The cryptocurrency market experienced significant movement following Donald Trump’s inauguration, which traders had closely anticipated. 

The cryptocurrency market experienced significant movement following Donald Trump’s inauguration, which traders had closely anticipated. His promise to establish the United States as the "crypto capital of the planet" and create a strategic Bitcoin reserve resonated positively with market participants. Bitcoin’s market capitalization surged, reaching an all-time high of $109,300 just before the inauguration on Jan 20, 2025. This surge illustrated the optimistic crypto market sentiment surrounding Trump's administration and its potential influence on cryptocurrency regulations.

However, this rally was tempered by a common market phenomenon known as "buy the rumor, sell the news." Following the inauguration, many traders who had invested in anticipation of the event sold their holdings, leading to a price decline. This reaction highlights the volatile nature of cryptocurrency markets, as excitement can quickly turn into profit-taking.

World Liberty Financial and Ethereum Accumulation

In related news, World Liberty Financial (WLF), a cryptocurrency venture associated with Trump and his family, made headlines by significantly increasing its Ethereum (ETH) holdings. From Jan 17–19, 2025, WLF acquired 55,247 ETH, bringing its total to 56,332 ETH, valued at approximately $181.6 million at the time of the report. This acquisition drew attention due to its substantial scale and timing, occurring just days before the inauguration.

WLF's wallet also held a diverse array of assets, including Wrapped Bitcoin (WBTC) and USD Coin (USDC), indicating a strategic investment approach. The rise in attention to WLF's holdings reflects a growing interest in institutional investment in cryptocurrencies, especially in the context of a pro-crypto administration. While Ethereum's price action has been somewhat disappointing compared to that of other altcoins, the accumulation strategy by WLF suggests confidence in Ethereum's long-term potential.

The report also highlights Solana’s remarkable performance, as SOL reached an all-time high of $295 on January 18, 2025. This surge was largely driven by the launch of an official TRUMP meme coin on the Solana network, which generated significant investor interest. The TRUMP meme coin achieved a market cap of $14.92 billion within two days of launching, illustrating the power of meme culture in driving market activity.

The correlation between the TRUMP meme coin's popularity and Solana's price rise indicates how new products can influence established cryptocurrencies. Despite the initial hype surrounding the meme coin, Solana has shown resilience, bouncing back above $258 after the inauguration, suggesting a robust underlying demand.

Looking toward future developments, the report discusses the recent filings for cryptocurrency exchange-traded funds (ETFs) with the U.S. Securities and Exchange Commission (SEC). These filings include proposals for Bitcoin (BTC), Ethereum (ETH) and various meme coins, signaling a potential shift toward mainstream adoption of cryptocurrency-based financial products. The anticipated pro-crypto policies under Trump’s administration could play a crucial role in shaping the regulatory framework for these ETFs.

The SEC’s response to these applications will be a significant indicator of how institutional investment in cryptocurrencies may evolve. Should these ETFs gain approval, it could lead to increased demand and price volatility, particularly as traders react to the outcomes of these regulatory decisions.

Advanced

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Bybit x Santiment: ETH Faces Pressures as SOL, XRP, Meme Shine

Our weekly crypto derivatives analytics report delves into macro events, the current state of crypto and trading signals from spot trading volume, and futures, options and perpetual contracts.

Trump's inauguration on Jan 20, 2025 was preceded by the launch of two meme coins from the Trump family, TRUMP and MELANIA, which quickly garnered billions in market capitalization. Speculation about a strategic Bitcoin reserve being included in the executive orders signed on the first day of his administration led to a significant bullish shift in derivatives market positioning. This shift resulted in an inversion of the term structure of volatility, increased funding rates on long positions and a tilt in short-tenor volatility smiles toward calls. However, when the anticipated bullish announcements didn’t materialize, implied volatility levels decreased, even as realized volatility increased. Despite this, the bullish skew toward out-of-the-money (OTM) calls persisted.

In the perpetual markets, funding rates remained consistently high across almost all assets, continuing beyond the inauguration event. In the options market, realized volatility surged to post-election highs, even as implied volatility levels fell due to an overestimation of the significance of inauguration day for crypto. Overall, positioning across all tenors remained bullishly tilted.

Please check out the report’s highlights.

