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This article is an interview with a cryptocurrency researcher and senior DeFi industry participant Hasu with a mysterious DeFi investor whose Twitter account is @DegenSpartan (hereinafter referred to as DS). This anonymous DeFi investor is an early investor in many well-known DeFi projects. His most well-known person is Synthetix’s “Patient Zero”, who is the first to discover the potential of this project. In the interview, he shared his experience in finding potential projects. In addition, unlike most people, DS is not optimistic about Maker, YFI and all other governance tokens.
Original title: Dialogue with the mysterious DeFi investment boss: How to get one step ahead and discover potential projects?
Wen | Wendy
The contents of this interview include:
- DS: Fallen or prudent investor?
- How did he discover (and sell) top DeFi projects?
- His investment approach?
- How to become “Patient Zero” of Synthetix?
- Why doesn’t he like Maker, YFI and all governance tokens?
The following is the complete interview content:
Hasu: First of all, thank you very much for joining our program, DS. I always think that your account is not only the most educational, but also the most interesting of all cryptocurrency tweets.
DS: Thank you for your invitation! I have been listening to your podcast when it started. I am a big fan of you, so being here is like a dream for me.
Hasu: You have an incredible story-from a retail investor who bought Ethereum at a high price in 2017-18 to one of the world’s largest DeFi investors. How do you do this? What makes you different from others who have the same experience?
DS: I’m not sure if I am the biggest DeFi investor, but maybe one of the more prolific participants. In fact, I am a retail investor and not a professional. I have a financial background. Before switching to cryptocurrency, I was an active investor in the traditional market. When I consider investing in cryptocurrencies, or what strategies to adopt in the market to make money, I think this background gives me a pretty good advantage.
Hasu: Can you introduce your skills and interests before you entered this field? In particular, what made you see the potential of cryptocurrency and DeFi and decided to become a full-time investor?
DS: Before entering the cryptocurrency field, I was a typical retail investor-focusing on stocks, bonds, real estate investment trusts, all investment strategies that ordinary people think can allow them to retire early. A popular concept at the time was “income investment”, that is, to find some business that can give you fixed dividends or income. This was a very popular investment concept at the time, allowing income to exceed expenditure to gain “financial freedom and early retirement.” Therefore, I am particularly sensitive to income-based investments. I will look everywhere for investments that can bring considerable income/dividends without putting capital at risk. What I want to say is that most products have a return rate similar to what you expect, or a safer product has a lower return rate. When I entered the crypto space, one of the first things I noticed was the rampant mispricing between exchanges and crazy arbitrage opportunities.
I kept comparing numbers and doing various calculations because I couldn’t believe it. There are many situations where you can use a few thousand dollars to earn a net arbitrage return of $50. I have seen this happen to multiple trading pairs several times a day. Of course, the net income of $50 is not that much, but if you can do this several times a day and the market is open 7 days a week… I did some calculations, and what surprised me was that arbitrage can be amazing. s return. And this operation is completely manual!
After arbitrage for a period of time, this made me firmer in my opinion-the cryptocurrency market is very inefficient, and this inefficiency also means profit opportunities. This is my motivation to enter this market.
Hasu: Going back to what you said at the beginning, you said that you were a fixed income/dividend investor at the beginning. I was very interested in this because it confirmed my hunch to some extent, although you created a “Degenerate” investor’s personality, but in fact you are a very cautious risk manager. We must talk about this topic-why did you decide to choose “degenerate” (referring to the word Degen in DS Twitter username) as your username?
DS: Haha. Maybe in the future when no one really believes that I am a fallen one, I should reshape myself into PrudentSpartan. (Cautious warrior) When I created my own personal settings, I didn’t want to limit myself to any specific currency or project, so I deliberately avoided including things like Bitcoin in my name. ——I want something more neutral, but I also want something that reminds me all the time that cryptocurrency is a very crazy field, and anything can happen.
