How to find DeFI Coins Before they Pump (with TokenTerminal)
DeFi or Decentralized Finance is one such industry that has seen massive growth in adoption and popularity in the last few years. The DeFi space is booming now more than ever.
Whether you are a beginner or an advanced user, one area which you must delve deep into is Decentralised Finance. Many decentralised platforms that operate using smart contracts also have their native tokens referred to as DeFi coins.
At the time of writing this, Defi coins have a global market capitalization of more than 46 billion dollars. Currently, there are many such coins that are listed on DEX and are rallying quite well. There are coins that have also had a good rally on places like Arbitrum and Optimism.
But the question that remains is how can you as a user find out these types of coins that are founded on projects with good fundamentals, have an impressive TVL (or Total Value Locked), generate exceptional revenue, and can additionally also grow well in the future?
Well if you are still confused, don’t worry. In this article, we are going to guide you through how you can find good DeFi coins before they pump and what are the important factors that you must check for.
What we are going to learn?
What are DeFi coins?
Before we go into the details, let’s first touch upon the basics to strengthen our understanding. DeFi coins are digital assets that serve as a digital equivalent of fiat coins, facilitating value transfer during financial transactions. These coins are built on their own distinct blockchain networks and are often named after their specific platform. Some of the most well-known DeFi coins in 2023 include Avalanche, (AVAX), Dai (DAI), Uniswap (UNI), Wrapped Bitcoin (WBTC), Chainlink (LINK), Lido DAO (LDO), and many more.
DeFi tokens are created and managed in an open-source, decentralized environment using modular frameworks that are resistant to censorship. Their value can be linked to the US dollar, determined by supply and demand, or subject to automatic adjustments based on changes in the market. These digital assets can be acquired, sold, and traded using decentralized applications (DApps) and are produced by a community of users rather than being controlled by a central authority.
How to find Defi Coins before they pump?
As the popularity and credibility of a particular project increase, we can also witness the coins associated with those projects growing decently. However, this is not much use to you unless you know how to find these substantially good coins and have an idea of which factors you must consider. There are certain ways that you can get this data and analyse it, which is what we will be discussing.
To find the kind of viable coins we talked about earlier you would require a tool called Tokenterminal. In addition, you will also need to analyse certain data available on the platform for example
- Track the TVL Dashboard
- Track Revenue data
- Track the data on fees
There are many other data that you can track and make use of, but I mostly use the above mentioned data points.
Established in 2022, Token Terminal is a platform that accumulates financial information from top blockchain networks and decentralized applications. It enables users to compare historical data of various DeFi projects and track current developments in the crypto sector. With Token Terminal, users have access to up-to-date, accurate, and concise financial insights, making it an ideal tool for informed investment decisions.
Token Terminal provides you with clear, precise, and recent market data to help you quickly comprehend current market trends and evaluate assets. If you are involved or engaged in investing, this platform is an indispensable resource.
Token Terminal tracks and compiles past data for a wide range of metrics, including, but not limited to, the highest revenue-generating protocols, the highest Total Value Locked, overall revenue, and price-to-sales ratio. Regardless of what metric you are interested in, Token Terminal has you covered.
Token Terminal provides several standout features, including:
- Exploration of new projects through various financial metrics, alternative aspects and market segments.
- A visual representation of historical data of several projects and standards with daily, weekly, or monthly options.
- Comparison and analysis of project performance founded on diverse monetary and alternative barometers.
Token Terminal offers three pricing options for its users: the Lite Plan, the Pro Plan, and the Enterprise Plan.
- The Lite Plan is free of charge and gives users access to aggregate data and leaderboards.
- The Pro Plan, which costs approximately 325 euros per month, provides users with additional features such as unlocking all data on the platform, custom charts and tables, denominations, Excel/CSV export, standard REST API, and priority support.
- The Enterprise Plan, which is still in its beta stage, allows users to access the full suite of Pro features, raw blockchain data, decoded smart contract data, SQL REST API, BigQuery, and dedicated team support. It does not have a fixed pricing rate yet, but users can schedule a demo to experience the added benefits.
For those who opt to pay annually, they can save around 16% on their monthly billings.
To access the TVL dashboard on Tokenterminal you first need to head to the platform’s official website (click here). Then right next to “Home”, you will find the “Dashboard” option. Once you do that on the left-hand side you will be able to view a panel with different options like “Home”, “Metrics”, “Markets”, “Projects” and “Trending Contracts”. Click on “Metrics” and under the drop-down box just simply select “Total value locked (TVL)”. Now you will be able to view this dashboard and the data in it.
