There’s no question, DeFi has gone parabolic.
Total Value Locked (USD) in DeFi - Data Source: DeFi Pulse
Per data from DeFi Pulse, the total value locked (TVL) in DeFi nears $40B. The growth has been astronomical with the majority of it happening in the second half of 2020, growing from just $2B in July to $40B today.
But the truth is, these stats aren’t 100% accurate. It’s actually significantly bigger.
You see, DeFi Pulse doesn’t list a lot of projects unlike DeFi Llama, which has far better stats because they list every real DeFi project under the sun that’s capturing real value.
Total Value Locked (USD) in DeFi - Data Source: DeFi Llama
Per data from DeFi Llama, the actual TVL in DeFi has already surpassed $50B. This is a more accurate number because it lists all real DeFi projects like 1INCH Exchange, a project with more than $2B TVL that DeFi Pulse does not list:
While finding DeFi projects on DeFi Llama is a helpful trick to finding DeFi gems you may not have known about, it’s not the weird trick I’m here to talk about today.
What I’m about to share with you is much, much better.
Let’s get to it!
How to Spot an Undervalued DeFi Gem?
The best way to spot an undervalued DeFi gem is to simply look at a little known on-chain valuation metric (specifically made for DeFi tokens) known as the “Market Cap / TVL Ratio”.
As described by CoinGecko, the MCap/TVL Ratio is:
“The ratio of market capitalization over total value locked of an asset. A ratio of more than 1.0 refers to its market cap being greater than its total value locked.”
In my opinion, this ratio was created specifically to help determine whether or not a DeFi token is undervalued (more room to grow) or if the token may be overvalued (less room to grow).
For instance, the lesser a token’s MCap/TVL Ratio is (close to 0 OR less than 1), the more room it has to grow. While a token with a high MCap/TVL Ratio (close to 1 OR over 1) may be overvalued in comparison to a similar DeFi protocol with a lesser ratio.
I believe this to be true because, in order for a DeFi token to have a low MCap/TVL Ratio, they need to have a high TVL in its protocol compared to its market cap.
Therefore, if a token’s protocol has a high TVL but small MCap, then you know a lot of people are using the DeFi protocol while its token has yet to attract serious investment, hence undervalued.
Now that we got that unpacked, let me direct you to my favorite MCap/TVL Ratio tool where you can sort the best projects with ultra-low ratios:
MCap/TVL Ratio Aggregator: www.alpha.whatisonchain.com/tvl
The above website is an aggregate of all the DeFi protocol tokens with an MCap/TVL Ratio. CoinGecko and DeFi Llama provide the data, and you can sort all the listed tokens by TVL, MCap, and MCap/TVL Ratio.
Now, let’s take a look at my favorite picks from that MCap/TVL Ratio list.
Top Undervalued DeFi Gems
1. Badger DAO (BADGER)
Badger Finance website homepage
MCap/TVL Ratio: 0.11
Badger is a decentralized autonomous organization (DAO) dedicated to building products and infrastructure to bring Bitcoin as a collateral asset to DeFi.
Recent Badger Developments:
Feb 9, 2021 - Badger Sett Vaults Reach $2B in TVL
Sett is the first Bitcoin DeFi product by BadgerDAO. It’s an automated DeFi aggregator focused on tokenized BTC assets.
Feb 5, 2021 - Badger DAO Network Growing
Jan 22, 2021 - Official Launch of $DIGG
$DIGG is a Community-Owned Bitcoin DeFi Product by BadgerDAO. It’s a non-custodial synthetic Bitcoin on Ethereum with an elastic supply that’s pegged to the price of Bitcoin.
Jan 13, 2021 - Badger App V2 Goes Live
(Source)
The update delivers visual improvements to the protocol while also improving performance and ease of use.
Jan 8, 2021 - Badger DAO Launches $500k Bug Bounty Program with Immunefi
(Source)
This was one of, if not the largest bug bounty in crypto to date: up to $500,000. The Badger DAO is moving to set a new standard for security in the DeFi space.
Dec 28, 2020 - Badger DAO Launches 2 New SushiSwap Vaults
(Source)
The Badger DAO launched 2 new Sett vaults where you could earn $BADGER and $SUSHI: wBTC/ETH SLP and Badger/wBTC SLP.
2. Harvest Finance (FARM)
Harvest Finance website homepage
MCap/TVL Ratio: 0.14
Harvest Finance is an automated yield farming protocol that puts users’ idle crypto assets to work in high-yielding farming opportunities by following the latest and greatest strategies.
