Find Undervalued DeFi Crypto — Step-by-Step Guide & Transcript

[00:02] to Dynamo DeFi. My name is Patrick and on this channel I talk about cryptocurrency, decentralized finance, and economics. recently, a lot of people have been feeling fear and uncertainty around

[00:15] their investments. However, this is the single best time to have a chance to sometimes get in at a heavily discounted price. Today's video I'm going to show you some

[00:27] of the tools and strategies that I like to use to research new crypto projects and to find potential DeFi gems. None of these websites have any affiliation with me. These are just tools that I like to use.

[00:39] I'll also say that these same strategies could be used for metaverse NFT type projects, but my focus is on is on DeFi, so I'm going to use DeFi examples when I talk about this. Cool. So, let's jump right into it. The

[00:54] this is essential if you're in DeFi, is DeFi Llama. DeFi Llama shows you the TVL across different protocols and chains. TVL, if you're not familiar, is just the total value locked in a DeFi protocol, and this could be money that's lent out.

[01:09] It could be different things depending on the protocol, but basically it's the amount of money deposited in that protocol. page we see the top protocols across every chain.

[01:22] And we see the one-day change, the seven change, the seven-day change, the one-month change, the TVL, and the market cap divided by the TVL. And And all of these are useful for different things.

[01:35] If you go down on the side here, we also have a breakdown by chain. And this is often times the first place I go to. And so, this will show you the changes grouped by chain, and also the dominance of different chains.

[01:50] So, over here we, for example, can see the percentage that every chain has. And if we go down, we can see, let's sort it by total TVL. We can see the the amount that Ethereum has, Terra Luna, Phantom, BSC, etc. And

[02:04] time. And if you were to go to the left here, some other tools, for example, a breakdown of DEXs, of assets, of lending different platforms. Lots of useful things that you can dive

[02:19] The way that I use it is I usually start by looking for protocols that have had by looking for protocols that have had sustained TVL growth recently. because those are ones that it's not just a one-day flash in the pan, it's

[02:33] something that has actually managed to attract users and continue to attract them over at least a month-long period. So, what I like to do is look at things that are green both on the one week and the one

[02:45] Cuz that means that it has some sustained momentum. And sometimes the one week can be red. So, for example, if we look here, Phantom obviously is green the number three chain right now. Osmosis, on the other hand, is only

[03:00] green on one day and one month, but that one month is pretty significant, and wanted to look up into whether Osmosis and the Cosmos ecosystem had some momentum. So, another thing that I like to do

[03:14] sometimes is to filter, or not filter by but sort by these things. So, you might see something like Metis or Fuse and see that these had grown a lot. these necessarily, especially with the market being shaky, but this would be a

[03:27] you'd say, "Okay, Metis TVL is 240 million, up a lot, and the market cap is not much higher than that. So, for a chain, a market cap of 200 some million is is uh relatively modestly sized. It's

[03:43] it's relatively modest. So, so if you were to get in now, and then you would still be getting in early. And I'm not saying that you should be getting into Metis, but you might see this and then you would decide to

[03:56] research it and decide whether it was something you wanted to invest in. Uh oh, the first place I go once I decide on that is I click into the chain a bit to see what's driving the growth. So, for example, if we now were to click

[04:08] Metis, you can see it had growth over uh decently long period over a month and then uh it started to dip with the rest you can go in here and see well, most of these

[04:21] platforms are totally new, but Net Swap is driving the most of it. So, the first thing you might want to do is then look at Net Swap and and see whether that was something that you wanted to invest in or wanted to learn more about.

[04:35] research. I'm guessing Net Swap is probably the DEX for Metis. Another thing that I like to do is go to the overview of everything and look at which protocols have been gaining TVL recently and also look at whether

[04:50] just is higher ranked than you would expect. is higher ranked than you would expect. So, for example, Multichain I see here both of those criteria. And also, I would say, well, you know, Multichain is

[05:02] uh but the market cap is pretty low. It's, you know, it's in the top 200, but it's placed along protocols that almost everyone knows like Aave, Anchor, Uniswap, etc.

[05:16] As So, so I might say, well, you know, that's one I want to dive into more and reason that the token isn't more valuable or is it maybe something that the market hasn't caught on to yet? Uh going down the list, we can see, for

[05:29] example, 0xDAO. That's what's driving a lot of the growth on Fantom. This that new NFT that's being airdropped to the top 20 protocols. We have Frax. So, this is a stablecoin platform

[05:42] and FXS is their investable token. And you can see here it's grown almost 90% over the past month and 31% over the past week, and that's when the market hasn't been doing well. So, so one might look into this and say,

[05:55] momentum even in a down market. That's something I want to research more and both these examples I've given, Multichain and Frax, are both some of recently. I've been researching a few projects a day, not investing in all of

[06:09] but researching a few a day while the market has been down. how I would use DeFi Llama. Last thing I would say is that this market cap per TVL can be very useful if you use it correctly.

[06:24] you don't want to compare different categories of tokens. So, for example, Uniswap and SushiSwap might be a good comparison tokenomics because you would say, well, they're

[06:37] both DEXes, so they probably have similar levels of value capture from their TVL or levels of ability at least to capture value. Similarly, you might compare MakerDAO and Abracadabra

[06:50] because they both have stablecoins. However, you would not want to compare Aave and Uniswap because the ability of a lending platform to capture value is not necessarily the same as the ability of a DEX to capture

[07:04] They're just different categories of DeFi projects. And as we'll see in a second when we look at revenue, Uniswap actually has much more revenue than than Aave. So, so that thesis does not hold true there. And there's actually several

[07:17] just because DEXes are better at extracting value from their TVL. Terminal. Token Terminal shows you the revenue

[07:32] across different blockchains and dApps. So, this can similarly be useful for developing a thesis about which types of protocols extract value, and also it can be helpful for finding things that again might be undervalued.

