Bear Market Gold Rush: Deep-Cover DeFi Strategies from Chinese-Region Degen Insiders
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Bear Market Gold Rush: Deep-Cover DeFi Strategies from Chinese-Region Degen Insiders
What sectors are the smart DeFi players focusing on? What are the most promising and highest-conviction Alpha opportunities in this industry?
Navigating Web3 tides with focused insights"Even during a prolonged crypto bear market, it's possible to achieve solid returns. If you have deep enough insight into the crypto industry, you can even capitalize on recurring crypto events to generate outsized profits." This is how Cobo co-founder and CEO Shen Yu summarized the source of his above-market returns over the past year.
Another guest, Super Jun, founder of the low-profile but highly skilled Benmo community, bluntly stated, "I never check price charts, nor do I get excited about any new trends or projects. I only care whether an arbitrage opportunity exists," making him a quintessential event-driven expert.
In contrast to Super Jun, Arthur, CEO of DeFiance Capital, spoke enthusiastically about a project that excites him—friend.tech, the recently viral social application, which he praised without reservation as the most exciting application since YFI.
The above excerpts come from a high-level roundtable discussion at "Singapore DeFi Day" on September 11, hosted by Cobo and co-organized by NEO. Industry leaders including Shen Yu, co-founder and CEO of Cobo; Arthur, CEO of DeFiance Capital; Super Jun, founder of Benmo Community; Wee Howe Ang, CEO of Tokka Labs; Jimmy, co-founder of iZUMi Finance; and Ryan, CEO of Solv Protocol, engaged in a high-quality dialogue centered around "DeFi yield opportunities and challenges," covering topics such as sources of base and alpha returns over the past year, encountered risks across their respective domains, and emerging exciting trends.
At this event, Shen Yu, co-founder and CEO of Cobo, summarized the newly launched features of Cobo Argus over the past year—all designed around one personal need as a major DeFi player: "to sleep well at night."
This conversation was lengthy and rich in content, and the summary above cannot capture all nuances. Want to know which sectors these smart DeFi players are focusing on? What are the most promising and highest-conviction Alpha opportunities in the industry? And the most anticipated topic—their outlook for next year’s market and profit expectations? Read on for key takeaways:
On Base Returns and Alpha Sources
Super Jun:
First, base returns mainly come from DeFi mining. Ethereum's PoS staking yields about 4%–5%, while DAI on MakerDAO generates approximately 5% U.S. Treasury-like yield. Together, this creates a dual income stream. Adding liquidity mining rewards on top results in a solid base return—this formed the foundation of our earlier "mine, sell, and withdraw" strategy.
For alpha, the primary sources are on-chain arbitrage driven by events and buying locked tokens at a discount during bear markets.
Shen Yu:
Base returns come from Ethereum PoS staking plus on-chain U.S. Treasury-like yields.
Alpha primarily comes from the fact that blockchain remains an event-driven market, where various events create yield opportunities.
If you deeply understand the fundamentals and protocol mechanics, then whenever small or large events occur, various arbitrage opportunities arise. With sufficient insight, these can significantly boost returns.
On top of that, we can use leverage or derivatives tools to amplify returns, making it relatively easy to achieve annualized returns above 5%.
Wee Howe Ang:
Base returns mainly come from trading major cryptocurrencies.
Although the volatility of major coins has decreased compared to last year, overall returns remain positive.
Alpha mainly comes from arbitraging price differences of smaller tokens between decentralized and centralized exchanges.
Jimmy:
Alpha primarily comes from airdrops and meme tokens.
Airdrops: By providing liquidity, you earn various fees, creating 2–3x higher return opportunities than traditional mining.
Meme token gains: In early stages, bots can jump in—sometimes with just $10 in cost—and exit with $10,000.
Both airdrops and meme tokens represent forms of asset creation. Essentially, you're moving information and liquidity. The closer you are to asset issuance—whether via public chain airdrops or native meme tokens—the greater your potential returns.
Ryan:
The first source of yield is dividends from various public chains, including high-potential early-stage projects and airdrop opportunities. The second is fees generated from Perp DEXs on-chain, followed by hedging on decentralized exchanges, which creates localized, short-term Alpha opportunities.
Arthur:
Overall, the return distribution of Web3 primary market investments is becoming increasingly similar to Web2—unless you invest in a top-three project within a given sector, you may see zero returns.
At this stage, secondary market investing offers more flexibility to adapt strategies based on market shifts. That’s why we launched a new fund dedicated to secondary investments this year, enabling us to respond more dynamically to market feedback.
