{"id":32406,"date":"2020-11-26T15:52:22","date_gmt":"2020-11-26T13:52:22","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=32406"},"modified":"2025-08-28T08:27:55","modified_gmt":"2025-08-28T05:27:55","slug":"study-finds-defi-token-indexes-are-not-as-diversified-as-commonly-believed","status":"publish","type":"post","link":"https:\/\/u1f987.com\/en\/study-finds-defi-token-indexes-are-not-as-diversified-as-commonly-believed\/","title":{"rendered":"Study finds DeFi token indexes are not as diversified as commonly believed"},"content":{"rendered":"<p>A problem with DeFi indexes is their excessive dependence on the performance of a handful of &#8216;blue chips&#8217;. They do not always achieve the goal of reducing risk for investments in this sector. This is described in a study by Messari analyst Roberto Talamas.<!--more--><\/p>\n<blockquote class=\"twitter-tweet\" data-conversation=\"none\">\n<p dir=\"ltr\" lang=\"en\">6\/ Check out our latest report for <a href=\"https:\/\/twitter.com\/masonnystrom?ref_src=twsrc%5Etfw\">@masonnystrom<\/a>\u2019s and my detailed analysis of DPI through this framework of diversification<a href=\"https:\/\/t.co\/1nUBAsrQ5M\">https:\/\/t.co\/1nUBAsrQ5M<\/a><\/p>\n<p>\u2014 Roberto Talamas (@RobertoTalamas) <a href=\"https:\/\/twitter.com\/RobertoTalamas\/status\/1331632869157064706?ref_src=twsrc%5Etfw\">November 25, 2020<\/a><\/p>\n<\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>The expert studied the DeFi Pulse Index. Since <a href=\"https:\/\/u1f987.com\/en\/news\/defi-pulse-and-set-labs-launch-defi-token-index\">launch<\/a> in September, the product based on it has attracted $35 million. The instrument allows users to invest in 10 popular Ethereum tokens \u2014 LEND, YFI, COMP, SNX, MKR, REN, KNC, LRC, BAL and REPv2.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p dir=\"ltr\" lang=\"en\">1\/ The DeFi Pulse Index (DPI) now has over $35M in assets showing increased demand for crypto indexes<\/p>\n<p>While DPI is a good investment for beginners, it may not provide the diversification that sophisticated investors demand, leaving them overexposed to individual DeFi assets<\/p>\n<p>\ud83d\udc47 <a href=\"https:\/\/t.co\/C298ayc3zN\">pic.twitter.com\/C298ayc3zN<\/a><\/p>\n<p>\u2014 Roberto Talamas (@RobertoTalamas) <a href=\"https:\/\/twitter.com\/RobertoTalamas\/status\/1331632856892837892?ref_src=twsrc%5Etfw\">November 25, 2020<\/a><\/p>\n<\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>In traditional finance, index funds are gaining popularity due to diversification, broad market access, lower fees and the aim to reflect market dynamics or asset class.<\/p>\n<p>Talamas noted that the methodology of such financial instruments can lead to high concentration of certain components and a reduction in diversification benefits. The analyst explained that this can apply to both the popular US stock market index \u2013 the S&#038;P 500, and the DeFi Pulse Index.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p dir=\"ltr\" lang=\"en\">3\/ Despite these attributes, index funds can become highly concentrated depending on their construction methodology reducing the diversification benefits of the product. This applies in particular to capitalization-weighted indexes like the S&#038;P 500 and the DeFi Pulse Index <a href=\"https:\/\/t.co\/pFpe8oNHAT\">pic.twitter.com\/pFpe8oNHAT<\/a><\/p>\n<p>\u2014 Roberto Talamas (@RobertoTalamas) <a href=\"https:\/\/twitter.com\/RobertoTalamas\/status\/1331632862353879040?ref_src=twsrc%5Etfw\">November 25, 2020<\/a><\/p>\n<\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>Based on the covariance assessments of components and the overall variance of the DeFi Pulse Index, the analyst concluded that 77% of its total risk is formed by just four assets. Uniswap (UNI) accounts for 26.1% of total risk, Aave (AAVE) \u2014 20.18%, Yearn Finance (YFI) \u2014 17.87% and Synthetix (SNX) \u2014 13.29%.<\/p>\n<blockquote class=\"twitter-tweet\" data-conversation=\"none\">\n<p dir=\"ltr\" lang=\"en\">5\/ After analyzing the DeFi Pulse Index we found that four assets account for 77% of the portfolio\u2019s total risk <a href=\"https:\/\/t.co\/KrbMoW7uEW\">pic.twitter.com\/KrbMoW7uEW<\/a><\/p>\n<p>\u2014 Roberto Talamas (@RobertoTalamas) <a href=\"https:\/\/twitter.com\/RobertoTalamas\/status\/1331632867517079556?ref_src=twsrc%5Etfw\">November 25, 2020<\/a><\/p>\n<\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<div id=\"attachment_117724\" style=\"width: 1596px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-117724\" class=\"size-full wp-image-117724\" src=\"https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-2_59-PM-1.png\" alt=\"Study: DeFi token indexes are not as diversified as commonly believed\" width=\"1586\" height=\"904\" srcset=\"https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-2_59-PM-1.png 1586w, https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-2_59-PM-1-300x171.png 300w, https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-2_59-PM-1-1024x584.png 1024w, https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-2_59-PM-1-768x438.png 768w, https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-2_59-PM-1-1536x876.png 1536w\" sizes=\"auto, (max-width: 1586px) 100vw, 1586px\" \/><\/p>\n<p id=\"caption-attachment-117724\" class=\"wp-caption-text\">Composition of the DeFi Pulse Index and its components\u2019 contribution to total risk. Data: Messari.