[07:46] We can see here we see the top across everything including chains. Ethereum is much higher than everything else. Uh let's filter to dApps, and you can see the top is actually Axie Infinity followed by OpenSea. And an interesting

[07:58] is that Axie Infinity has been the top here since its market cap was way, way I just realized that you can't see the name Axie Infinity, but there we go. So, so since it was way lower it's been the top there.

[08:13] uh and and the thing about this is that at the time that would have been a great signal that Axie was undervalued because because you this revenue, but the market cap just is not there.

[08:26] say, "Okay, well, Pancake Swap, you know, I'm not invested in Binance Smart 'Okay, well, Pancake Swap, although it's not what everyone's talking about, it's actually bringing in a lot of money.'" Similarly, Curve, right? Curve is

[08:40] more money than Aave, more money than Compound. Like it's a it's it's a top DeFi project. Yearn is bringing in even more than Curve. Isn't that interesting?

[08:52] So, so so it's just interesting to see the comparison between these compared to And then if you go down here, you can see it broken down even further. Uh and one thing to to separate here is

[09:06] they have a tab for total revenue and also for protocol revenue. Protocol revenue is basically revenue that's captured in some form for token which is what the difference is. But you can again see the trends over

[09:19] time, which is very useful, similar to TVL. And one thing that's also interesting is you can see if you go to protocol revenue, you can see the PE ratio, which is interesting because

[09:33] actually have PE ratios that would be considered fairly conservative in traditional finance and equities. Trader Joe, for example, has a P/E ratio of you should necessarily invest in Trader Joe or any of these

[09:48] but but that might be a good clue that you wanted to investigate this project further and see what is its growth potential, what are they what new things are they adding to the project, is the team good, is there a reason why

[10:00] to always consider that maybe the market is right. And and and it's just overall a great starting point to find undervalued And and uh they don't have everything on here, but if you go down, you can see

[10:14] have that have revenue in here. And not all That is Token Terminal, very, very useful. Final tool that I like to use, at least of my favorite tools, is DappRadar. The

[10:30] useful thing with DappRadar is that it actually shows you the users across number of users, and to find that, you go to the rankings section. They have a DeFi section as well, but I I think DeFi Llama does what they're trying to do

[10:43] But if you go to the ranking section, you can see users, and you can see, for example, PancakeSwap has a ton of users. And and if you filter to DeFi, then And so, Trader Joe, for example, has a ton of

[10:57] users. Katana, which is the DEX on Ronin, which is the Axie Infinity chain, has a ton of users. Again, that might be a a tip-off right Ronin DEX is actually has more users, for example, than SushiSwap." And

[11:11] and why is that? You know, that that's a good starting point. And and and and overall, it's just another good metric to add to your And sometimes it doesn't mean you investigate in these you invest in these

[11:24] specific platforms, but it can give you a hint in the right direction to go. Uh one other thing that's good to know here is that exchanges for is important on exchanges some are on D5.

[11:38] But but here's a good example. So Uniswap V2 and V3 18,000 users. If we go to D5 we can see that believe it or not Trader Joe actually has more users.

[11:52] And you know you might then combine that with our our findings on revenue earlier then you might also go investigate TVL and do research on the dev team and invest in Trader Joe. And that's basically how I would use

[12:06] DappRadar in a nutshell and you can use this for gaming and other types of this for gaming and other types of projects as well. would I do? Basically what what I would do after

[12:18] this is I would go to the project's website is the first place I go. So jumped out for us before when we were looking at TVL. application and see how it was and and you know sometimes the best

[12:33] person to trust is yourself and your own eyes. Most of my when I found Osmosis over the summer when when I started using Luna relatively early

[12:45] Avalanche early it was just cuz I tried out using the said wow this is a great product to use. And and sometimes you just got to trust useful to you it's probably going to be useful to other people as well.

[13:00] So so here I would check out all these different features see what they all do think about how I would use it. And and if I liked what I saw then I documentation and I would start reading the white paper.

[13:14] uh and you don't necessarily need to memorize this although I think it would you can read the more you'll learn about crypto. here is I'd want to go to the information about their token cuz

[13:27] And I'd want to understand what's the utility of their token, how are they releasing it, and how does it accrue value from the platform if it does. want to see is I'd want to find the tokenomics.

[13:40] So here for example, if we go to token distribution of FXS, FXS, then we could see how much is distributed to the community versus the team and investors, and we can find out their strategy for unlock.

[13:52] that sometimes tokenomics. So so it's important that you find something that's a red flag, thesis. And and I'm not saying that about that about Frax because the video

[14:06] is not about Frax, it's just an example. But but this is basically the process that I would go through when I'm researching a project. And that's all I got for today. DeFi Llama for TVL, Token Terminal for

[14:19] revenue, DappRadar for users, and that's going to get you far ahead of most research. If you have any other tools or in the comments. And if you enjoyed this video, please like, subscribe, and

[14:33] follow me on Twitter. Till next time. This is Dynamo DeFi.