I think my depraved person setting has played a very good role. It can serve as a very obvious warning for others to think about what I am talking about. But I never thought I would have so many fans. Sometimes, I really hope that those new fans who don’t understand my stalk and humor don’t take everything I say seriously.
Sometimes I worry that when I make jokes about my trading strategy, others will copy orders because of my influence. I think that by constantly doing some psychological construction, I have successfully minimized most of the copying behavior, so that fans can think before imitating me.
As for why there are Spartan (Spartan Warriors), it’s purely because they are great and cool, right? *laughing out loud*
Hasu: I really like the “psychological construction” you did on Twitter, because it can trigger some of my thinking, and many Twitter veterans can’t insist on this. But I think what impressed me the most is that you are not like most people on Twitter, but DeFi is the only one. You have been exposed to DeFi very early, but at the same time you are the first to say “I think this industry is developing too fast”. Why can you do this? What signal did you see?
DS: The peak of DeFi prices at the end of August was a very, very crazy time for me, and liquidity mining was booming. I want to say that the beginning of the DeFi hype may be the launch of COMP. Basically, from that day on, I sleep for 3-4 hours a night, trying to grasp all the information. I have been in this field for a while, so I think I have good endurance as a participant, but this situation lasted for several weeks. But the problem is that the quality of the things that came out afterwards is indeed rapidly deteriorating: after YAM, there are a bunch of replicas named after food. After YFI, there are a bunch of “fair release” copies inspired by YFI…
When people realize that the optimal strategy is to exit earlier than others, the cycle of each new project becomes shorter and shorter, and then everyone tries to cash out before everyone else. At first, YAM used-I think-two weeks are over? The last food coin mining I saw crashed in a day or two!
Of course, as a heavy DeFi user, I have been very active during this entire period. From one coin to another, standing on the front line and seeing how bad each subsequent project is, this tells me that this madness will be very It’s almost over!
From my personal point of view, I think Sushiswap is the pinnacle. This is by far the most risky form of DeFi mining in this field. Before that, only if you are brave or stupid enough to participate in the “second pool” of the mining project, you will take risks (except for malicious or other smart contract risks).
Sushiswap can be said to have forced all these mining participants who have never provided liquidity before to suddenly inject hundreds of millions of liquidity into Uniswap.
Prior to this, one problem with DeFi tokens was that they were very liquid. Nowadays, as Sushiswap encourages everyone to provide mobility, it creates a huge opportunity for those seeking to exit and eventually leave this huge ocean of mobility.
By participating in Sushiswap mining, I make a lot of money every day. This is unrealistic. I say to myself every day: This is so stupid, it doesn’t make any sense, what could be more stupid than this? I make a lot of money every day. This feeling scares me. It makes me stop and think, maybe I should leave. The last time I had this ridiculous idea was at the peak of 2017, when I did not handle it well, haha.
Hasu: Do you mean that once the rewards are over, not only will the prices of these tokens collapse, but some big players will stop providing liquidity?
DS: I guess like YAM and YFI, there may be more copies of sushi using Uniswap LP shares as a’pool’ of mining assets. We do see examples such as sashimi and Moonswap… but like Like the rapid collapse of all replicas later, my opinion is that none of them can provide as much liquidity as Sushiswap in the initial stage of return. The shrinkage of liquidity may cause large investors to withdraw when liquidity is still available. In the past month, basically everyone’s mining has reached a few hundred percent annually… How many people want to transfer these assets to their native protocols, hoping that they can be used reasonably? How many people take the risk of potentially reducing returns significantly (relatively speaking) or nothing?
I think it is (1) the increasingly crazy mood of DeFi mining and (2) it is difficult to replace the mining model of Sushiswap. The combination of these two points makes me feel that the market may go down and this crazy cannot last forever. Digital food mining is not a machine that makes money for free forever, haha.
Hasu: There are some projects that have made you a lot of money and can be sold, but how do you control yourself?
