The Best and Worst DeFi Investments of 2021
Level 2 - Value Investor
Welcome Avatar! This is a time of year when we work hardest: reviewing the lessons learned this year and laying the groundwork to achieve our goals in the next. Today we cover our personal best and worst performing DeFi investments this year.
We’re going to ask you to share your best and worst investments with us in the comments, together with something important you’ve learned from your travels in DeFi.
Let’s go!
Iguana
Peak Midwit – Olympus DAO (“Oh, a ponzi”)
Early in August there was talk of a coin aspiring to be the reserve currency for crypto. The project seemed to be selling tokens backed by $1 of reserves for … $275. And then using some of the $274 profit to pay out staking rewards (nosebleed APY into the tens of thousands of percent). Seems like a ponzi, midwitted the lizard (who didn’t invest). Opportunity Cost: roughly, 3x of a 2% degen position (6%).
In hindsight the mistake was not to recognize the strength of the marketing. Our readers are sharp and OHM was the most requested coin on DeFi Education. (OHM: The Meditation Token). Our post on portfolio construction and risk management did help some cartoons rebalance their OHM down to a sensible degen percentage of portfolio when OHM’s market cap was around $3.6bn.
Worst DeFi Investment – Fish Coin (long term investment)
From our research item on Sushi – (part 1 and part 2):
“Iguana: ~4.6% of crypto portfolio, largest altcoin position. The staking yield (recent average 9.95% APY) and growth prospects make Sushi an attractive holding. Strong tech team and the project continues to innovate, recent example the yield bearing limit order feature.”
As covered in our post Sushi Update: Rekt…?, departures of two senior members of the Sushi team amid allegations of unprofessional conduct have weighed heavily on the token price. Purchasing BTC or ETH tokens in July-August was rewarded with a breakout to record highs, fish coin lost 50% of its value against ETH. Iguana’s worst trade of 2021. Loss: 50% of a 5% investment = -2.5%.
Best DeFi Investment – Nexus Mutual (buyback)
DeFi research finally pays off! Lots of nothing then step function.
Nexus Mutual is a DeFi protocol which provides cover for smart contract risk - DeFi Education covered an intro to DeFi insurance, and research item on Nexus Mutual (part 1 and part 2) this year.
We leaked the alfa last month.
In the 5 days following this tweet, the Mutual repurchased 4,370 ETH worth of WNXM token at an average price of 0.01923. (Dune Analytics, credit @Muir)
Did better than expected mostly due to timing luck and aggressive size (since NXM tokens have a share in the Mutual’s ETH capital pool, so lower risk than a degen play). Double digit gain on portfolio.
Owl
Best DeFi Investment – Rari Capital
Best: In $ terms, RGT. Bought at ~$8 and doubled down in May ($6). Kept buying as part of my regular DCA stack over the summer and sold a good chunk above $40. Still have some left but price has gotten crushed due to merger dynamics. I will participate in the merge and hold the rest as a moonbag.
On the RGT front, I learned 1) sometimes you have to hold through pain for a long time for the market to catch-up (sidenote: 6 months feels like forever but a 5-10x in 6 months is a very high return in trad markets) 2) people don’t care about one-off hacks *if* team is solid + keeps going and 3) never hurts to sell into a major upward move on an altcoin. Be disciplined about position sizing and portfolio allocation. If your 2% early-stage high risk investment becomes 20-30% of your portfolio it’s probably a good time to revisit your upside/downside analysis.
Worst DeFi Investment – Sushi
Sushi as well. My numbers look about the same as Iguana’s. Have had worse performers on a % basis (BSC shitcoin trading earlier this year), but in $ terms sushi is the biggest DeFi loss I’ve taken due to position size.
Despite far more transparency in crypto than any other industry, it’s hard to know the true state of a DAO from the outside. As such, you have to look for indicators that give hints as to what the state of affairs is internally. For example, sushi had constant delays on product launches. That should’ve been a sign for me to cut losses earlier. At the same time, Uniswap was eating even more market share and sushi’s horizontal expansion strategy wasn’t working (other products were not gaining traction). Of course, hindsight is 20/20.
Price has rebounded quite a bit (sitting at ~$9 as of time of writing). Sushi recovery to $15-$20 range from here would be max pain scenario.
That’s us!
We’ll open it up for discussion here. Let us know your:
Best DeFi investment for 2021
Worst DeFi investment for 2021
Any lessons you’d like to share
Note: focus on position size here, not just percentage. If you have a $100K portfolio and did a 10x on $500 compared to a 3x on $25K, the 3x investment added way more value.
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Disclaimer: None of this is to be deemed legal or financial advice of any kind and the information is provided by a group of anonymous cartoon animals with backgrounds in Wall Street and Software.
Best investment was Dopex Public Sale. Worst investment was Chainlink, down bad in ETH terms. Most valuable lesson learned was that even if it is fundamentally a great product, if the tokenomics are shit you're probably going to lose money.
Best trade was spell-- 13x
Worst was missing out on cvx when it was cheap. Sad!