We spoke with Trevor, CEO of Midas.Investments, about DeFi, how to find DeFi gems, and Midas.Investments DeFi strategy based on real investments.
Trevor assured us at the start of our happy hour that there is no doubt that DeFi is the future of finance. “These days, everyone talks about the DeFi world; there are a lot of fresh publications-articles about it, as well a lot of new researches are done on the topic.” We asked him what is his personal view of DeFi?
He said that it is difficult to explain in a few words, but thinks, that DeFi is the future of finance since it is a far more efficient system than the current finance system. “DeFi is not only about finances, but also about broader economics and how value is distributed among individuals, and on top of that, there are a lot of fantastic trends“. He sees a lot of outstanding teams building the foundation on which not only finances, but our entire world transactions, will be constructed. “DeFi is innovative, somewhat complex technical stuff, and if you do not understand it, someone will understand it for you” he added. We then asked him how long he believes it will take for DeFi to become commonplace method – way of transferring and using funds?
“I’m hoping we’ll have enough time to profit from this “marriage.” It literally took roughly 30 years to completely utilize all of the internet’s capabilities, and nowadays information is delivered much faster, therefore I believe we have 5 to 15 years to pass critical keystones in the DeFi world. To fully change to a DeFi-based economy, it must be accepted by the world’s countries (possibly regulated). And for this to happen, we need one fantastic DeFi use case, and as we can see, countries are only now attempting to get their hands on BTC, which will take some time. We don’t need to live in a “tokenized” society where you can buy a car or a house with NFT.” He went on to say that he believes it is only a matter of time before major financial institutions and players recognize DeFi as the superior system for almost everything – since it is much more scalable and adaptable than traditional finances. He was asked if he would move all his capital to trustful DeFi instruments?
He responded that, outside from BTC, Midas, and Ethereum, he has almost all of his capital in DeFi instruments. He has taken long positions on crypto fundamentals just by establishing a crypto firm. “If cryptocurrency increases, so will my business.” As he says, the greatest crypto approach if you don’t have a crypto business is to simply buy some BTC each month and hold it on Midas or Ledger. The next inquiry concerned the specific instruments he employs in DeFi and where he invests in them?
He stated that it is dependent on market conditions. “Our staff in the DeFi investment department is reviewing everything that has already been reviewed – every blockchain with smart contracts that include DeFi. We mostly focus on Ethereum. We are currently researching Uniswap version 3, which is similar to active liquidity provider management, and here is where our Algo trading and DeFi competencies come into play because we can optimize the liquidity pools. Our tests reveal that big liquidity pairs like Ethereum can yield up to a 30-40% return on investment. We employ a variety of instruments; for example, if we locate tokens, we have a position on Sushi swap, which has a leverage of 1.5 on larger signals. We are very bullish on Sushi. As a result, we do not hedge this position. And by hedging, I mean going and shorting Sushi on 20% of the collateral we have in liquid to collect yields”.
We then asked him how they analyze DeFi project – what is the best algorithm for analyzing default protocols and deciding whether or not to invest in one?
Trevor explained that they employ the so-called “Trinity of fundamental DeFi analysis,” which you can apply for any analysis and drift off like, by any fundamental — it is the approach of uncovering gems, not low cap gems, but unfulfilled opportunities, such as inefficiencies for token appreciation. “There are three criteria in socially responsible investing. The first is short-term investing, which focuses on revenue and earnings and provides all of the data on how dynamic it is. It is what the majority of investors desire and seek. The second is mid-term investing, in which you observe and study the people who go through the system, what experiences they have, and what deficits they have—like it’s recognizing “inner brain energy” as the foundation for adaptability. The third option is long-term investing, in which you want to invest in something that has societal benefit (it turned out to be the winning strategy over years). If a corporation does not add social value to society, it will most likely fail.”
We then discussed how socially responsible investing (SRI) fits into DeFi. He emphasized that you have the first core, which you can analyze — it’s all about statistics, he said. You have protocol revenue and treasury-how much money the protocol has at its disposal. “You are going to seek liquidity, how much degree to pass how many users it has, and that is the most significant question in terms of short-term investing. On the second part, you have “tokenomics”, which is the only option for you to profit from protocol revenue. The key premise is as follows: the protocol has long-term revenue streams and aids token growth (this is the basic block). The visible community/investors are the second factor in short-term protocol revenue (venture capital). When you evaluate that, you just join the community and attempt to be a part of it, so you can see what the community proposes and what they want to change about the protocol. Long-term investing is one of the most difficult things to do. It will take time for any investor to recognize that level of complexity, which is why you must conduct thorough research. And there will be no cumulative impact for growth if there is no long-term value in some form of DeFi. Then there’s the possibility of this protocol in the new decentralized economy (network) where there are partnerships”.
He went on to say that if you invest in DeFi, you must understand layers of value since the protocols rely on one another to create more efficient systems, and you must also understand how they may evolve and have this network impact.
When it comes to Sushi, Trevor believes their economics should be improved; they offer staking at around 11 percent. However, in terms of a team, they have an incredible team behind them, which is integrated with other teams and has many partnerships with numerous DeFi projects. In terms of long-term potential, Sushi has an upcoming Trident release, which basically has Uniswap version 3; it has balancer built in it, and liquidity polls – basically everything.
Then Trevor explained to us why Midas invested in Badger Finance (they bought it in July). Badger Finance is a Bitcoin-centered product ecosystem built on Ethereum DeFi. Behind the initiative is a fantastic team that is continually adaptable and imaginative in response to changing conditions. They got the project off to a wonderful start by simply adding dropped tokens to everyone who participated in protocols that they were interested in. Trevor then explained why the Badger token had dropped so dramatically: “The yields and interest rates on the Badger Finance went down, and they had to finance interest rates with badger, causing the coin to drop down to $8 (from the ATH of $80). So you have poor economics but consistent revenue streams from protocol utility. And in order to do so, they had to redress BTC, which allows you to transfer BTC between blockchains. They also sit on a massive treasury, which they solely use to fund grants. There were some significant changes in July. To begin with, they constantly delivered products, one of which was a new partnership with Convex finance, which increased yield rates. Previously, you had to lock a certain amount of modular to receive the maximum yield, but the plan was to change it to be more flexible and exponential. So you need to back up all of your funds with Badger or their other token to get the maximum yield (Midas aimed to buy cheap Badger to get the best BTC rates).”
At the end of our happy hour, Trevor responded to some of our listeners` questions, which mostly concerned assessing some of the DeFi projects (for example, one of Trevor`s favorite Olympus). He also spoke briefly about Midas` upcoming projects, including dividend tokens and the DeFi Midas app.