Interview with Sergey ZinenkoHow to make money on DeFi in 2024?

Our latest podcast episode with Sergey Zinenko delved into key strategies for earning in the DeFi sphere. We discussed asymmetric investments, explained the principles behind liquidity pools, and explored the various ways to profit in this field. We also reviewed the top DeFi protocols and their core features.

About our guest

Sergey Zinenko is an expert in financial markets and an investment advisor. He is also:

• An entrepreneur, private investor, and speaker;
• A DeFi lecturer at NSU;
• A capital manager with monthly returns exceeding 1 million rubles;
• One of the leading specialists in DeFi.

Watch the video version on our YouTube channel.

Disclaimer: The podcast was recorded on June 26, 2024, so some information may no longer be current.

— Sergey, hello! Let's talk more about DeFi today and give an expert's perspective on the industry. 

— Hi! I’m curious: why did you choose to invite me?

— I follow a lot of channels, and it quickly became clear that you’re one of the few who really understands DeFi. So, let’s talk about your perspective: who’s the core audience of the DeFi?

— Talking about user numbers, there are around 600 million crypto wallets worldwide. Of course, many people own multiple wallets, but about 550 million people have interacted with crypto somehow. Of those, only 7-8 million have engaged with DeFi, so true "crypto natives" are still few.

— How much can we make in DeFi?

— Right now, placing capital in fundamental assets can yield 20-30% annually if we discuss smart, stable investments and not risky "degen" strategies. You can earn around 30% per year using stablecoins, but you must understand what you’re doing. 

— It’s clear that BTC won’t give 100x growth anymore. But ETH could still make some serious moves. So, it makes sense to invest more in ETH. What assets do you hold in your portfolio?

— I believe ETH will outpace BTC. DeFi is snowballing, and I’m confident ETH will be bullish soon. Currently, about 70% of my portfolio is in ETH.

— So, does BTC make up a tiny part of your portfolio?

— Yes. I think we'll witness significant price movement once we see capital flowing into ETH ETFs. It hasn’t reached its peak in this cycle yet. The Ethereum ecosystem attracts more capital and smart developers, so I believe it has the best outlook.

— Okay, let's go deeper in DeFi. Liquidity pools. What are they?

— Imagine two baskets of assets. Here’s how a decentralized exchange works: you come to swap ETH for stablecoins. On one side, there’s a basket with ETH; on the other, there’s a basket with stablecoins. You deposit ETH, and they hand you stablecoins from the other basket. Investing in a liquidity pool means supplying one of those baskets with assets. And people looking to make swaps pay a fee. We earn from that fee. 

— How much stablecoins should you hold so you can use them safely? 

— In DeFi, we have a health rate, the ratio of your position to the liquidation level. For example, in a bank, you can only borrow a portion of the collateral’s value. For instance, if you use your house as collateral, the bank gives you about 75% of its value as a safety buffer. In DeFi protocols, smart contracts work similarly. I recommend keeping your health rate at 1.4–1.5 so you can sleep well at night. 

— How can you make money with DeFi?

 — I break it down into four key areas:

1. Deposits in decentralized banks. You deposit assets and earn interest. The bank profits by lending your assets at a higher interest rate. Often, banks run promotions to attract clients, and you can earn up to 10% annually.
2. Providing liquidity for decentralized exchanges. You supply assets to the exchange for trading, earning a share of the transaction fees in return.
3. Decentralized derivatives. For traders, there are derivative platforms. For example, on Binance, you can buy Bitcoin with leverage, and the exchange provides liquidity for such trades. This one’s for adrenaline lovers, but you profit from their trades by providing liquidity.
4. Staking and restaking. This helps maintain blockchain security. In return, you earn around 3.5-4% annually. Essentially, you’re providing capital to keep the network secure. 

— Let’s talk about restaking. How does that work? 

— There’s a platform, EigenLayer, that offers a new way to leverage capital. If you’re building a new blockchain or service and need security, you can use EigenLayer. It allows you to link your project to the Ethereum blockchain. You provide capital to secure the network and, in return, earn a percentage of the revenue.

— Do you have any assets on EigenLayer?
— The platform was developed by some of the top programmers in the industry, but I want to ensure it's stable first. I have several wallets where I distribute my capital and receive tokens. So far, everything looks reasonable, and they've implemented many rules to prevent users from suddenly dumping tokens.

— What do you think about the ETHENA stablecoin? Would you consider it DeFi?

