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Decentralized Finance (DeFi) solutions have grown in popularity over the past few years, offering traders high rewards despite cryptocurrency market volatility and low yields in traditional markets. DeFi applications operate with functions similar to that of existing traditional financial services. However, DeFi applications are built on the blockchain to increase transparency and minimize intermediaries. As the DeFi space continues to evolve, traders continue to use DeFi as a hedge against volatility and alternative to traditional banking. In fact, nearly $100 billion is now locked in various DeFi protocols.
The continued volatility and unpredictability of the cryptocurrency market has done little to deter behemoths like Tesla and Square from betting big on blockchain projects — and those bets have paid off. Over the past 12 months alone, the total cryptocurrency market capitalization ballooned from $360 billion to $2 trillion. This aggressive growth culminated with the cryptocurrency market capitalization topping $2.43 trillion a mere three months ago, only to take a steep 33% haircut soon after. This translated into more than $820 million eliminated from the cryptocurrency market over a 12-day span.
Volatility is part of the game, and traders need various strategies to manage their risk. Here are five ways DeFi is insulating traders from all experience levels from stormy markets.
1. (Smart Contract) Automation
Until now, it has been