Yield farming and crypto investments are profitable, as long as you understand the risks and assess them accurately. Risks are hidden everywhere: smart contracts, impermanent loss, rug pulls, liquidation, token volatility, people's greed. Why settle for less when some projects promise more than 10,000% APY? In an environment like this, going for 150% returns feels like you're losing money. But is it the right thing to do?
The primary cause of unsafe actions is a lack of information, the misleading nature of information and a lack of knowledge for drawing accurate conclusions from it. Q DeFi Rating aims to help users become better at managing their portfolios by educating them about DeFi, providing them with an advanced analysis on each position, offering insights into projects’ performance as well as personalized recommendations.
Q DeFi Rating is a fully-fledged database pertaining to the DeFi sector and has been designed to be an advanced portfolio management tool. Its main value isn't in collating all the data in one place but in the complex methodology and automated ratings that analyze the market indicators and liquidity flows. Thus, users can assess the performance and profitability of their portfolio, adjust their investment strategy and discover new investment opportunities.
On the main page, you see a list of all the following sections present on the platform:
The biggest source of insights is your personal Q DeFi Rating account. First, let's look at the dashboard and its functionality, then at the use cases and what benefits you receive.
To see all your investments on a single dashboard, log in with your wallet and add all the addresses you want to track. This feature is completely free and secure.
The account tracks all the wallets, deposits, liquidity and farming pools you entered and the amount of debt. Below, you can see a list of all the liquidity pools and a breakdown of their performance.
The number of metrics and their names may be slightly confusing in the beginning. If you doubt or forget what a specific metric means, hover over the '?' symbol and you will see a pop-up window with a description.
Here's a quick breakdown:
By clicking on the pool name, you proceed to an even more detailed analysis of the position. It features current holdings, a comparison with a hodling strategy, closed positions and investment history.
The dashboard shows what contributed to the returns the most: price volatility or swap fees. The return takes into consideration the number of fees paid to perform the transaction.
The amount of information is overwhelming. Here's a couple of scenarios showing how to make good use of this information.
How to Minimize Impermanent Loss
Every user that invests into a liquidity pool and participates in yield farming is subject to some degree of impermanent loss. The Q DeFi Rating algorithm considers this risk when calculating the Pool ROI, that's why the percentages you see on this dashboard differ from the ones promised by the DeFi projects themselves. By monitoring this metric and comparing it to the hodling return, users can make better informed decisions.
Pool ROI is a more reactive measurement while the Expected Impermanent Loss is a proactive tool. Before investing in a pool, do some quick research. Go to 'ALL POOLs' and search for the pair you're interested in. Q DeFi Rating calculates the impermanent loss that could occur within the next 30 days.
How to Calculate Returns, APY and ROI
Why use Q DeFi Rating if every project gives you their APY, APR or ROI? The returns depend on a combination of factors: volume of liquidity provided to the pool, volatility of assets, fees, impermanent loss, demand for the underlying tokens, etc. Platforms show returns based on the present moment and if one of these factors changes, the whole picture changes.
Q DeFi Rating displays the average APY that a pool could bring in the next 3 days, one month or three months. The system analyzes how the pool performed in the past and builds a prediction model. Thus, users can decide if it's worth committing to the pool or not.
APY, APR and ROI also don't consider withdrawal, performance or Gas fees. Considering the recent spike in Ethereum’s transaction fees, a user could lose more than they gain if they leave this factor out of the picture. Q DeFi Rating includes Gas in the equation.
How to Discover and Audit New Projects
A comprehensive analysis of a project requires technical knowledge to read its smart contract and a general understanding of the economics needed to analyze its tokenomics. A good analysis should also reveal whether a system is sustainable. Q DeFi Rating offers a shortcut. Each project is evaluated by our system based on criteria which includes: liquidity, trade volume, pool duration, governance token supply, smart contract vulnerability and a social rating. No more blind trust.
The crypto industry lures users and amateur investors with 100x and quick gains but often fails to warn them about the risks or explain all the nuances. Q DeFi Rating makes smart investing a lot easier by shining a light on the factors that are often kept in the dark.
Register on Q DeFi Rating and test it for yourself. All the features are free at all times.
(Disclaimer: The author is the CEO and a co-founder of Platinum Software Development Company)