Evegny Gokhberg: Market neutral DeFi strategies are essential for volatility, why diversification isn’t enough to manage risks, and the future of capital in DeFi

Market-neutral DeFi strategies are emerging as a safe haven amid crypto’s volatility and risks.

Key Takeaways

Market neutral DeFi yield strategies aim to earn yield without being affected by price direction.
Building a business on a market neutral foundation is crucial due to crypto’s inherent volatility.
In the early days of DeFi, stablecoins could yield significantly high returns.
The unique risk-return profile in crypto is based on software platform hacks, uncorrelated with traditional assets.
Diversification in DeFi is insufficient alone to effectively manage risks.
DeFi risk is likened to selling a put option, earning returns until a catastrophic event.
A framework can categorize blockchain attack vectors to assess risk and diversify investments.
DeFi’s annual default rate has decreased from double digits to 2-5%.
Engaging with DeFi platforms requires understanding the primary risk of loss from hacks.
The DeFi market remains structurally starved of capital despite new platforms.
Supply and demand dynamics in DeFi will continue to favor allocators.
On-chain trading strategies’ returns vary significantly with market conditions.
Diversification is key in managing risk in on-chain trading strategies.
Holding assets is preferable if they remain structurally sound and communication with the team is strong.
The philosophy of diversification is crucial in the uncertain DeFi landscape.

Guest intro

Evgeny Gokhberg is the founder and managing partner of Re7 Capital, a DeFi hedge fund specializing in market-neutral yield strategies and on-chain risk management. He previously worked in investment management at UBS and Deutsche Bank, managing equity long/short portfolios, before transitioning to crypto in 2018 at Everledger. Re7 Capital has deployed approximately $1.2 billion in DeFi liquidity provision since its founding in 2021.

Market neutral DeFi strategies

Market neutral strategies focus on earning yield without price direction impact.
— Evegny Gokhberg
Building a business on market neutral foundations is essential due to crypto volatility.
— Evegny Gokhberg
Early DeFi days allowed for high stablecoin yields.
— Evegny Gokhberg
The unique risk-return profile in crypto is based on uncorrelated software platform hacks.
— Evegny Gokhberg
Diversification in DeFi is not enough to manage risks effectively.
— Evegny Gokhberg

Risk management in DeFi

DeFi risk resembles selling a put option, earning returns until a catastrophic event.
— Evegny Gokhberg
A framework can categorize blockchain attack vectors for risk assessment.
— Evegny Gokhberg
DeFi’s annual default rate has decreased significantly.
— Evegny Gokhberg
Understanding the risk of loss from hacks is key to engaging with DeFi platforms.
— Evegny Gokhberg
The DeFi market is structurally starved of capital.
— Evegny Gokhberg

Supply and demand in DeFi

Supply and demand dynamics in DeFi favor allocators.
— Evegny Gokhberg
The cyclicality of yields in DeFi impacts performance more than capital demand.
— Evegny Gokhberg
Multiple layers of risk exist when holding crypto assets.
— Evegny Gokhberg
Convergence of CeFi, DeFi, and TradFi is expected over time.
— Evegny Gokhberg

On-chain trading strategies

On-chain trading strategies’ returns vary with market conditions.
— Evegny Gokhberg
Diversification is crucial to managing risk in on-chain trading strategies.
— Evegny Gokhberg
The philosophy of diversification is crucial in the DeFi landscape.
— Evegny Gokhberg
The firm aims to remain flat on the year despite volatility.
— Evegny Gokhberg

Bitcoin and altcoins

Bitcoin is viewed as digital gold; other crypto are software businesses.
— Evegny Gokhberg
Altcoins are undergoing a cleansing process, with most expected to lose value.
— Evegny Gokhberg
The crypto market resembles early Silicon Valley startups.
— Evegny Gokhberg
A dual approach of top-down and bottom-up analysis is needed in crypto.
— Evegny Gokhberg

Investment strategies in crypto

Investing in crypto requires balancing established businesses and speculative bets.
— Evegny Gokhberg
In an unforgiving market, patience is better than frequent trading.
— Evegny Gokhberg
Holding assets is preferable if they remain structurally sound.
— Evegny Gokhberg
The last part of the market cycle is crucial for altcoin gains.
— Evegny Gokhberg