DS: One thing I am different from other traders and even investors is that I never have a clear target price. For me, the decision to buy or sell should be based on the perception of the project. If the price rises, but there are still many people who are skeptical, or you hear someone say that this is just the beginning of an experiment, I would think that there are more bystanders to continue this feast. I think who will buy these coins next is a very important question. Will anyone buy them after that? But this is definitely art rather than science. You can sell it bit by bit. Before you sell coins, see if everything goes well. Every price peak has two sides, but some people seem to forget, you can also choose the right time to sell after the price peak! As long as you don’t have the mentality of’oh my god, I didn’t sell at the highest point’, then you can control yourself.
Hasu: How do you assess market sentiment?
DS: I think it’s really difficult, but that’s one of the reasons why I often follow Twitter. You can observe what happened. Observe what people do, how they feel, and what their next plan is. These can all reflect everyone’s point of view. I will use a lot of different social media to observe, and chat with other investors to understand their feelings, and then try to figure out what different types of participants want to do next. This may be a very silly way of doing things. I believe that some statisticians will be scared of what I just said and may give me a wink, even though I think this method is quite useful. But I don’t know what better way, haha!
Hasu: I always believe in practitioners in these kinds of things. What do you think of your investment method? You mentioned emotions, but I always feel that you are a very fundamental person. How long do you usually hold a position, and will you go long and short at the same time?
DS: I think so far, my approach has been to be a reverse investor, find a rather unpopular theory and investment, and figure out whether there really are fundamentals that can reverse its destiny. This basically means that I try to research in areas that professionals don’t care about. This means that I am not competing with smarter and more talented people. If it is fair competition, I am definitely the one that fails. Instead, I won before they knew the game started. This makes my job as a capital allocator easier, because I don’t need to accumulate positions while competing with others, and they won’t bid to raise my average investment price. Of course, I am not concerned with all unpopular items. This idea must also have some truth. Combining a rather unpopular project with fundamental improvement, I think this is the secret to high profits.
As long as I think there is room for upside, I will keep holding it, but I may reduce the size of my position if it is too large compared to my other portfolios. I almost never go short because I am really bad at short shorts, and considering how irrational the crypto market is, I think short shorts are much more difficult and risky. I don’t think that short selling is worthwhile, unless there is really obvious play, I will use collateral and liquidity to open the short!
I think it’s definitely easier to go long in the crypto market than go short. During the recent decline in the DeFi sector, I was very upset about being short. I kept wondering, when can I return to the bull market, I just need to call for orders? Haha!
Hasu: Next, I want to know what you think of some projects. Compared with other projects, you and Synthetix are deeply connected. You are called the “Patient Zero” of this project and attract many large investors. Do you talk to us about Synthetix? When did you discover it? How did you discover its potential?
DS: Patient zero, very interesting statement!
Hasu: You have never heard such a statement before!
DS: I think the best understanding of Synthetix is a derivative or synthetic agreement. You can go long or short the supported synthetic assets. Since these positions are synthetic, these assets are not limited to ERC20 tokens, but also cover non-Ethereous encrypted assets such as Bitcoin and Ripple, as well as non-encrypted assets such as precious metals and stock indexes. There are almost no restrictions-as long as there is a source of price somewhere, it may become a synthetic asset on this platform. To be honest, I think I think Synthetix is mostly a blind cat and a dead mouse. Synthetix was originally called Havven, which was a decentralized stablecoin project. What they were doing at the time was to tag the protocol fee every time a transaction was completed. But GUSD, USDC, and of course, centralized stablecoins such as USDT, have almost eliminated all stablecoins that need to be charged for each transaction.
In my opinion, the switch to synthetic assets is a success. But as far as I know, this process is more of a change in the community’s mentality of this project, rather than a technical change, because it still has a leveraged debt pool model. Havven was also based on this in the beginning-they just Discovered that consolidating debt can do more. I guess I was also convinced by this change, haha. I think it’s easier for me to accept and digest this change because I technically understand why they want to change and what they are trying to do with their new direction.
I still believe in my luck, but the main thing is that the wisdom of the Synthetix team realized that they can do bigger things, which is why SNX is a good investment for me, haha!
