As the DeFi sphere experiences a number of problems and challenges, Finance Magnates spoke to Iakov Levin, the Founder & CEO at Midas.Investments on the modern problems of the DeFi sector, the current market situation, nascent CeDeFi technologies, and his vision of where this could lead the crypto market in the future.
Q: With Bitcoin below $20k and the crypto market a long, long way away from its all-time highs; where exactly are we right now in the whole cycle of events?
During the last nine months, we’ve witnessed the painful decline of the whole market, and it was apparent that most of the inefficient market players won’t make it through the crypto winter. Still, the decline is a great time to start tracking nascent cryptocurrency trends, which are attracting investments and liquidity and reaching new all-time highs.
Right now, we are witnessing some of these trends surge outside of the mainstream. An excellent example of this is the GMX protocol. Despite being pivoted during the bear market, it’s attracting a lot of liquidity and attention from all market players. For this reason, GMX has a high chance of becoming one of the major DeFi protocols in the next bull cycle.
Even though the market is looking dull now, the focus of investors should be on what is emerging now: new trends and projects, new DeFi mechanics that would allow for better capital management, etc.
Q: One of the main drivers of the previous bull cycle was the rise of DeFi and yield farming – why isn’t this happening again?
Yield farming is slowly becoming a thing of the past. You see, increasing liquidity for the issuance of tokens becomes more and more challenging. Raising capital for efficient business models that pay in ETH and stablecoins is, on the other hand, much easier. GMX, DeFi bribes and 'Real Yield' are good examples.
I hope that there will be more and more tools in DeFi where one would hold a particular investment and get revenue from the efficiency and value of proposition protocols. This is exactly what many DeFi protocols are experimenting with right now.
Q: If the lack of liquidity is crucial for the DeFi sector, how is this problem solved?
The main problem of the modern DeFi sector is the lack of liquidity, which DeFi has been trying to solve by leveraging yield farming. The whole crypto market has dropped by about 60-80 percent, and we are seeing the same drop in liquidity
Liquidity
The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent
The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent
Read this Term.
Because of this, DeFi projects have a hard time managing capital, protocols are facing troubles with fundraising, and their tokenomics are weakened. The best solution to this problem would be to contribute to faster market growth in any way we can.
Q: Moving on to the nascent CeDeFi sphere. How do CeDeFi investment strategies benefit the user in the crypto market?
Since there is little liquidity in DeFi, investments in the sectors are currently very limited. This is a "which came first: the chicken or the egg?" type of issue. As DeFi tech is not intuitive, it takes time to figure out. Because of that, the number of users, and the onboarding chain, are both limited.
Our solution is CeDeFi investment strategies: building blocks for DeFi investments any user would be able to use with ease. By holding a tokenized strategy on our platform, one is actively managing their DeFi position. They don't waste gas nor keep 50 tabs open at once; they don't have to monitor all the metrics and worry about security – Midas takes care of it all.
Our main bet is that CeDeFi will become a much easier and more native way to enter the DeFi market, and we're doing all we can to make that happen.
Q: We all saw what happened to Celsius. How can CeDeFi overcome the disadvantages of the current asset management model and avoid Celsius-like problems?
The main problem with Celsius-like models is that, on the one hand, the company gives the lowest possible rates. At the same time, it tries to get the most out of the funds by taking risks. On the outside, the product looks safe, but in reality, it’s an illusion.
It leads to the fact that for those projects which have accumulated a lot of money, it becomes difficult to find a venture to put millions of dollars with enough liquidity, so they could withdraw it at once should the need come. This is what sank the ship of Celsius and others: they didn't have enough money to pay for all the withdrawals. It's a big problem for such a fixed-yield product.
CeDeFi is a different model where your money is invested into a strategy; you can go to a specific address and check all the stats, withdraw it or put it back in at any time. You are earning all the benefits the strategy offers and also facing its risks.
Q: Speaking of risks, what are the risks of CeDeFi investment strategies? Are there any ways to hedge against them?
The first, systemic risk of CeDeFi is the DeFi protocols. We manage it through on-chain alerts and 24/7 monitoring of all CeDeFi positions.
The second is the directive risk of the CeDeFi strategies. The performance of the strategies can go up and down, which, in turn, would affect the asset price. For each strategy, we create a manual that helps users understand the strategy, which market conditions it’s the best fit for, and how to balance the specific risks by leveraging other strategies or opening futures positions.
Q: To sum up, how do you see the future of CeDeFi investments?
I see CeDeFi strategies as the key to getting people into the DeFi sector quickly and easily. Through them, users can dive deeply into DeFi via comfy apps without spending a lot of time collecting information, analyzing and reviewing every protocol.
CeDeFi offers simplicity and, at the same time, efficiency in investments. Ultimately, all parties would highly benefit from using the CeDeFi investment layer.
