What I'd Lose If DeFi Went to Zero (Honest Numbers)

Added: 2026-05-31

[00:00:00]I want to show you the exact risk that I take on a daily basis as a DeFi investor and more importantly break down what the potential outcome or the reward is by taking those risk. But the goal of this video is to ensure that should I decide to invest in DeFi, you understand every possible risk, but maybe also open your eyes to a couple different earning opportunities that maybe you weren't familiar with beforehand. So, diving into my portfolio, I have about $127,000 right now. Now, ultimately, my portfolio wants the market to go down. And I'm going to show you why. That's because I'm running something called a blue chip flywheel, where I take assets that I believe in that are also blue chip assets. So, that's wrapped Bitcoin, that's cBBTC, that's wrapped either 5 Ethereum, wrapped staked Ethereum, right? Basically, Bitcoin and ETH. And then I also have something that's kind of blue chip, it's called Hype, and Hype is an asset that I'm very big on and it's being staked as kHYPE right now.

[00:00:56]Now, ultimately, assuming the market falls and then eventually comes back up, these positions will perform very well.

[00:01:04]If the market just goes up instantly, they'll perform well, but not as well as if the market falls and then comes back up. And that's because ultimately, I am dollar cost averaging on the way down.

[00:01:14]Now, a lot of people think that dollar cost averaging means that you just have set buys recurring every single week or maybe whenever you see low prices, you just go and pop in, buy on Coinbase, and kind of move on with your life. But to be frank, that's not how it works. And the reason why is because there's something that us humans have called emotions. And emotions make us not want to buy at specific prices. Emotions change our mindset from "Oh my gosh, it's going down. I can buy at a better price because this is going to go back up in the future" to eventually over-analyzing things, trying to find the perfect price, and then eventually missing all the opportunities to buy because the market is now moving back up. So, my strategy utilizes concentrated liquidity pools in D5 to be able to buy on the way down. It's essentially a liquidity pool with say ETH and USDC or wrapped Bitcoin and USDC or hype to USDC. And then what happens is as the market is moving down, these assets are slowly being shifted into the crypto asset. That's because people are essentially selling these assets and they're selling them to us because we are liquidity providers. So we are taking those assets from them. And since they're selling them, that's why the market is moving down. So just to show you for perspective, I want to take a look at this Ethereum to USDC position that I have right here. And let's just say we simulate the performance and this moves down to a price of 15 50, right? Essentially at the very bottom of the range. Let's actually just call it 1540. And you'll see that I end up with about 3.887 Ethereum. Even though right now I have 4619 USDC and 1.3 Ethereum.

[00:02:55]Essentially the remainder of this USDC is used to buy this Ethereum. And I actually started with a little bit more USDC in this position. It's just it's already started to accumulate Ethereum because Ethereum has been running down.

[00:03:07]And that's good because when we simulate that performance, we end up with that 3.887 Ethereum. But when we go back to that initial entry price, which in this position was about $2300 per Ethereum, that's the time that we opened it at, I will have $8940 despite starting with $7500 in this position. That right there is $1400 more because I let it go down and then I eventually let it come back up. But the absolutely crucial part is once we go below the min price, I close this position and I hold this Ethereum. But my risk here is of course if Ethereum does not go back to its initial entry price. If it doesn't go back to 2300.

[00:03:48]But again, it's Ethereum at the end of the day. It's something that I truly believe in. It has an ecosystem around it. It has the product and it has the TVL and it has the investors. So, in my opinion, there's no reason to say that Ethereum will not go back to $2,300, right? Ultimately, DeFi makes up for about $79 billion in TVL. Ethereum makes up for about 41, nearly 42 billion dollars of that. So, Ethereum essentially is the bulk of DeFi basically, and that's why I'm very bullish on it because I'm very bullish on DeFi.

[00:04:17]But, then I also have Bitcoin and I have a larger allocation over here to Bitcoin where I'm running a Bitcoin to USDC position right over here. And this one has about 12.3K in it. And this one started with about 92% USDC, now has 90% USDC. So, long way to go to buy Bitcoin on the way down, but ultimately, I am betting on the market falling so the position can buy the Bitcoin. I exit the position, and then ultimately, the market goes back up to initial entry prices or past that, and I have significantly greater profits. And all while it's doing that, I am earning income in the meantime.

[00:04:52]Now, here's the thing, I'm not just running these strategies with assets that I own. I'm actually running it with borrowed assets. So, I'm supplying stuff like wrapped Bitcoin as well as wrapped staked Ethereum and other assets on Aave, and then I'm borrowing go which has a relatively fixed interest rate. Obviously, it fluctuates, but it's always around about 3.8% and ultimately, there's a couple risks here as well. So, number one, the borrowed capital that I am borrowing, if Ethereum falls and this position underperforms and it doesn't come back to this initial entry price, then I have to repay this borrow from my collateral.

[00:05:27]That's one risk, but again, I'm doing this with Ethereum, I'm doing this with Bitcoin, so it makes sense. Another risk is if the collateral falls substantially, then ultimately, it might go ahead and liquidate me, which is selling my collateral to repay my borrow and ensure that my debt is covered. That way, we don't have to deal with any bad debt on the platform. Those are a couple of the risks associated with Aave. I also have smart contract risk amongst Uniswap as well as Aave, but remember these are multi-billion dollar projects that have not been exploited in the past. Now, that being said, now that we've started to put things together, the largest risk within my portfolio is obviously price risk. As I've mentioned before, it relies on assets coming back to specific prices, but ultimately I'm investing with the thesis that these assets will come back to specific prices. And anyone that's just simply holding Bitcoin or holding Ethereum or holding any other asset in these markets is also under that same exact impression. So, if you want to put together a system where instead of having to manage your own emotions, instead of having to react to the market, you essentially just execute on a playbook. And I actually built a course that breaks down exactly how you can open your first liquidity position.

[00:06:32]It's pretty cheap, it's a couple bucks, but ultimately it walks you through step by step by step from getting the capital from your bank account into the wallet that you just set up, that we will help you set up, to ultimately deploying into your first liquidity pool position. And eventually what to do after that and how to scale that up to your overall portfolio. So, that way you can execute on a similar strategy. Again, it's the first step in the sequence and the number one thing that I've seen that has held people back is having analysis paralysis or not knowing what they don't know. And that's exactly what this course solves. It shows you the exact steps that you take, helps you get a pilot position up that we can get your feet wet, get that time in the market, and eventually start to build and scale your portfolio. So, if you guys want to get access to that, we are going to be raising the price pretty soon because we've had a lot of great feedback so far. But link is going to be at the top of the description. And last but certainly not least, I want to break down another position that I'm in that's actually a stablecoin position. It's USDC over on GTrade or Gains Trade. And essentially what I am doing is providing liquidity for perpetual futures. I'm in a counterparty vault, which means that if traders go on a rip and they start winning all of their trades, the vault that I am in pays out those winners basically. So, it's a loser for us.

[00:07:46]Whereas, if traders do what they typically do and that is lose their trades, then we make the money from traders losing their trades. And in addition to that, we earn all the fees regardless of if they win or lose their trades. So, ultimately that's one of the other positions that I am in that has also been doing pretty well for me. Uh comes out to about 6% per year typically. And it's GUSD over on Gains Trade. With that being said, don't copy my positions without understanding your risk, the reward, when my exit and entry triggers are, and of course every single step of the way. And if you guys want to learn how you can put your own thesis together, you can do so by clicking the link at the top of the description. I'll see you guys next one, and peace out.