— Since the beginning of crypto, most projects have been focused on making money. Many are trying to find ways to provide consistent returns. For instance, the Lido project earns 10% yearly through staking, which is a nice revenue for the team and investors. ETHENA tackled the challenge by taking your stablecoins, buying Ethereum, staking it, and then shorting ETH. The profits are shared with users, and the returns can reach 20–30% annually. So, they’re offering a clear and profitable way to work with stablecoins.

— What are your thoughts on TON?
— Everyone wants to attract regular users to crypto. For example, Meta recently tried to launch a coin for Facebook, but no one could capture a significant audience except for TON. Telegram succeeded in getting people to engage with financial tools.

— What do you think led to their success?

— They only accept payment for Telegram Ads in TON. That was a smart move, forcing advertisers to pay in crypto. So, I think, TON could become a profitable investment in the future.

— So why not ditch Ethereum and invest everything in TON right now?

— There are two points to consider. First, TON already has a high market cap, so it’s unlikely to grow 10x soon. Second, there’s scepticism around projects associated with Russia. The global community is hesitant to give too much influence to these projects. On top of that, some big players might sell their assets during a price surge.

— So, large investors are hesitant to jump into TON?

— Yes, that includes major investors, influencers, and regular users. There’s no clear consensus that TON is the future.

— What could be a growth driver for the TON blockchain? 

— There’s a theory that big market makers get together and make investment decisions, but I believe it’s a complex process involving major IT companies' interests. For example, Binance recently listed TON, which results from coordinated efforts by capital, exchanges, influencers, etc. At the same time, TON has gotten people used to “tapping” and earning through it. Moving forward, other companies will likely try to push for mass adoption by adding new elements like referral programs or promotions. Eventually, we’ll see something like Hamster Combat.

— What will happen when the Hamster Combat coin is listed?

— The token won’t skyrocket right after launch. No one wants to buy in at a high price. The team will let weaker hands sell off to make the growth more sustainable. The listing process and TGE need a precise strategy to make everything look stable and attractive to investors.

— What strategy would you choose for TON right now?

— If I knew how to secure my assets on the TON network, I’d buy coins and send them, along with stablecoins, to yield farming. But it’s not something I’d recommend doing with borrowed money.

— Would you use TON yourself?

— Everything the TON developers are doing seems right, but there are risks of unpleasant situations like the app getting removed from the Apple Store or Telegram being blocked in some countries. Bitcoin is complicated to shut down, but newer networks are vulnerable to these threats.

— What’s your outlook on Layer Zero?

— They’re acting like market leaders. They have strong potential, but I still want to see what the project's revenue will be when some audience leaves. 

— Can you explain what happened with Michael Egorov* and the $140 million liquidation?

— Michael worked hard for a long time and decided to cash out. Instead of just selling his tokens, he took out stablecoin loans using CRV tokens as collateral. What ultimately happened was that he had a stablecoin loan, the CRV token price dropped, a major player exited the project, and a series of conditions led to his position being liquidated.

*– Founder of Curve Finance

— So the protocol he created ended up liquidating him?

— Yes, but it’s important to note that everything went relatively smoothly. With the support of external investors, Michael repaid the debt. He simply wanted to reap the rewards of his years of work. People like Michael can afford to retire peacefully and enjoy fishing — he’s earned it. He didn’t dump his tokens en masse like some other developers did.

— How do you assess the future of the CRV token? Has it hit bottom?

— It’s a fundamental asset. A good strategy would be to buy at these low levels with minimal risk. Yes, I believe that was the bottom. Emotional decisions often lead to losses.

— When do you think the market will peak?

— I think cycles will shift, and the end of 2025 will be the peak.

— Are we currently in a bear phase?

— No, it’s clear that since last summer, we’ve been at the bull stage.

— So, we can expect growth until the end of 2025?

— Yes, I believe holding ETH and BTC until the end of 2025 is a solid strategy.

— Sergey, thank you for coming. This was very insightful.

Conclusion

The podcast with Sergey Zinenko revealed many investment opportunities in DeFi. Sergey shared his insights on key assets like Ethereum and Bitcoin, offering valuable advice on risk management and investing in fundamental projects such as TON and Layer Zero.

Sergey regularly shares investment ideas and analyses on his Telegram channel, where you can find even more valuable information on successful DeFi investing.

You can find more interviews on our YouTube channel. We also post all announcements on our Telegram channel.