During the inauguration weekend, perpetual swap trade volumes hit their highest levels in over a month as traders positioned for expected crypto-friendly executive orders. Notably, SOLUSDT perpetuals experienced a significant surge in activity, reaching new all-time highs and a spike in realized volatility. Trump's launch of the TRUMP meme coin on Solana DEXs allowed Solana’s network to surpass competitors in fee generation, highlighting the symbolic choice of a sitting U.S. president to launch on Solana instead of Ethereum.

Perpetual swap funding rates saw minimal repricing despite the lack of significant announcements on inauguration day, remaining at neutral-to-bullish levels across all coins. Open interest data indicated no major changes in positions, even amidst spot price volatility. Consequently, while options markets adjusted short-term expectations, sentiment in the derivatives market viewed the lackluster inauguration day as just one of many opportunities for future positive news in the industry.

Speculation that the incoming president would announce a strategic Bitcoin reserve in his inaugural speech led to a buildup of short-tenor options positions just before the event. This resulted in a significant increase in call buying and the strongest inversion of at-the-money term structure since the Nov 5, 2024 election. While the extreme pricing of front-end volatility has diminished, the strong skew toward OTM calls remains, reflecting a continued preference for upside exposure as Trump prepares to sign executive orders.

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Bybit X Block Scholes Crypto Derivatives Analytics Report (Jan 22, 2025): Sentiment Cools While Remaining Bullish Following Trump’s First Day

Figuring out how much to invest in crypto can be even more important than deciding which specific coins you want to purchase. Learn more here.

If you keep up with financial news, it can often feel like you’re hearing a story about a self-made crypto millionaire every other day. However, smart investors know that the reality is a little more nuanced. The crypto market comes with high rewards, but it also has high risks. To be successful, you need to be willing to 

 and make wise choices. This guide will explore one of the most basic things you’ll need to decide on before choosing to jump into the world of crypto — how much you should invest in crypto.

Figuring out how much to invest in crypto can be even more important than deciding which specific coins you want to purchase. Not only does the amount you invest in crypto impact your other finances, but it also determines which strategies you can afford to use.

The simple answer to how much you should invest in cryptocurrency is based on your net worth. Someone with millions of dollars can easily risk a lot more than, for instance, a college student without any savings. Traditional investment advice from financial expert Douglas Feldman 

 people shouldn't invest more than 1% to 5% of their total net worth in cryptocurrency. However, some crypto enthusiasts, such as

 be wise to invest up to 10% of your income in cryptocurrency.

Factors to Consider When Deciding How Much to Invest in Crypto

There's a lot of variation in guidelines for how much to invest in crypto. To find the right amount to invest for your specific situation, you'll need to stop and consider these essential factors.

One of the most important factors in determining how much to invest in crypto is the level of risk you’re willing to consider, or your risk appetite. If you have a high risk tolerance, you can invest more. Risk tolerance is partially a matter of personal preference. Some people are naturally cautious, while others are more comfortable making risky moves. However, it’s also wise to factor in your age. A high risk tolerance can work well when you're young because gradual market growth over the years will help balance losses. However, if you're older and closer to retirement age, a lower risk tolerance is advisable.

When planning to invest in crypto, it's a good idea to consider the best-case scenario as well as the worst. Ask yourself: What will happen if my crypto assets suddenly skyrocket in price and I make thousands of dollars overnight? If you're the type of person who would throw in more money or keep holding onto your crypto until the bubble bursts, it might be smart to reduce the portion of your money that you invest in crypto. The flashy profits associated with crypto can lead to overly emotional decisions that can cause problems for certain types of crypto investors.

, the types of coins you're holding make a big difference. Not all types of crypto have the same level of risk. If you intend to go for a risky investment portfolio with nothing but 

, you probably shouldn't take all your assets and invest them in crypto. However, if you intend to invest in a broad range of reliable coins, especially 

, allocating more of your assets toward crypto is a reasonable choice.

Things change fast in the crypto world, so the same advice doesn't always work in different situations. Any time you’re going to invest in crypto, you need to take a look at crypto market conditions. In a 

, prices are consistently high, so you may want to invest less. Meanwhile, in a 

, prices are low, and you can often get big returns by putting extra into crypto investing.

Your liquidity refers to the amount of easily accessible cash you have at hand. Crypto markets are fairly liquid, since you can remove your funds at any time. However, since crypto is a volatile asset class, trying to remove your funds during a bear market can lead to considerable losses. Before putting large sums into crypto investing, think about when you'll need liquid cash. For instance, if you're going to need a large lump sum for a house deposit or another big purchase soon, you need to invest less money in crypto.

