Asset Management Tools
From a certain technological and functional point of view, they have become almost obsolete since they use centralized forms of custody of funds, without giving full control of the same to the users.
That of custodial and non-custodial solutions, however, is a topic that we will deal more specifically another time.
The disadvantages that projects prior to this new era conveyed to users were and are linked to a matter of practicality. Moreover, investors must have a certain know-how before carrying out an operation, both technically and financially.
They must analyze the market to understand what is the best asset to invest in and then perhaps turn to a centralized exchange paying very high fees, finally transferring their balance on any digital wallet once again paying a fee for the transaction.
As can be easily understood, the problem is not only related to the level of knowledge of the crypto investors, but also to the many manual interactions that the users have to perform.
Focusing on these important factors, thinking about the development seen in the new DeFi projects and then linking to this specific case of tools and strategies dedicated to asset management, it is possible to notice the evolution of the platforms and the advantages brought to each user.
These are the cases of Set Protocol and Melon, the two applications born in the world of decentralized finance and leaders in the asset management tool world. The former is currently at a more advanced stage compared to its competitor, especially considering the more elaborate products it offers.
In particular, here is how they work and what are the strategies linked to the two projects.
Set Protocol is an asset management tool platform whose objective is to make this process totally automated through the strategies it offers.
The purpose of this article is not to deal with the topic from a general point of view, which has already been addressed on another occasion, but to give this project the attention it deserves.
That said, the automated investment and asset management strategies are made possible thanks to several basic technical analysis components derived from trading; the variety of these strategies offered are available in the “Robo Sets” section of the platform.
As previously mentioned, there are several options to choose from and each one adapts to the multiple needs that an investor may have, related for example to their risk adversity.
To give a practical example, let us take into consideration the currently most performing configuration in terms of capitalization; its full name is “ETH 20 Day MA Crossover Set” and this already gives an idea of how it works.
It is really simple: it is based only on the exchange between the ETH crypto and the USDC stablecoin and follows the performance trend of the former. When the price of Ethereum rises above the 20-day simple moving average, then the algorithm buys a certain amount, which is converted into the WETH token.
Conversely, when the price of the Ethereum crosses the moving average downwards, the algorithm automatically sells by converting the corresponding value into USDC, thus reducing further losses.
Moreover, the platform is able to allocate and diversify the resources contained in the portfolio in an effective and automated way, based on the performances of those assets in the market and the different strategies chosen by each user.
Melon, on the other hand, is an open-source protocol in which each user can create, manage and/or invest in decentralized investment funds. These funds can be composed of various ERC20 tokens supported within the platform.
Since each activity is recorded on the Ethereum blockchain, each fund has total transparency and so any user can evaluate their composition, performance and profitability, choosing carefully the one they prefer.
Compared to Set Protocol, this platform offers automated processes only to those who invest in assets managed by others.
The fundamental thing about asset management tools and trading managed by automated strategies is that not only do they eliminate emotional risk, a limiting feature of at least 70% of traders, but they also reduce the probability of missed opportunities in the market and save time undoubtedly.