DeFi is being hit hard right now, even without the crypto crash that fixed asset prices earlier this year. Hacks continue to grow in the crypto world, exposing projects that have been slow to build up their defenses. But the US government’s crackdown is even more damaging to the market this week. Sanctions, arrests and the prospect of a restrictive policy have all investors wondering which DeFi cryptos to sell.
Currently, the United States is heavily cracking down on crypto projects. Almost every corner of government is diving into DeFi; the U.S. Securities and Exchange Commission (SEC) launches investigations, the Department of Justice (DOJ) makes arrests, and the Treasury enforces penalties. Meanwhile, investors continue to see projects get hacked or scam users. Just today, Curve Finance (CRV-USD) was hacked for over $570,000 in assets. fuzzy finance (BLR-USD) also hurt investors today, turning out to be a pickpocketing scam.
That said, the best DeFi cryptos to sell are those caught in the worst of recent government scrutiny. Investors should consider these three cryptos if they plan to lighten their portfolios:
DeFi Cryptos For Sale: MakerDAO
The MakerDAO crypto, MKR, might be worth removing from your wallet as the project’s developers worry about a troubling future. Right now, concerns are erupting over recent US Treasury sanctions; the developers fear that the penalties will bring down the entire network.
Specifically, the recent Treasury sanction against Tornado Cash raises this concern. The government criticizes the crypto mixing service for its use in crypto money laundering. As a result of the sanction, US residents are no longer allowed to use the service. Dozens and dozens of crypto wallet addresses are also blacklisted.
Why are developers worried? Well, the sanctions also inflicted unintended blows against Circle and his USD Coin (USDC-USD) stablecoin. This froze some $81,000 in USDC in those blacklisted addresses, essentially rendering them useless. MakerDAO could face similar consequences as a stablecoin protocol itself.
If the push materializes, the Treasury could continue to impose sanctions against stablecoins associated with crypto mixing and anonymity. This would directly affect MakerDAO. Founder Rune Christensen said the sanctions could completely kill the project. As a result, the developers are drawing up an emergency shutdown plan in case sanctions reach the project.
DeFi lender Aave isn’t worried about penalties. But the project got caught up in the crypto crash, largely thanks to its lending practices. Aave may be disproportionately affected as lawmakers shape crypto policy and take the crash into account.
When the crypto crash started in mid-May, things unfolded much like the housing crisis of 2008. Similar to mortgage borrowers at the time, crypto hedge funds and other investment firms had underwritten massively over-indebted loans from platforms like Aave. When the market bubble burst and prices began to fall, the crash catapulted these companies into huge debt. At least three major investment companies have declared bankruptcy as a result of these loans. Two were specifically indebted to Aave.
In the aftermath of the 2008 crisis, the gravy boat of mortgage lenders had come to an end. The same can be expected from Aave and other DeFi platforms. But scarier for him, Congress and other branches of government are hungry for regulations in the crypto market.
It can be said with relative confidence that lawmakers will rely heavily on their understanding of the crypto crash to craft these policies. This could lead to restrictions on the operation of Aave and other platforms. Being one of the biggest platforms, Aave might even take the brunt of the damage.
DeFi Cryptos For Sale: Amp
Amp is one of the best DeFi cryptos for sale right now, simply because it has been given a rough ride. Sanctions will not have a significant impact on the token. Nor is Amp likely to inspire notable crypto politics. Instead, Amp is caught in the middle of another regulation battle.
Amp’s woes began just weeks ago when the SEC and DOJ teamed up to arrest a trio accused of the first-ever crypto insider trading scheme. The scheme involved a former Coinbase (NASDAQ:PIECE OF MONEY) employee and two others. In its complaint, the SEC labeled nine cryptos involved in the scheme as securities rather than currencies. AMP is one such crypto.
The backlash from that little comment could have devastating effects on the project, leading the SEC to pursue some kind of legal action against Amp for selling an “unregistered title.” It even drives other exchanges to action; Binance (BNB-USD) quickly removed AMP from the list following the news, citing extreme caution. Other exchanges may also delist it in the future, causing bearish attitudes around the token.
As of the date of publication, Brenden Rearick has not held (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.