speculate on the price of real-world assets such as precious metals, currencies, stocks and crypto assets using ERC-20 tokens.
Synthetix has partnered with Chainlink to acquire real-world information of the price of assets which would help give decentralized price feeds.
SNX Price Performance
SNX opened at a price of $7.22 on 1st January and reached its all-time high of $28.77 in February. SNX price fell to $5.8 in June then increased to $14.9 in September.
Currently, SNX commands a price of $5.20 and a market capitalization of $596 million.
Experts at Trading Beasts forecast SNX to trade at an average price of $5.895 by the end of 2023.
With more partnerships such as the one with Chainlink in the near future, Experts believe SNX could be trading at average prices of $8 and $10.31 by the end of 2023 and 2024.
10. Terra Luna - Can Luna Reach $300 in the long term?
Founded in 2018 by Do Kwon and Daniel Shin, Terra is a blockchain protocol which uses fiat-pegged stablecoins to power price-stable global payments systems.
Terraform Labs is the company behind the continuous development of blockchain technology and cryptocurrency.
Terra has formed partnerships with mobile payment applications company Chai from South Korea. It is also supported by the Terra Alliance (it advocates for the adoption of Terra).
Trading under the ticker LUNA, it has a price of $67.10 and market capitalization of $25 billion.
Terra Luna has returned 13,900% year-to-date after opening at $0.6529 on 1st January 2021 and reached a high of $22.33 in March. The cryptocurrency dropped to $4 in May but in July it started to rise to reach an all-time high of $78.19 on 5th December.
Walletinvestor forecasted Terra Luna could reach $141 by the end of 2023. With more partnerships in the near future, the analyst estimates LUNA to trade for a coin at $222 to end 2023, $304 (2024) and $385 by the end of 2025.
Based on such analysis by one of the credible analysts in terms of crypto finance, Terra Luna could be worth your money in terms of investment.
So, Is Decentralized Finance A Good Investment?
Decentralized Finance is a good investment in 2023 and beyond.
When you consider blockchains which run smart contracts such as Ethereum and Tron, their prices are not solely determined by the forces of demand and supply. Neither is their price supported by just mere integrations on millions of merchants across the globe.
DeFi applications in the decentralized lending, exchange and yield aggregation categories have propelled especially Ethereum to new all-time highs.
With more than $98 billion locked in DeFi already which does not even include future DAPPS by Cardano, decentralized finance could become the go-to source for all sorts of investments in the future.
The top 10 DeFi cryptocurrencies pointed out promises great returns in the future. It could make millionaires out of traders and investors depending on the amount of money they are willing to risk.
With an eye on a prediction by Skerdian Meta that Ethereum could reach $25,000 by 2025, now could be the time for you to invest in DeFi and reap future rewards.
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How do you get passive income from DeFi?
You can get passive income by lending on Compound or Aave. You can also earn money through yield aggregation using Yearn Finance.
What is the difference between DeFi coins and Crypto coins?
Cryptocurrencies were originally created to serve as a digital currency for day-to-day transactions. DeFi coins on the other hand powers the networks of the blockchains which run smart contracts. Great examples are CAKE, UNI and CRV; they power their networks but are not accepted as transactional currencies.
Is DeFi Safe?
The technology and mediums - such as decentralized currency - of a virtual marketplace afford investors a sense of security and trust in their transactions.