<\/p>\n<\/div>\n<p>Talamas emphasised that simply adding more assets to the index due to their high correlation during sustained trends would be counterproductive.<\/p>\n<p>The expert believes that higher returns with lower risk could be achieved by switching to an equal-weighted portfolio with weekly or monthly rebalancing. However, this would raise gas costs, he added.<\/p>\n<p>The DeFi Pulse Index, launched on September 9, has fallen by nearly a quarter from its initial value.<\/p>\n<div id=\"attachment_117723\" style=\"width: 1161px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-117723\" class=\"size-full wp-image-117723\" src=\"https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-2_59-PM.png\" alt=\"Study: DeFi token indexes are not as diversified as commonly believed\" width=\"1151\" height=\"631\" srcset=\"https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-2_59-PM.png 1151w, https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-2_59-PM-300x164.png 300w, https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-2_59-PM-1024x561.png 1024w, https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-2_59-PM-768x421.png 768w\" sizes=\"auto, (max-width: 1151px) 100vw, 1151px\" \/><\/p>\n<p id=\"caption-attachment-117723\" class=\"wp-caption-text\">DeFi Pulse Index dynamics. Data: TokenSets.<\/p>\n<\/div>\n<p>According to Dune Analytics, the total number of DeFi protocol users approached 1 million. The figures may include multiple addresses belonging to the same investor.<\/p>\n<p>Total market capitalization of DeFi tokens <a href=\"https:\/\/defimarketcap.io\/\" target=\"_blank\" rel=\"noopener noreferrer\">amounts to<\/a> $16.7 billion. Over the past seven days, assets in the top 10 of this list showed movements from -16.6% to +3%.<\/p>\n<div id=\"attachment_117726\" style=\"width: 1026px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-117726\" class=\"wp-image-117726 size-full\" src=\"https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-3_10-PM.png\" alt=\"Data: DeFiMarketCap.\" width=\"1016\" height=\"591\" srcset=\"https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-3_10-PM.png 1016w, https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-3_10-PM-300x175.png 300w, https:\/\/u1f987.com\/wp-content\/uploads\/Clipboard-November-26-2020-3_10-PM-768x447.png 768w\" sizes=\"auto, (max-width: 1016px) 100vw, 1016px\" \/><\/p>\n<p id=\"caption-attachment-117726\" class=\"wp-caption-text\">Data: DeFiMarketCap.<\/p>\n<\/div>\n<p>A third of ForkLog users surveyed refused to invest in the DeFi sector due to distrust in projects.<\/p>\n<p>Subscribe to the ForkLog channel on <a href=\"https:\/\/www.youtube.com\/channel\/UCC9FnXTC8_ENzaNSO5cHQ6g\" target=\"_blank\" rel=\"nofollow noopener noreferrer\"> YouTube<\/a>!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A problem with DeFi indexes is their excessive dependence on the performance of a handful of blue-chip components. They do not always achieve the goal of reducing risk for investments in this sector. This is described in a study by Messari analyst Roberto Talamas.<\/p>\n","protected":false},"author":1,"featured_media":32407,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"select":"1","news_style_id":"","cryptorium_level":"","_short_excerpt_text":"","creation_source":"","_metatest_mainpost_news_update":false,"footnotes":""},"categories":[3],"tags":[1093,1616,167],"class_list":["post-32406","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-and-analysis","tag-defi","tag-index","tag-research"],"aioseo_notices":[],"amp_enabled":true,"views":"20","promo_type":"1","layout_type":"","short_excerpt":"","is_update":"","_links":{"self":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/32406","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/comments?post=32406"}],"version-history":[{"count":1,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/32406\/revisions"}],"predecessor-version":[{"id":32408,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/32406\/revisions\/32408"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media\/32407"}],"wp:attachment":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media?parent=32406"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/categories?post=32406"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/tags?post=32406"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}