In basic language, TVL, or Total Value Locked, is a metric that represents the total amount of assets held within DeFi protocols. This includes all types of coins invested in DeFi services like staking, lending, and liquidity pools.
What does higher or increasing TVL signify?
An increase in TVL often signifies increased liquidity, popularity, and usability for the DeFi platform, all of which offer something to its success. When more capital is locked into DeFi protocols, participants benefit from higher yields. Conversely, a lower TVL indicates fewer available funds and lower returns.
When you scroll down you will see a dashboard called “Data Table” under this select the 30 and 90 days tab in order to get a better insight. Now according to the 30 day window, you need to analyse which protocols have had good growth. Currently, the project Gamma Strategies is leading on the basis of 30 day growth. Now when you click on this protocol, you will be able to see the details around it and what it does.
For example, in this instance, we can see that Gamma Strategies has a Total Value Locked of around 27.9 million dollars and it has grown by about 272 per cent in the last 30 days. In fact its Fully diluted market capitalization value is over 10 million dollars which has also shown an upward growth of 40 per cent in the last month while the Circulating market cap is at 5.44 million dollars.
We can notice how there is quite a disparity between the TVL and the fully diluted market cap. In a situation where the TVL is quite higher than the Fully Diluted Market Cap, and the circulating market cap is less than half of the TVL, we can assume it to be a positive metric as it highlights that the coin is undervalued. We can also observe another thing which is that while the TVL has shot up by 422 per cent, on the other hand, the price of the coin is up by only 40 per cent. This difference goes to show that there is a high chance for the value of the coin to grow massively in the future.
For me, $GAMMA looks good so far, next I would see is fundamental analysis. I think what all research I do before buying a new token is a topic for another day. I might write a detailed guide on it, and share on my newsletter. Incase, you still have not subscribed yet, I highly recommend you to do it.
Now you decide whether Gamma Strategies is a good buy or not?
You can see similar metrics for other protocols as well like for example Frax Capital, Radiant Capital, Velodrome, DFX Finance, Goldfinch etc.
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The revenue generated by DeFi protocols provides insight into the amounts of money generated for its users and token holders. The Revenue section provides information on the dApps and chains that have generated the most revenue. This data sheds light on the underlying strengths of the projects and the degree to which they are utilized. A higher revenue indicates more stable growth for the platform.
However, it’s essential to keep in mind that the revenue generated by DeFi protocols can be impacted by various elements such as the platform’s adoption rate, the level of competition in the market, and the present economic conditions. Thus, it is vital to examine revenue trends and patterns over a longer period and not just based on isolated incidents.
Under the Data Table, filter the information according to 30 days. Along with the 30 day growth, you must also see that the size of the revenue should be big enough. Generally, projects with a revenue of more than 100 thousand dollars in a span of 30 days are considered to be better. For example, in the current chart, we can see Liquity which has a monthly volume of 375.1 thousand dollars and a growth of 428.7 per cent.
Similarly, Botto has a 30-day revenue of 167.4 thousand dollars that has grown by 414.4 per cent.
When you click on a particular protocol, you can view other details on it like the Circulating market cap, Fees (30d), Fully diluted market cap, Revenue (annualized), Total value locked, Transaction volume (annualized), etc. If in situations where the growth in fees is massive but the rice growth hasn’t matched it, we can see it as a signal that the token may be undervalued. This can for example be seen with MUX (MCB) which has a price of 7.2629 dollars currently that has shown a 30 day growth of 70.81 per cent whereas its fees generated is 358.66 thousand dollars which is an approximate growth of 250 per cent.
Disclaimer: Just because you found these tokens through token terminal early, does not mean, the token will do good in long term. For the token to do well, there are many other factors. However, knowing how to research on new tokens keeps you ahead of others. Before investing, you will be able to know if the token is worth investing or not.
PRO INFORMATION: What I have seen is Binance now a days list tokens that are generates positive revenue and fees. Not always though. There are tokens like Goldfinch which is not listed yet, but tokens like GMX, GNS, were listed recently.
Want to learn about what other onchain tools I use? Read this post.
Remember that these are just ways of analysing the future of the growth of certain coins. None of these factors can assure a sure shot of growth or guarantee a profitable investment. Hence don’t put in your money blindly into any coin. If you invest greatly with your eyes shut, you can end up losing a lot of money.
Consider the many other parameters and never forget to do your own research. You must learn about these tools and aspects and be aware of the process of understanding which coins can protectively reap benefits. However, don’t base your financial decisions solely on these factors.