Market dynamics and liquidity

Investors should approach trading with a clear understanding of risk.
— Evegny Gokhberg
Compounding gains in crypto is more effective by holding assets.
— Evegny Gokhberg
FOMO is a major destroyer of returns in the market.
— Evegny Gokhberg
Current market volatility may be related to liquidity issues.
— Evegny Gokhberg

Market forecasts and opportunities

There is hope for positive market movement if critical levels are held.
— Evegny Gokhberg
The market shows stability and altcoin outperformance compared to Bitcoin.
— Evegny Gokhberg
The current market resembles small caps versus major stocks.
— Evegny Gokhberg
Investors should not panic sell during market distress.
— Evegny Gokhberg

Disconnect between fundamentals and price

There is a significant disconnect between DeFi fundamentals and price performance.
— Evegny Gokhberg
Liquidity is a dominant factor affecting market narratives.
— Evegny Gokhberg
Lack of liquidity causes underperformance in software and crypto assets.
— Evegny Gokhberg
Gold’s rise attracts attention away from marginal assets like SaaS stocks and Bitcoin.
— Evegny Gokhberg

Banking system and leverage

The banking system can create significant leverage through regulatory changes.
— Evegny Gokhberg
Re-leveraging in the banking system will increase liquidity and impact the business cycle.
— Evegny Gokhberg
Current market conditions indicate a lack of sufficient liquidity.
— Evegny Gokhberg
Gold peaks often precede Bitcoin’s performance, indicating potential market shifts.
— Evegny Gokhberg

Risk tolerance and investment decisions

Risk tolerance is crucial for investment decisions, especially in volatile markets.
— Evegny Gokhberg
Investors should consider a benchmark like ETH to manage risk.
— Evegny Gokhberg
Higher beta assets experience larger drawdowns compared to major crypto.
— Evegny Gokhberg
Investors need to be realistic about their risk tolerance and potential losses.
— Evegny Gokhberg

Market corrections and opportunities

The current market correction does not indicate the entire crypto market is broken.
— Evegny Gokhberg
The market could change rapidly, but a prolonged downturn is not imminent.
— Evegny Gokhberg
Current market conditions should be viewed as an opportunity, not a signal to abandon.
— Evegny Gokhberg
Market noise will ultimately be just that—noise.
— Evegny Gokhberg

Market-neutral DeFi strategies are emerging as a safe haven amid crypto’s volatility and risks.

Key Takeaways

Market neutral DeFi yield strategies aim to earn yield without being affected by price direction.
Building a business on a market neutral foundation is crucial due to crypto’s inherent volatility.
In the early days of DeFi, stablecoins could yield significantly high returns.
The unique risk-return profile in crypto is based on software platform hacks, uncorrelated with traditional assets.
Diversification in DeFi is insufficient alone to effectively manage risks.
DeFi risk is likened to selling a put option, earning returns until a catastrophic event.
A framework can categorize blockchain attack vectors to assess risk and diversify investments.
DeFi’s annual default rate has decreased from double digits to 2-5%.
Engaging with DeFi platforms requires understanding the primary risk of loss from hacks.
The DeFi market remains structurally starved of capital despite new platforms.
Supply and demand dynamics in DeFi will continue to favor allocators.
On-chain trading strategies’ returns vary significantly with market conditions.
Diversification is key in managing risk in on-chain trading strategies.
Holding assets is preferable if they remain structurally sound and communication with the team is strong.
The philosophy of diversification is crucial in the uncertain DeFi landscape.

Guest intro

Market neutral DeFi strategies

Market neutral strategies focus on earning yield without price direction impact.
— Evegny Gokhberg
Building a business on market neutral foundations is essential due to crypto volatility.
— Evegny Gokhberg
Early DeFi days allowed for high stablecoin yields.
— Evegny Gokhberg
The unique risk-return profile in crypto is based on uncorrelated software platform hacks.
— Evegny Gokhberg
Diversification in DeFi is not enough to manage risks effectively.
— Evegny Gokhberg

Risk management in DeFi

DeFi risk resembles selling a put option, earning returns until a catastrophic event.
— Evegny Gokhberg
A framework can categorize blockchain attack vectors for risk assessment.
— Evegny Gokhberg
DeFi’s annual default rate has decreased significantly.
— Evegny Gokhberg
Understanding the risk of loss from hacks is key to engaging with DeFi platforms.
— Evegny Gokhberg
The DeFi market is structurally starved of capital.
— Evegny Gokhberg

