Have you felt the panic in the crypto asset market?

Is DeFi dead? A DeFi Investor’s View

Declining Total Value Locked (TVL), evaporating yields, decoupling risk, protocol hacks, UST severe de-pegging, and poor macro outlook.

Total Value Locked (TVL) fell from over $240 billion in January to around $110 billion today (-55%).

At the same time, people have turned to the safe USDC and DAI stablecoins, whose yields have fallen below 2%, meaning that the yield cannot be used to pay for some junk coins.

Even if you look further on this risk curve, taking the very active ETH/USDC fund pair (as a liquidity provider) on Uniswap v3 as an example, it is expected to obtain a return of about 12%. But a combination of risky assets and stablecoins like this will face exact impermanent losses when withdrawing assets.

While LUNA/UST’s failure was due to the inherently low reserves of its algorithmic stablecoins, there were also numerous DeFi vulnerabilities that saw investors’ capital swallowed up overnight.

Should it be believed that there is still an opportunity for sustainable returns in a risk-adjusted manner? Short answer, yes – but you have to get smarter to do it.

First, how sustainable is it all?

DeFi yields are affected by two main factors:

1. Leverage Requirements (Margin)

2. Fees generated by network activity (transaction volume)

Look at the trends of both

Retail demand for leverage is cyclical and highly correlated with price movements. In more bullish market conditions, retail investors are looking to improve risk/reward. Many have been liquidated during the dramatic price drop.

However, a better barometer for retail leverage demand is to look at the perpetual funding rate, which is still very high at present. After analyzing the previous funding rates, we can see that there is still considerable demand for assets such as ETH, whether it is long or short of the asset.

At the same time, the demand for investment masters who use leverage to execute market-neutral strategies is stable. For example, a common hedge fund trade is to borrow to buy ETH, sell futures (above spot), and make a profit by holding expiring ETH exposure

This spread is called a “basis,” and an upward-sloping futures curve like this is called a “contango.” It reflects the broad interest of institutional investors in the crypto ecosystem. The contango has been persistent recently, but could disappear at any time.

Leaving needs aside, what’s even more pleasing to DeFi investors is that DeFi protocols incur fees. Below are the weekly fees that Curve Finance has incurred amid recent market volatility.


These fees are record breaking and reaffirm our view that we want to own productive assets like CRV and CVX for the long term with low valuation multiples, cost average (DCA).

For example, Curve Finance (CRV) is an automated market maker (AMM) that primarily does stablecoin exchanges. CRV Coin is currently trading at a market cap/total locked value ratio of 0.06.

Therefore, if performing yield farming, you will need to dynamically adjust your stablecoin mining and blue chip mining allocations based on supply and demand markets. Platforms like CRV offer counter-cyclical opportunities to gain profits without long-term lock-in.

So, with stable returns, you mainly need to apply some low-risk innovations. One strategy we have successfully implemented is called “Skew Farming”

Here, we partnered with a VC-backed DeFi protocol (@TracerDAO) to build a market-neutral return strategy. Essentially, this is an arbitrage opportunity where we are both long and short on the asset, but on different platforms.

With customization, we can easily extend it into a system strategy, coded with signals and trading APIs.

We also work with the prestigious Index Coop on other strategies including money arbitrage strategies.

Finally, we are increasing our exposure to DeFi protocols with real-world examples.

Goldfinch allows real-world borrowers to lend in their own currency. On the back end, liquidity providers like me provide crypto loans and make profits from quality borrowers at 12-14% annual yields. In the event of a default, this will be absorbed by the riskier inferior tier.

As long as you have a laptop by your side, you can keep an eye on imbalances in your lending pool and receive real-time news on coins like Tron and USDD and USN. Another example, MIM2CRV using Beefy on Arbi currently pays a 23.6% annual yield, below is the Curve pool.


But even capital turnover on L2 can be very inefficient once deposit, withdrawal, and operational fees are factored in. Honestly, I don’t know how many people can get a few hundred/thousands of dollars on a multi-million dollar deposit.

All in all, you better learn more about the ins and outs of all this. If you have some coding skills, build some systematic strategies and maybe learn how to integrate them with the alfa-added mempool browser.

And generally speaking, as ever – short euphoria and buy extreme fear. Take profits and enjoy the summer.

In general, as always – short when mania, buy when extreme fear. Hope you make a fortune and enjoy this summer.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/have-you-felt-the-panic-in-the-crypto-asset-market/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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