Hasu: I still remember reading articles about Havven before. At that time, I thought that their mode of charging transaction fees for transfers might not be sustainable, but unlike you, I stopped following them from that moment. Since then, how have your views on Synthetix changed? Are you satisfied with their current direction? What do you think they will achieve in the end?
I think the most important question is, when will they be able to issue independent US securities with confidence? Will that be a watershed in the entire field of synthetic assets?
DS: Maybe not many people in the community have such aspirations like me, but I really hope to see synthetic stablecoins other than the US dollar used for purposes other than transactions and become an alternative to the’official’ digital fiat currency Product. Synthetix is unique in design because it can actually assist in the implementation of various fiat currency versions of cryptocurrency and overcome the liquidity problems that any custodian will encounter when interacting with other parts of the market. Maybe someday in the distant future, this may happen!
I think the future of Synthetix is to become a multi-asset version of BitMEX, allowing traders to trade multiple assets, including short or long, and can choose to use leverage.
As for independent U.S. securities, maybe it will happen after the further decentralization of this project (so that it will not be affected by regulatory actions)? I think we are rapidly approaching a time when the team cannot control everything and is therefore’fully decentralized’. At that time, you can’t call everyone into a room and then ask them to stop trading.
In fact, I think the watershed moment will be a second-tier perpetual swap transaction with leverage, rather than independent US securities.
Hasu: The way to trade on BitMEX is that they only allow external market participants to match each other, therefore, each customer’s long position must match another customer’s short position. Therefore, no matter what transactions happen on its platform, BitMEX will not generate any balance sheet risk. The difference between Synthetix is that SNX pledgers will choose outstanding synthetic assets. For example, each sUSD corresponds to short USD-SNX, each sBTC corresponds to short BTC-SNX, and so on.
Do you think there are any major risks in this approach? What measures does the pledger need to take to hedge risks?
DS: Yes, that’s why the sustainable model is a watershed for me. At that time, the agreement will be aware of the imbalance in the position, and there will be a capital ratio to enable people to balance their positions. I started paying attention to this issue very early, so I really want to see this upgrade. I hope it can compress Synthetix’s risk exposure to a narrower range and reduce the risk of serious offside.
The current hedging model is still relatively clumsy. In fact, I think people are not worried enough about it! However, Synthetix came up with some expedient measures to pay for short sellers through BTC or ETH pledge reverse synthetic positions. Since the project went live, the imbalance in positions and the risks taken by minters have been greatly reduced, at least in my opinion. I think this is a small success now, but I really think this method is not too particular.
Hasu: Yes, I found that the output and pledge of iBTC and iETH can be rewarded, because it helps reduce the risk of the pledger to some extent. I also think this is a step in the right direction. Speaking of Havven, sUSD, etc., another project that you (and I) have bluntly criticized in the past is Maker. Can you tell me why you don’t like it?
DS: Oh my goodness, Maker again, haha. My main criticism is their design, which I think is inadequate, because it lacks the ability to deal with negative interest rates and charge DAI holders to maintain stability, or from another perspective, it cannot stimulate the creation of DAI supply . Another thing I have doubts about the Maker design problem is that this is a three-party system:
- DAI holders/users
- DAI supplier/CDP holder
- And MKR holders
I think this three-stakeholder system creates a strange tension in every situation and decision, because it seems that one party will always become a “loser” and the other two parties will benefit from it. The last point is not about the agreement, but about the accrual design of their token value. I don’t like the buy-and-burn model, because you need to consider the going concern and secondary market bidding. I prefer the fee collection and distribution model because it is more direct and selfish, but I think this may be a safe tax avoidance/tax decision.
Hasu: What do you mean by going concern?
DS: When you finally want to sell, it may continue to be profitable indefinitely. Contrary to the cost allocation model, if it ceases to operate, at least you have “recovered” some of the investment from the allocated costs.
