There’s no escaping it: DeFi markets have cooled over the past year.
After breaking the $180 billion total locked in last November — coinciding with bitcoin’s race to a new all-time high of $68,700 — DeFiLlam data shows that the market’s collective value has now shrunk to around $40 billion.
Nevertheless, experts remain optimistic about the potential of decentralized finance. The protocols are building furiously during the bear market, ensuring that they will be in a strong position for the next wave of adoption. And while this recent downturn has spooked some retail investors, there are still opportunities to be had.
Here’s the problem – across crypto and fiat, many consumers are making a fatal mistake. Whether their savings are denominated in US dollars or stablecoins, they let their capital sit idle in accounts that don’t earn interest. And given the rampant levels of inflation we now see in the major economies, that basically means their wealth is shrinking – and their purchasing power is eroding by the month.
DeFi may be the answer here, but finding the best opportunities in this nascent space and ensuring that your assets are always allocated efficiently is a task that is virtually impossible to do manually. And even if you hit a level of market-beating returns, it can often change before you can take advantage of the opportunity.
Crypto is a volatile market that requires 24/7 monitoring to be an effective investor. Additionally, traders often end up with FOMO – fear of missing out – after committing their assets to a particular protocol.
What is the answer?
A new concept emerging in DeFi is reactive liquidity. This means that cryptocurrency enthusiasts have the ability to ensure that their digital assets earn the best risk-adjusted return until such time as their assets are needed in another position. Investors have the ability to add customizable market triggers to their liquidity to ensure their positions are constantly tracked on-chain. The moment the conditions are met – set by the user – the liquidity moves to where it is needed.
Mero is championing this approach to decentralized funding, saying it can have great benefits in this time of market turbulence. It allows you to deposit funds into liquidity pools in exchange for Mero LP tokens. Liquidity that is provided to Mero Liquidity Pools earns an automatically compounded return from automated return management strategies. Any user holding Mero LP tokens can register market triggers or events for their liquidity – allowing them to earn on Mero until their assets are needed elsewhere.
Mero currently supports market triggers, or actions to supplement or add additional collateral for loans on protocols such as Aave and Compound. Once signed up, the Mero protocol’s network of manager bots keep a close eye on these loans – and in the blink of an eye, move liquidity from Mero funds (where they generate revenue) to loan collateral to prevent liquidations.
The team behind Mero, formerly known as Backd, says they are driven by a desire to make capital allocation in DeFi not only more efficient, but also a better user experience. Their approach effectively automates the asset deployment process – ensuring that funds are always allocated as efficiently as possible. When better opportunities arise or funds are needed for time-sensitive purposes, they can be delegated elsewhere.
All of this can take a lot of weight off the shoulders of a DeFi investor – freeing up valuable time to focus on other things.
Working across DeFi
As you’d expect, consistently uncovering competitive returns depends on engaging as many parts of the DeFi infrastructure as possible. Fresh off securing $3.5 million in funding over the summer, Mero Finance intends to do just that.
The platform’s liquidity core funds, which support DAI, USDC, and ETH deposits, have been consistently ranked among the top 10 funds for Ethereum core APY by DeFi Llama. In addition, three security audits have been completed since the initial launch last spring, and new dedicated liquidity pools have been added for USDT and FRAX.
Additional features beyond collateral raising are planned to launch in the next six months, and a governance token is also in the works.
The project told Cointelegraph: “Mero allows you to maximize the performance of your assets with reactive liquidity. Start using DeFi like a pro with Mero’s 24/7 chain monitoring, interest-bearing assets and automated liquidity management.”
Disclaimer. Cointelegraph does not endorse any content or product on this site. While we strive to provide you with all relevant information we could obtain, readers should do their own research before taking any action related to the company and take full responsibility for their decisions, nor should this article be considered investment advice.