Supply and demand in DeFi

Supply and demand dynamics in DeFi favor allocators.
— Evegny Gokhberg
The cyclicality of yields in DeFi impacts performance more than capital demand.
— Evegny Gokhberg
Multiple layers of risk exist when holding crypto assets.
— Evegny Gokhberg
Convergence of CeFi, DeFi, and TradFi is expected over time.
— Evegny Gokhberg

On-chain trading strategies

On-chain trading strategies’ returns vary with market conditions.
— Evegny Gokhberg
Diversification is crucial to managing risk in on-chain trading strategies.
— Evegny Gokhberg
The philosophy of diversification is crucial in the DeFi landscape.
— Evegny Gokhberg
The firm aims to remain flat on the year despite volatility.
— Evegny Gokhberg

Bitcoin and altcoins

Bitcoin is viewed as digital gold; other crypto are software businesses.
— Evegny Gokhberg
Altcoins are undergoing a cleansing process, with most expected to lose value.
— Evegny Gokhberg
The crypto market resembles early Silicon Valley startups.
— Evegny Gokhberg
A dual approach of top-down and bottom-up analysis is needed in crypto.
— Evegny Gokhberg

Investment strategies in crypto

Investing in crypto requires balancing established businesses and speculative bets.
— Evegny Gokhberg
In an unforgiving market, patience is better than frequent trading.
— Evegny Gokhberg
Holding assets is preferable if they remain structurally sound.
— Evegny Gokhberg
The last part of the market cycle is crucial for altcoin gains.
— Evegny Gokhberg

Market dynamics and liquidity

Investors should approach trading with a clear understanding of risk.
— Evegny Gokhberg
Compounding gains in crypto is more effective by holding assets.
— Evegny Gokhberg
FOMO is a major destroyer of returns in the market.
— Evegny Gokhberg
Current market volatility may be related to liquidity issues.
— Evegny Gokhberg

Market forecasts and opportunities

There is hope for positive market movement if critical levels are held.
— Evegny Gokhberg
The market shows stability and altcoin outperformance compared to Bitcoin.
— Evegny Gokhberg
The current market resembles small caps versus major stocks.
— Evegny Gokhberg
Investors should not panic sell during market distress.
— Evegny Gokhberg

Disconnect between fundamentals and price

There is a significant disconnect between DeFi fundamentals and price performance.
— Evegny Gokhberg
Liquidity is a dominant factor affecting market narratives.
— Evegny Gokhberg
Lack of liquidity causes underperformance in software and crypto assets.
— Evegny Gokhberg
Gold’s rise attracts attention away from marginal assets like SaaS stocks and Bitcoin.
— Evegny Gokhberg

Banking system and leverage

The banking system can create significant leverage through regulatory changes.
— Evegny Gokhberg
Re-leveraging in the banking system will increase liquidity and impact the business cycle.
— Evegny Gokhberg
Current market conditions indicate a lack of sufficient liquidity.
— Evegny Gokhberg
Gold peaks often precede Bitcoin’s performance, indicating potential market shifts.
— Evegny Gokhberg

Risk tolerance and investment decisions

Risk tolerance is crucial for investment decisions, especially in volatile markets.
— Evegny Gokhberg
Investors should consider a benchmark like ETH to manage risk.
— Evegny Gokhberg
Higher beta assets experience larger drawdowns compared to major crypto.
— Evegny Gokhberg
Investors need to be realistic about their risk tolerance and potential losses.
— Evegny Gokhberg

Market corrections and opportunities

The current market correction does not indicate the entire crypto market is broken.
— Evegny Gokhberg
The market could change rapidly, but a prolonged downturn is not imminent.
— Evegny Gokhberg
Current market conditions should be viewed as an opportunity, not a signal to abandon.
— Evegny Gokhberg
Market noise will ultimately be just that—noise.
— Evegny Gokhberg

Loading more articles…

You’ve reached the end

Add us on Google

`;
}

function createMobileArticle(article) {
const displayDate = getDisplayDate(article);
const editorSlug = article.editor ? article.editor.toLowerCase().replace(/\s+/g, ‘-‘) : ”;
const captionHtml = article.imageCaption ? `