Keep in mind that a lot of the recommendations to invest between 1% to 10% of your money in crypto are based on income. However, the reality is that different people have different budgets. Some may need almost all of their income for things like food and housing, so it's not smart to take all your money and invest in crypto. However, others who have more disposable income left over after managing other budgetary needs can invest in crypto more often.

The cryptocurrency market as a whole does follow certain trends, but crypto investments always fare better if you actually understand projects before you invest. It's a poor decision to put a large portion of your assets into obscure crypto you know nothing about. Informed investors only put significant investment into specific cryptocurrencies if they take the time to 

, understand its real-world utility, explore its pricing history and see how well it performs on crypto exchanges.

What Is a Good Allocation for a Well-Balanced Crypto Portfolio?

Once you figure out how much money you want to invest in crypto altogether, you need to consider how much money to put into each specific crypto. It's important to have a diversified portfolio, so a single coin running into issues won't tank your entire crypto investment portfolio. There are a lot of different ways to invest in crypto.

The simplest investment advice, as suggested by

, is simply to put 60% of your money into Bitcoin and 40% into Ethereum. That's a decent choice if you know nothing about crypto assets but still want to invest in crypto. However, if you're willing to research individual coins and pick your favorites, try this asset spread:

If you are open to some speculative exposure, consider allocating a small percentage (2 - 3%) to emerging sectors like 

Compared to some other investments, such as bonds, cryptocurrency is considered risky. The 2020 - 2024 chart below, detailing Bitcoin and S&P's weekly returns, reveals the relatively drastic peaks and troughs of Bitcoin in comparison to S&P 500. Notably, Bitcoin recorded a weekly drop of over 40% and nearly 30% rise in 2020, thugh its volatility has declined over the years. In contrast, S&P 500's gains and losses rarely exceeded 10% throughout the entire period.

Despite Bitcoin's drop in volatility, it is still considered relatively risky to invest in crypto because of the market’s significant price fluctuations and the proliferation of 

s. Additionally, there are countless examples of people who invest in crypto, jumping onto trends and losing their money when prices on the crypto exchange drop. One

 illustrates these dangers: he became interested in crypto during the pandemic and quickly got hooked upon seeing his portfolio values rise. He invested $50,000 into crypto, and eventually built an impressive portfolio worth $300,000. Following a 

, he had only $5,000 left in his account.

Furthermore, crypto markets are still not fully understood by the public, and are less regulated than traditional investments, so it's easier for malicious actors to take advantage of naive investors. For example, crypto-lending company 

 promised to store customers' assets, but when the company went 

, many users found that the company refused to return their invested funds. A similar issue arose when 

, and investors could no longer withdraw funds from their accounts.

Despite its risk, cryptocurrency fills an excellent niche in the financial world. When you invest in crypto, it can ensure your portfolio is diversified and insulate you from stock market crashes and other issues with traditional investments. Deciding to invest in crypto is also a valid option when you want to work with some higher-risk investments. Even beginning traders can find it useful to place a small portion of their investment funds into some reliable cryptos.

Furthermore, cryptocurrency allows people with tech expertise to make highly informed decisions. Finding your niche is always a useful investment strategy. Those who don't keep up with manufacturers and foreign currency exchange rates might find that they can specialize by choosing to invest in crypto. If you enjoy learning about the latest tech news and following online memes, crypto investments can be a great way to turn your knowledge into profits.

However, even though it often works well to invest in crypto, you still need to exercise some caution before working with crypto exchanges. If you want to invest in crypto, it's essential to follow the classic rule of, "Only invest the money you can afford to lose." Those who take out loans to buy 

 or throw their entire retirement account into crypto can end up losing it all if the markets take a turn for the worse. Like any other volatile asset class, crypto needs to be approached with some common sense.

Deciding how much money to invest in crypto is an essential part of your investment strategy. By considering things like risk tolerance and liquidity, you can create an investment portfolio that addresses your unique needs. When you have the right amount of money invested in crypto, you have the potential to make impressive profits without risking all your savings.

Beginner

how much to invest in crypto, how much to invest in bitcoin

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How Much Should You Invest in Crypto? 7 Factors to Consider

Explore how to participate in the Bybit Copy Trading Gold&FX Fiesta to win rewards. In addition, learn how you can unlock an additional 5,000 USDT prize pool!

