Despite artificial intelligence (AI) taking the spotlight recently, decentralized finance (DeFi) has still secured its position as one of the fastest-growing sectors. AI’s integration could boost growth in DeFi by enabling investors to have absolute control over their assets without relying on traditional third-party intermediaries. At the heart of DeFi investment picks lie Bitcoin (BTC-USD) and Ethereum (ETH-USD) as a means of transacting. However, the sector comprises many blockchain projects leveraging secured peer-to-peer interactions.

Although there has been a rapid sector expansion and adoption, challenges remain. Cryptocurrencies and companies in the space have shared substantial volatility. One example is the meteoric rise of some altcoins during the pandemic, followed by a near-100% tumble in reaction to the Fed’s interest rate hikes in 2023.

Now that borrowing costs are expected to decline, at least momentum in DeFi has been growing. After bottoming out in mid-October 2023, the total valuation of DeFi assets has risen in tandem with the broader market amidst expectations of a Fed pivot. But is this what makes DeFi investment picks more special? There is actually more to it.

3 Unbeatable Reasons to Invest in DeFi

DeFi is gearing up with several enticing projects, offering investors unbeatable reasons to dive in. As an emerging technology, it embodies an exciting opportunity for those seeking exposure to innovation and growth:

• Innovation: DeFi symbolizes the financial industry’s future, constantly rolling out groundbreaking technologies and ideas to revamp finance and digital interaction.
• Yields: This niche accentuates crypto lending and borrowing, among other transactions, offering a chance for substantial returns through global digitization.
• Accessibility and Inclusion: DeFi breaks down traditional barriers, aiming to widen reach, improve financial inclusion and provide universal access.

Although numerous DeFi investment picks can co-exist, the most noteworthy are the ones with more significant growth potential. The list below can help investors diversify their crypto portfolio and position it for long-term success.

Avalanche (AVAX-USD)

Avalanche (AVAX-USD) is recognized as a challenging contender to Ethereum. It is a leading open-source platform for launching DeFi applications and enterprise blockchain deployments. The DeFi platform supports smart contract functionality and is the base for developing decentralized applications (dapps), a cornerstone of Web3 development.

AVAX has made headlines recently, partly due to institutional adoption highlighted by JPMorgan’s (NYSE:JPM) use of an Avalanche subnet. Having been a proponent of cryptocurrencies in the past, this marked a turning point for AVAX as one of the top DeFi investment picks. Moreover, Avalanche’s rise of its total value locked (TVL) and increased utilization of its dApps stressed how fast its network usage grew.

Interest in AVAX surged starting in mid-October. The DeFi investment pick appreciated over 300% versus the four months prior. Since December 2023, AVAX’s market cap has risen to over 100% at some point. In contrast, Ethereum’s flattened out, according to data from CoinMarketCap.

Lido DAO (LDO-USD)

Lido DAO (LDO-USD) is the dominant Ethereum staking pool and another top DeFi investment pick. Lido allows Ethereum holders to stake their coins and validate blockchain transitions in return for earning ETH. LDO, its governance token, lets users stake LDO for voting rights on protocol development. With a strong focus on non-custodial staking, Lido enables users to earn rewards without surrendering control over their assets, enhancing LDO’s utility and potential value.

LDO also witnessed substantial growth since the mid-October bottom. It rose almost 50% over the prior four months. A few days back, the cryptocurrency soared around 10% due to an official announcement of the Lido stETH bridge, marking a significant development for the decentralized autonomous organization (DAO). It follows the rebuking of LayerZero for building a bridge to move Lido’s stETH token without seeking permission from Lido DAO while promoting it as a partnership.

Compound (COMP-USD)

Compound (COMP-USD) operates a blockchain-based interest rate protocol that enables crypto lending. It eliminates intermediaries using Ethereum’s protocol and smart contracts to pair lenders with borrowers. Notably, it allows both the lender and the borrower to lend out cryptocurrencies and earn interest. This reciprocal benefit system has propelled Compound’s platform growth and adoption.

COMP, its underlying token, spiked over 190% after bottoming in mid-June However, it has since subdued to a ~100% gain after reaching a low of $26. Given that COMP has doubled in price, it seems token holders prefer its dynamic interest rates, perhaps due to the current monetary policy environment.

On the date of publication, Stavros Tousios did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.