${article.imageCaption}

` : ”;
const authorHtml = article.isPressRelease ? ” : `
`;

return `

${captionHtml}

${article.subheadline ? `

${article.subheadline}

` : ”}

${createSocialShare()}

${authorHtml}
${displayDate}

${article.content}

`;
}

function createDesktopArticle(article, sidebarAdHtml) {
const editorSlug = article.editor ? article.editor.toLowerCase().replace(/\s+/g, ‘-‘) : ”;
const displayDate = getDisplayDate(article);
const captionHtml = article.imageCaption ? `

${article.imageCaption}

` : ”;
const categoriesHtml = article.categories.map((cat, i) => {
const separator = i < article.categories.length – 1 ? ‘|‘ : ”;
return `${cat}${separator}`;
}).join(”);
const desktopAuthorHtml = article.isPressRelease ? ” : `
`;

return `

${categoriesHtml}

${article.subheadline ? `

${article.subheadline}

` : ”}

${desktopAuthorHtml}
${displayDate}
${createSocialShare()}

${captionHtml}

`;
}

function loadMoreArticles() {
if (isLoading || !hasMore) return;

isLoading = true;
loadingText.classList.remove(‘hidden’);

// Build form data for AJAX request
const formData = new FormData();
formData.append(‘action’, ‘cb_lovable_load_more’);
formData.append(‘current_post_id’, lastLoadedPostId);
formData.append(‘primary_cat_id’, primaryCatId);
formData.append(‘before_date’, lastLoadedDate);
formData.append(‘loaded_ids’, loadedPostIds.join(‘,’));

fetch(ajaxUrl, {
method: ‘POST’,
body: formData
})
.then(response => response.json())
.then(data => {
isLoading = false;
loadingText.classList.add(‘hidden’);

if (data.success && data.has_more && data.article) {
const article = data.article;
const sidebarAdHtml = data.sidebar_ad_html || ”;

// Check for duplicates
if (loadedPostIds.includes(article.id)) {
console.log(‘Duplicate article detected, skipping:’, article.id);
// Update pagination vars and try again
lastLoadedDate = article.publishDate;
loadMoreArticles();
return;
}

// Add to mobile container
mobileContainer.insertAdjacentHTML(‘beforeend’, createMobileArticle(article));

// Add to desktop container with fresh ad HTML
desktopContainer.insertAdjacentHTML(‘beforeend’, createDesktopArticle(article, sidebarAdHtml));

// Update tracking variables
loadedPostIds.push(article.id);
lastLoadedPostId = article.id;
lastLoadedDate = article.publishDate;

// Execute any inline scripts in the new content (for ads)
const newArticle = desktopContainer.querySelector(`article[data-article-id=”${article.id}”]`);
if (newArticle) {
const scripts = newArticle.querySelectorAll(‘script’);
scripts.forEach(script => {
const newScript = document.createElement(‘script’);
if (script.src) {
newScript.src = script.src;
} else {
newScript.textContent = script.textContent;
}
document.body.appendChild(newScript);
});
}

// Trigger Ad Inserter if available
if (typeof ai_check_and_insert_block === ‘function’) {
ai_check_and_insert_block();
}

// Trigger Google Publisher Tag refresh if available
if (typeof googletag !== ‘undefined’ && googletag.pubads) {
googletag.cmd.push(function() {
googletag.pubads().refresh();
});
}

} else if (data.success && !data.has_more) {
hasMore = false;
endText.classList.remove(‘hidden’);
} else if (!data.success) {
console.error(‘AJAX error:’, data.error);
hasMore = false;
endText.textContent=”Error loading more articles”;
endText.classList.remove(‘hidden’);
}
})
.catch(error => {
console.error(‘Fetch error:’, error);
isLoading = false;
loadingText.classList.add(‘hidden’);
hasMore = false;
endText.textContent=”Error loading more articles”;
endText.classList.remove(‘hidden’);
});
}

// Set up IntersectionObserver
const observer = new IntersectionObserver(function(entries) {
if (entries[0].isIntersecting) {
loadMoreArticles();
}
}, { threshold: 0.1 });

observer.observe(loadingTrigger);
})();

Source: https://cryptobriefing.com/evegny-gokhberg-market-neutral-defi-strategies-are-essential-for-volatility-why-diversification-isnt-enough-to-manage-risks-and-the-future-of-capital-in-defi-raoul-pal-the-journey-man-2/