Trading in Gold and Forex has long been favored among seasoned investors seeking stability and long-term wealth preservation. However, these markets are traditionally complex, requiring deep knowledge of macroeconomic trends, currency correlations and geopolitical factors. But what if you could tap into these lucrative markets without the steep learning curve?

 — a game-changing solution that enables traders automatically mirror the strategies of experienced professionals. Bybit has now 

, allowing crypto traders to seamlessly diversify their portfolios without needing prior experience in these traditional asset classes.

To make this transition even more enticing, Bybit has launched the Copy Trading Gold&FX Fiesta, an exclusive event offering a 130,000 USDT prize pool to reward participants who trade in gold and forex using Bybit’s Copy Trading Gold&FX. Furthermore, there’s an additional 5,000 USDT prize pool you can unlock when you participate in the Copy Trading Gold&FX Read-to-Earn campaign. This comprehensive guide will help you understand the event, its mechanics and how you can actively participate to maximize your trading potential.

What Is the Bybit Copy Trading Gold&FX Fiesta?

 is a trading event in which participants can diversify their portfolios into gold and forex markets, copy expert traders and compete for 130,000 USDT in rewards.

With seamless integration of crypto-based trading using USDT, and the ability to follow professional traders, this event opens unique opportunities for beginners and experienced traders alike.

How Does Bybit Copy Trading Gold&FX Fiesta Work?

The event is structured to make trading in gold and forex markets accessible and rewarding. Participants can trade using USDT without needing to convert it into fiat currencies, making the process straightforward for crypto enthusiasts. By leveraging Bybit’s Copy Trading feature, users can replicate the strategies of successful Master Traders, gaining exposure to proven techniques.

There are two ways in which you can earn rewards from this event — as a Copy Trading Gold&FX Master Trader, or as a Copy Trading Gold&FX Follower.

To compete as a Copy Trading Gold&FX Master Trader, simply follow the two steps below:

If you’d like to compete as a Copy Trading Gold&FX Follower, simply follow these steps:

The event runs from Jan 24, 2025, 10AM UTC through Feb 24, 2025, 11:59 PM UTC, with rewards distributed on a first-come, first-served basis.

How to Participate in the Bybit Copy Trading Gold&FX Fiesta

Now that you have a better understanding of the campaign, let’s take a look at how you can participate in the Bybit Copy Trading Gold&FX Fiesta and grab a share of the 130,000 USDT prize pool! 

Before you can register for the event, you’ll first need to create a Bybit account. Follow our detailed 

 if you require assistance. If you’d like to participate as a Copy Trading Gold&FX Master Trader, you’ll first need to apply to become one by following this guide.

Participate as a Copy Trading Gold&FX Master Trader

: You will be prompted to log in to your Bybit account. If you don’t already have one, please register for a Bybit account. Once you’ve successfully registered for the event, you’ll see that the 

button is now gray and you’ll be able to see the required tasks in order to win a share of the rewards.

task and complete your first Master Trade.

: Trade at least two lots of gold or forex daily for the duration of the campaign to gain one Lucky Draw chance per day.

Once you’ve accumulated Lucky Draw chances, you can use them to spin the Lucky Draw wheel on the Copy Trading Gold&FX Fiesta page. Simply click the 

button. You can view your available rewards by clicking 

Participate as a Copy Trading Gold&FX Follower

task and a pop-up window will appear. Click 

On the Bybit Copy Trading Gold&FX page, scroll down to view the 

. You can filter all the Master Traders by 

. Look for a Master Trader whom you resonate with, and click on the corresponding 

: Input the amount you’d like to trade, and select the items to copy. Then, check the box once you’ve read the 

[BONUS] Copy Trading Gold&FX Read-to-Earn Campaign

Looking to boost your rewards? Unlock an additional 5,000 USDT prize pool when you participate in the 

Running from Jan 24, 2025, 10AM UTC through Feb 24, 2025, 11:59PM UTC, the Copy Trading Gold&FX Read-to-Earn campaign features five modules and a quiz at the end of the course. Read all five modules and complete the quiz to win a share of the 5,000 USDT prize pool!

Should You Participate in the Bybit Copy Trading Gold&FX Fiesta?