As the DeFi sphere experiences a number of problems and challenges, Finance Magnates spoke to Iakov Levin, the Founder & CEO at Midas.Investments on the modern problems of the DeFi sector, the current market situation, nascent CeDeFi technologies, and his vision of where this could lead the crypto market in the future.
Q: With Bitcoin below $20k and the crypto market a long, long way away from its all-time highs; where exactly are we right now in the whole cycle of events?
During the last nine months, we’ve witnessed the painful decline of the whole market, and it was apparent that most of the inefficient market players won’t make it through the crypto winter. Still, the decline is a great time to start tracking nascent cryptocurrency trends, which are attracting investments and liquidity and reaching new all-time highs.
Right now, we are witnessing some of these trends surge outside of the mainstream. An excellent example of this is the GMX protocol. Despite being pivoted during the bear market, it’s attracting a lot of liquidity and attention from all market players. For this reason, GMX has a high chance of becoming one of the major DeFi protocols in the next bull cycle.
Even though the market is looking dull now, the focus of investors should be on what is emerging now: new trends and projects, new DeFi mechanics that would allow for better capital management, etc.
Q: One of the main drivers of the previous bull cycle was the rise of DeFi and yield farming – why isn’t this happening again?
Yield farming is slowly becoming a thing of the past. You see, increasing liquidity for the issuance of tokens becomes more and more challenging. Raising capital for efficient business models that pay in ETH and stablecoins is, on the other hand, much easier. GMX, DeFi bribes and 'Real Yield' are good examples.
I hope that there will be more and more tools in DeFi where one would hold a particular investment and get revenue from the efficiency and value of proposition protocols. This is exactly what many DeFi protocols are experimenting with right now.
Q: If the lack of liquidity is crucial for the DeFi sector, how is this problem solved?
The main problem of the modern DeFi sector is the lack of liquidity, which DeFi has been trying to solve by leveraging yield farming. The whole crypto market has dropped by about 60-80 percent, and we are seeing the same drop in liquidity
Liquidity
The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent
The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent
Read this Term.
Because of this, DeFi projects have a hard time managing capital, protocols are facing troubles with fundraising, and their tokenomics are weakened. The best solution to this problem would be to contribute to faster market growth in any way we can.
Q: Moving on to the nascent CeDeFi sphere. How do CeDeFi investment strategies benefit the user in the crypto market?
Since there is little liquidity in DeFi, investments in the sectors are currently very limited. This is a "which came first: the chicken or the egg?" type of issue. As DeFi tech is not intuitive, it takes time to figure out. Because of that, the number of users, and the onboarding chain, are both limited.
Our solution is CeDeFi investment strategies: building blocks for DeFi investments any user would be able to use with ease. By holding a tokenized strategy on our platform, one is actively managing their DeFi position. They don't waste gas nor keep 50 tabs open at once; they don't have to monitor all the metrics and worry about security – Midas takes care of it all.
Our main bet is that CeDeFi will become a much easier and more native way to enter the DeFi market, and we're doing all we can to make that happen.
Q: We all saw what happened to Celsius. How can CeDeFi overcome the disadvantages of the current asset management model and avoid Celsius-like problems?
The main problem with Celsius-like models is that, on the one hand, the company gives the lowest possible rates. At the same time, it tries to get the most out of the funds by taking risks. On the outside, the product looks safe, but in reality, it’s an illusion.
It leads to the fact that for those projects which have accumulated a lot of money, it becomes difficult to find a venture to put millions of dollars with enough liquidity, so they could withdraw it at once should the need come. This is what sank the ship of Celsius and others: they didn't have enough money to pay for all the withdrawals. It's a big problem for such a fixed-yield product.
CeDeFi is a different model where your money is invested into a strategy; you can go to a specific address and check all the stats, withdraw it or put it back in at any time. You are earning all the benefits the strategy offers and also facing its risks.
Q: Speaking of risks, what are the risks of CeDeFi investment strategies? Are there any ways to hedge against them?
The first, systemic risk of CeDeFi is the DeFi protocols. We manage it through on-chain alerts and 24/7 monitoring of all CeDeFi positions.
The second is the directive risk of the CeDeFi strategies. The performance of the strategies can go up and down, which, in turn, would affect the asset price. For each strategy, we create a manual that helps users understand the strategy, which market conditions it’s the best fit for, and how to balance the specific risks by leveraging other strategies or opening futures positions.
Q: To sum up, how do you see the future of CeDeFi investments?
I see CeDeFi strategies as the key to getting people into the DeFi sector quickly and easily. Through them, users can dive deeply into DeFi via comfy apps without spending a lot of time collecting information, analyzing and reviewing every protocol.
CeDeFi offers simplicity and, at the same time, efficiency in investments. Ultimately, all parties would highly benefit from using the CeDeFi investment layer.