Recent Harvest Developments:
Feb 10, 2021 - Plans to add Harvest to the BINANCE Smart Chain
Harvest continues to expand its DeFi ecosystem, this time by expanding to another blockchain Binance Smart Chain.
Feb 2, 2021 - Harvest conceived a new value accruing iFARM token
The new iFARM token represents your profit share stake and can potentially be used in protocols like Aave without losing your profit share APY.
Jan 30, 2021 - Harvest launches Marketing Contest
(Source)
The contest is for the Harvest community to come up with materials to help explain in a clear and concise manner how Harvest Finance works so they can better market to newcomers.
Jan 19 - Harvest Launches 12 New High-Yielding Strategies
(9)
(Source)
Harvest introduced Mirror Finance’s real-world assets in their farming strategies. Harvest farmers can earn yield with synthetic real-world assets like Apple, Tesla, and Google. They also added new CRV strategies and others.
3. Curve Finance (CRV)
Curve website homepage
MCap/TVL Ratio: 0.16
Curve Finance is an Automated Market Maker (AMM) based Decentralised Exchange (DEX) with a main focus on arbitrage opportunities by swapping between assets that are supposed to have the same value.
Recent Curve Developments:
Feb 9, 2021 - Curve adds USDP Pool to its Stablecoin Pools
Curve is continuously adding new pools and USDP is now 1 of 4 stablecoin pools supported on the platform along with DAI, USDC, and USDT.
Feb 5, 2021 - Incentivized SushiSwap pool for yveCRV
This is just the most recent example of one of many incentivized CRV liquidity pools.
Feb 4, 2021 - More new Pools
Curve pools are always being added on DeFi platforms like Aave, SushiSwap, Harvest Finance, Uniswap, and more.
Feb 3, 2021 - Curve Bettering its Pools with Improvements
Curve is constantly implementing improvements to better its pools by increasing liquidity and making them more stable.
Jan 30, 2021 - Curve Reaches the Milestone of $100M in Cross-Asset Swaps
Jan 26, 2021 - Binance Launches CRV Staking
You can now stake your CRV on Binance and earn up to 13.42% APY.
4. BarnBridge (BOND)
BarnBridge App Interface
MCap/TVL Ratio: 0.21
BarnBridge is a fluctuations derivatives protocol for hedging yield sensitivity and market price.
Recent BarnBridge Developments:
Feb 8, 2021 - BarnBridge DAO is Activated
BarnBridge is now 100% decentralized as the community is now fully in charge of the protocol. Now there are governance rewards for staking $BOND and at the same time, Pool 3 where people were staking $BOND ends.
Jan 31, 2021 - BarnBridge Introduces Plans for Bond.Bet
Bond.Bet is a betting protocol and a no-loss gambling protocol that plugs into the BondBridge and PoolTogether protocols.
Jan 31, 2021 - BarnBridge becomes the first protocol to utilize PoolTogether’s no loss prize pool builder
Jan 25, 2021 - BarnBridge Launched NFT Program with Community Rewards
The NFTs were rewarded to early contributors and community members of BarnBridge.
5. 1inch (1INCH)
1inch Exchange website homepage
MCap/TVL Ratio: 0.22
1inch Exchange is a decentralized exchange (DEX) aggregator platform that aggregates all of the liquidity and pricing data from all major DEXes into one platform, making it easy for users to get the best price for their desired trade.
Recent 1inch Developments:
Feb 9, 2021 - 1inch launches Join Liquidity Mining Program with Tornado.Cash
(Source)
In the program, 300K 1INCH tokens will be distributed among providers of liquidity to the ETH-TORN pool over a four-week period.
Feb 6, 2021 - 1inch Extends Main Liquidity Mining Program
(Source)
The main 1INCH liquidity mining program with the following pools: ETH-1INCH, ETH-DAI, ETH-USDC, ETH-USDT, and ETH-WBTC is extended for 4 more weeks.
Feb 5 - 1inch Supports ETHDenver2021 Hackathon
(Source)
Participants will have a chance to win a total of $10,000 in prizes from 1inch.
Feb 1, 2021 - 1inch Launches Yield Farming Program
(Source)
The program is called the “quadro farming” and enables users to benefit four ways from an stETH-LDO liquidity pool.
Jan 29, 2021 - Joint Liquidity Mining Program with Opium
(Source)
In this program, 600k of the 1INCH token total supply will be distributed among providers of liquidity to the ETH-OPIUM pool over a four-week period.
Jan 23, 2021 - 1inch Supports EtherPunk 2021 Hackathon
(Source)
1Inch believes in supporting hackathons as 1inch’s MVP was once created at a hackathon. Participants were given a chance to win prizes for a total of $8,000 in 1INCH tokens.