This event is a golden opportunity (pun intended) for traders who want to explore gold and forex markets with minimal effort while enjoying a range of benefits. Here are some compelling reasons to consider joining:

While crypto trading can be highly rewarding, the crypto market is 

. Gold and forex markets offer a level of stability that crypto lacks, making them a great way to hedge risk and create a more balanced portfolio.

One major challenge in gold and forex trading is the complexity of fiat conversions. Bybit simplifies this by allowing users to trade these assets with USDT, eliminating the need for bank transfers or currency conversions.

3. Copy Expert Traders — Instead of Learning from Scratch

Traditional gold and forex trading requires an in-depth understanding of macroeconomic trends, monetary policies and market fluctuations. However, Copy Trading removes this complexity by allowing users to follow and replicate the strategies of successful Master Traders. This is perfect for beginning traders who want to start without spending years mastering market analysis.

With 130,000 USDT in rewards and an additional 5,000 USDT prize pool up for grabs, you can earn daily rewards simply by executing trades. Completing daily trading tasks not only improves your trading experience, but also gives you the chance to win Lucky Draw bonus rewards.

This campaign is designed to be accessible to everyone, whether you’re an experienced trader or completely new to gold and forex. With Copy Trading, all you need to do is select the best Master Trader for you — and let the system handle the rest.

The Bybit Copy Trading Gold&FX Fiesta is more than just a trading event: it’s an opportunity to broaden your horizons, learn from experts and earn rewards. With simple steps to join and a host of benefits, this event is designed to empower traders at every level.

Don’t miss out on your chance to diversify into gold and forex markets and compete for your share of the 130,000 USDT prize pool. Moreover, you can unlock an additional 5,000 USDT prize pool simply by reading five modules and completing a quiz via the Copy Trading Gold&FX Read-to-Earn campaign! 

 — and take the first step toward unlocking new trading opportunities today!

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How to Participate in Bybit Copy Trading Gold&FX Fiesta

DeFi

DeFi vs CeFi differs in its applications, security, and its impact on profitability. Discover how DeFi can revolutionize CeFi in the near future.

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Bitcoin prompted the emergence of an entire industry around blockchain technology and digital currencies. Some cryptocurrency market participants argue that decentralized solutions would 

 traditional financial services. While it’s too early to make such claims confidently, we can agree that an exciting competition and interaction between decentralized finance (

) and centralized finance (CeFi) is taking place precisely within the cryptocurrency industry. In the present article, we’ll discuss the main contrasts between the two trends.

The main difference between DeFi and CeFi is that the former involves decentralized infrastructures, where the financial services are governed by communities rather than single entities. In CeFi, all operations are managed by a business or a consortium of companies and organizations. Consequently, the mechanisms differ as well.  

Before understanding the differences between DeFi vs CeFi, we’ll start by defining each approach separately. While CeFi came first to address the Bitcoin adoption, DeFi is the buzzword this year, and we’ll start with it.

 represents a trend or movement that promotes blockchain-powered infrastructures and open-source software to create all kinds of financial services and products, including traditional ones. You can think about services such as lending, trading, issuance of money, payments, insurance, over-the-counter (OTC) trading, 

, financial data, asset management, and more. To visualize it, DeFi is all about transforming traditional banking services to decentralized architectures. So that communities could manage them instead of banks, governments, or regulators.

DeFi is a formidable trend right now, resembling the craze of initial coin offerings (ICOs) from late 2017. The new ecosystem revolves around financial applications developed on blockchain networks. The decentralized applications (dApps) integrate secure permissionless, trustless networks, and eradicate central authority managing the services.

Most DeFi projects currently rely on Ethereum, a public blockchain that offers an open network with intelligent features such as the smart contract. The latter is a critical feature that enables the development of dApps. A smart contract is a blockchain code that can automatically execute and settle whenever predetermined conditions are met. In this way, there is no need for intermediaries like banks and regulators to handle sales, transactions, and other deals involving two or more parties.

As the name suggests, in CeFi, users trust centralized companies and institutions that store their funds to provide various services. Currently, most CeFi solutions are related to cryptocurrency trading, though other applications are also popular.

Most CeFi service providers implement Know Your Customer (KYC) and Anti Money Laundering (AML) practices to abide by their respective jurisdictions’ rules. That means users have to share their personal information and make sure the funds are not coming from criminal activities.

Many CeFi services operate with custodial wallets, which store users’ private keys. Custodians would do everything possible to keep and manage clients’ crypto funds conveniently.