Hasu: After the market crash in March and Compound mining caused the Dai price to continue to soar above $1.05, I think it will reach a boiling point and eventually be forced to integrate negative interest rates. But what they did was to introduce centralized stablecoins into the system—not even to collect stability fees from them. What is your opinion on this? They will focus on integrating real-world collateral, rather than issuing more synthetic assets (not just dai) with the same trustless collateral.
DS: Yes, I think that the acceptance of centralized stablecoins as collateral does affect the positioning of “as a purely decentralized stablecoin”, but Maker still enjoyed such a positioning before. Many of the most steadfast supporters have to conduct a lot of self-reflection to determine whether this direction is really something they can support. I think their community has had a lot of differences since March. I really want to tell myself that everything they do is planned in advance, but this is too easy for their supporters to divide. To be honest, I really don’t know what their future is. Their holders seem to be out of touch with reality. It took them several months to accept LINK as collateral, while MANA has always been collateral? I do not understand. I don’t know what they are doing. At this point, I see Maker as an entertainment. What is their future? I do not know.
Hasu: The last project I want to talk to you about is Yearn finance. I believe that you have been skeptical of them in the past and have not believed in hype. Why are you not optimistic about this project? When YFI first reached 40k, would you doubt yourself?
DS: I was not optimistic about this project from the beginning. I have been familiar with yCRV and iEarn products for a while, because I always keep my goal of pursuing revenue. I hardly want to mine YFI, because I was thinking,’What will they govern, and why do they govern? What product flow do they manage? Where are the fees they can vote for token holders? ‘But of course the price of tokens is crazy, so of course, it is difficult for me to mine YFI. I don’t understand why people buy this currency. Has Andre promised that he will work for all YFI holders for free before retirement? To be honest, I am confused about Andre’s behavior of releasing new things under YFI’s umbrella.
For example, are yVaults really yVaults? For me, they can easily become AndreVaults, and Andre himself is charging for the maintenance and management of the machine gun pool. But I guess what he wants is a body that can organize itself. I didn’t expect Andre to continue to make something and inject them under the YFI umbrella.
Not long after yVaults, Curve launched CRV and guided these machine gun pools to mine. This is an excellent time for this field, which is very profitable for everyone involved. Everyone was excited about the’cash flow’ flowing in from the machine gun pool. But are these cash flows sustainable? In my opinion, absolutely not. In this world, a return rate of more than 20% is an anomaly that will be corrected sooner or later.
Of course, seeing the price of tokens rise, there will always be such an idea: damn, if I keep holding until now, I can make more money! But fundamentally, I can’t do this, I can’t buy the coins back. It doesn’t make sense to me. I can appreciate it as an interesting trading combination, but when I start thinking about the fundamentals, those numbers are meaningless to me. Maybe I was really offside. I think I can only accept reality. You cannot capture every cryptocurrency with potential. Even if I have YFI, I don’t have the belief to hold it, which is why I sold it while holding it, haha.
Hasu: I think your point is very reasonable. If the opportunities for liquid mining in the future are not significantly reduced, I would be really surprised, especially when the large capital pools are completely transparent, and other parts of the market can also be copied for free. Now that you mentioned Yearn’s governance capabilities, this brings me to my last topic today. You have always been skeptical of governance tokens. Are you a minimalist?
DS: I have never really considered what kind of person I belong to, but yes, I think I would say that I am a minimalist in governance. Looking at the real world, it does more harm than good! Governance tokens are valuable because they can vote on fees in the future. I disagree with this idea. Governance tokens have difficulty voting on the fees of token holders, and the tokens have not gained strong value. Is Maker a good example?
I feel that the holders of governance tokens, compared to the value they create, are largely free-riding. Can holding YFI and uncensored governance proposals create value? Or are the builders operating under the YFI umbrella the ones who create value? Who is creating value and who is earning value is very strange to me.
Perhaps tying governance tokens with more quantifiable work, rather than just voting on proposals, may be a better way for holders to become value creators, rather than (in my opinion) free-riders .
Hasu: Well said, thank you very much for taking the time to interview.
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