Whenever you trade on popular crypto exchanges like Coinbase, Binance, 

, you deal with a CeFi service. These are platforms run by centralized entities responsible for matching buyers and sellers, offering the required features, and making sure the rules are followed by everyone accordingly. As with any business, the profits from fees are shared among company stakeholders.

Besides trading services, companies fall under the CeFi umbrella that offers borrowing, lending, margin trading, and other financial services.

Some large companies, such as Binance, merge all these crypto services to access them from a single account. Most of the clients agree with sharing their data or storing funds into the custody of these companies providing that they are trustworthy institutions. However, even the most reputable exchanges have 

or thefts that compromised user funds. So this is a risk that CeFi users must know.

Other CeFi crypto firms providing non-trading services are Cred, BitGo, Crypto.com, and Nexo.

DeFi and CeFi share some similarities in the sense that they both involve the same financial services. Sometimes the end-user wouldn’t even notice if a crypto service relies on a DeFi or a CeFi infrastructure. At the moment, both CeFi and DeFi enable the same group of financial services, including spot trading, derivatives trading, margin trading, borrowing and lending, payments, and the creation of stablecoins.

Speaking about trading, both CeFi and DeFi platforms can create intuitive interfaces so that newbies could be onboarded effortlessly.

Often, the same people and organizations are involved in the development of both CeFi and DeFi projects. After all, both trends are advocating the use of blockchain and digital currencies.

Even though both trends’ fundamental goals are the same – to promote the adoption of decentralized ledger technologies (DLTs) – several significant differences split DeFi and CeFi into two different worlds. Here are the main aspects that differ:

As mentioned, CeFi projects are controlled by a single entity or group of entities that run every business aspect. Elsewhere, even though distinct groups of people and organizations develop most DeFi projects, the resulting platforms are governed by communities via different mechanisms. Any DeFi project would try to mimic Bitcoin or any other public blockchain in decentralization, though the consensus algorithms differ from case to case.

Some DeFi projects offer governance tokens that enable holders to take part in decision-making processes. An example of a governance token that exploded in the summer of 2020 is Compound (COMP).

CeFi and DeFi services provide various features that are unique for each group. For example, most CeFi projects offer custody solutions and have dedicated customer service teams, generally not available in DeFi.

On the other side, trading on DeFi platforms happens on blockchain as there is no single authority involved. This achievement is possible thanks to several key features, including automated market-making (AMM), liquidity pools and 

, and non-custodial swaps. Usually, there are no KYC requirements in DeFi, while the funds are stored in personal wallets until the transaction’s execution. The crypto exchanges built on blockchain infrastructures are called decentralized exchanges (

While some companies provide both centralized and decentralized exchanges, Binance is one such example. Its DEX platform doesn’t require registration or KYC verification.

Another great feature of DeFi is the tokenization of traditional assets. Thus, blockchain can be used to create digital units of any asset or investment, including commodities, company shares, forex pairs, and stock indexes, among others.

Initially, when the first crypto exchanges facilitated fiat conversions, there was no regulation whatsoever, as governments didn’t fully understand Bitcoin and blockchain. Nevertheless, today most jurisdictions try to regulate crypto operations directly or indirectly. So, this is one of the reasons why most CeFi platforms require KYC verification. In the US, Coinbase is registered with the Securities and Exchange Commission (SEC), while other global platforms moved their headquarters to crypto-friendly jurisdictions like Malta or Estonia. Meanwhile, the European Commission is about to create 

 aimed at cryptocurrencies. All in all, there are more jurisdictions in correlation to CeFi services.

As for DeFi, this is a new trend, and it is not regulated anywhere given the nature of decentralized networks. However, even if it’s more difficult to impose regulation on DeFi markets, a research paper by BCG Platinion and Crypto.com

 that the rapid boom in DeFi created conditions for money laundering will attract regulators sooner than later.

Usually, centralized exchanges charge higher fees to maintain the platform, pay salaries to the staff, improve their products, and more. Elsewhere, DEX platforms are more affordable to trade on, as they don’t provide custody services and don’t have any team involved in the governance process.

Generally, the fee revenue is shared among liquidity providers and token holders that choose to stake their tokens. An example is Uniswap, a crypto swap platform that distributes the funds from fees among liquidity providers.

The way liquidity is achieved in DeFi is very different. In CeFi projects, the platforms match buyers’ and sellers’ orders similarly to forex or stockbrokers. In DeFi, all trading is not carried out automatically on blockchain. Instead, DEX platforms rely on AMMs, an innovative concept in which both sides of a trade are pre-funded by liquidity providers incentivized to locate their funds.

Eventually, the trading fees are shared between liquidity providers, as mentioned in the previous paragraph. Usually, liquidity pools comprise two constituents representing a trading pair, e.g., BTC/ETH. Liquidity providers have to contribute equal values by locking both BTC and ETH based on the current rate.

Even though CeFi platforms do their best to maintain a high degree of security, you can regularly find out about some significant exchange being hacked. At the beginning of the year, Chainalysis said that 2019 saw the most hacking attacks ever, though the number of stolen funds had declined drastically compared to 2018.

There is no such risk for decentralized exchanges, as the platform doesn’t store user funds. The only thing users should pay attention to is the code and the consensus algorithm used by the DeFi project. Sometimes the underlying technology may come with bugs and other issues.

The execution speed is relatively high in both CeFi and DeFi, though it depends on each platform individually. Most exchanges can provide almost instant performance for market orders.

CeFi platforms are the simulations of traditional banks, and they have already demonstrated their potential and still do. On the other hand, DeFi is only at its nascent stage. Many industry onlookers predict a vast revolution in which DeFi services would gradually replace traditional ones and threaten the banking system.

Still, as of today, both DeFi and CeFi have their places in the crypto industry. They provide faster transactions, attractive yields, and excellent infrastructure aimed at communities.

Both DeFi and CeFi can be applied to all kinds of traditional and crypto-related financial services, such as spot trading, derivatives trading, lending and borrowing, and more. Fiat to crypto conversions and vice versa is also available in both ecosystems. Also, both DeFi and CeFi platforms may provide cross-chain services, though the mechanisms differ.

In general, the two trends have similar applications, but the approach is very different. One thing specific for DeFi alone is the tokenization of assets. For example, Synthetix hosts a DeFi ecosystem where users can create so-called synthetic assets (synths), which are ERC20 tokens representing real-world assets. Users can eventually provide liquidity to those synths and trade them on a dedicated exchange. Synthetic assets have great potential, capable of making derivatives trading more flexible, accessible, and transparent.

There are good projects in both sectors, but DeFi runs the show these days, at least from an investor’s perspective. You can get direct exposure to CeFi projects by investing in the native tokens of cryptocurrency exchanges. At the moment, Binance Token (BNB), Crypto.com Coin (CRO), and Huobi Token (HT) are the most popular CeFi tokens. Arguably, 

 is a CeFi constituent, given that Ripple is a centralized company.

That said, there are way more DeFi options to choose from now. That’s especially when this sector is still at its infant stage.

DeFi tokens are way more volatile than the rest of cryptocurrencies, which is very telling of the risks. It would be best if you stuck to proper risk management techniques when investing and never deposit more than you’re ready to lose.

Another problem with DeFi is that it hosts an increased number of

, the same as the ICO space did a few years ago. That’s why you should better invest in well-established DeFi projects.

DeFi tokens can boost your profitability, especially if you managed to catch the trend right after Bitcoin’s nosedive back in March 2020. Tokens like UNI, COMP, Maker, SNX, and KNC have demonstrated impressive returns this year. The same is right about projects that benefit from the DeFi boom, such as Chainlink and Polkadot. Here is how the most popular DeFi tokens performed so far this year:

Bitcoin (blue line) has performed better than most DeFi tokens year-to-date as it hit the highest level in almost three years as of November 2020. Still, LINK and KNC have provided impressive yields. Despite Bitcoin domination, DeFi tokens have much room to grow.

What To Expect From DeFi and CeFi in the Future?

The medium-term future is bright for both DeFi and CeFi, as the financial crisis will highlight the importance of refuge assets with low correlation to traditional markets. It will also stress the importance of blockchain solutions for all kinds of financial services that governments should not manipulate.

In the long-term future, DeFi will thrive as it has the potential of making financial services accessible to everyone. Investors should keep an eye on Ethereum’s transition to Proof of Stake and the regulatory changes related to DeFi, which will impact the emerging sector. 

DeFi vs CeFi Cryptocurrency: What Are The Differences?

Grab Up to 5,000 USDT in Rewards

Grab Up to 5,000 USDT in Rewards