DeFi returns still exist this year, but risks have increased. We’re being more cautious—only entering when we identify truly compelling opportunities.
On Risks and Returns
Risks in On-Chain Derivatives
Ryan:
There are three main types of risk: (1) smart contract hacking risks; (2) operational risks; and (3) investment strategy risks.
The second—operational risk—is something Cobo Argus helps solve.
For our derivatives trading, especially cross-arbitrage between centralized and decentralized platforms, timing delays can occur, requiring sophisticated strategies. Cobo Argus’s permissioned access control enables risk isolation—allowing delegation to professionals while maintaining limited permissions to ensure asset security. This means operations can be secure whether conducted by asset owners themselves or delegated to experts.
Risks in DEXs
Jimmy:
To ensure safety, we select larger-cap, technically mature protocols or relatively established emerging public chains.
For DEXs, another critical concern is bridge risk.
When users conduct cross-chain transactions, they effectively leave assets on official or third-party bridges and receive mapped tokens. The key risk lies in whether deposited assets can be reliably redeemed. This redemption risk must be carefully evaluated.
Two mitigation strategies: examine the chain’s underlying mechanisms and audits, and assess its TVL.
Risks and Risk Management in High-Frequency Trading
Wee Howe Ang:
The main risk is smart contract risk.
Since we primarily trade small-cap tokens, many associated protocols and tokens carry significant smart contract risks that are hard to analyze. The market currently lacks a comprehensive framework to evaluate such risks.
Current Best-in-Class Risk Control Solutions
Shen Yu:
Previously, delegating DeFi operations was difficult due to large asset sizes and complex permission structures. To address this pain point, after about one to two years of development, Cobo this year achieved granular, contract-level risk controls through the Argus system—allocating fine-grained permissions to individuals while keeping funds in multi-sig wallets. Asset owners no longer need to micromanage. Team members with single signatures can perform authorized actions independently, freeing up executives like CTOs and CIOs from operational details.
Second, a long-standing personal issue has been frequent late-night security alerts disrupting sleep. DeFi has seen numerous incidents this year—including exploits targeting programming languages themselves. As DeFi users, we must constantly monitor on-chain metrics, receiving 24/7 alerts across multiple priority levels. Because attackers often operate across time zones, attacks frequently happen on weekends or at night, forcing us to wake up groggy and make urgent decisions.
To tackle this firsthand pain point, we developed solutions using ultra-fine-grained permissions: bots now automatically monitor on-chain anomalies 24/7 and execute predefined risk response strategies. By granting specific operational permissions to live bots, they can detect anomalies and instantly withdraw assets from pools back into multi-sig wallets, greatly improving sleep quality.
In summary: First, we’ve cracked decentralized fund governance—enabling efficient, role-based delegation. Second, we've built internal bots to maximize asset security and optimize returns. Previously, we kept leverage low to avoid stress, but now bots handle monitoring and execution, allowing us to safely increase leverage.
On DeFi Investment/Mining Risks
Arthur:
DeFi mining isn’t just about APY—risk-adjusted returns matter. Some protocols are complex, exposing you not only to protocol-specific risks but also external ones. This year, DeFi mining yields have been attractive with manageable risks. If you believe in a project, just buy the token. Generally, the longer a protocol has been battle-tested, the safer it is.
On Market Outlook and Emerging Trends
Arthur:
Using TVL as a metric, current DeFi TVL is around $4–5 billion. Within a year, it could reach $10–100+ billion. Growth depends on how much real-world assets can be brought on-chain. I see three high-potential areas: decentralized perpetual trading, liquid staking, and real-world assets. At this time next year, ETH should be worth at least $3,000.
Shen Yu:
One major trend today is the shift of asset trading from centralized to decentralized platforms, especially after the FTX collapse—now nearly an industry consensus.
Second, two key drivers for industry growth: user growth and inflows of traditional fiat capital. The latter is influenced by macro policies. Regarding user growth, in the coming years, improved performance, Layer 2 rollouts, and smart wallets will let users interact with blockchain seamlessly—without needing to understand private keys or underlying tech. While standardization is still fragmented, this direction will bring massive new users. Where the money flows isn’t clear yet, but user onboarding is a clear trend.
By this time next year, Bitcoin will have undergone halving and likely trade between $40,000 and $60,000. ETH should follow a similar multiple.
Wee Howe Ang:
I’m bullish on intent-based trading, which enhances Web3 UX and could allow it to compete with—or even surpass—Web2.
Regarding new opportunities, it depends on infrastructure progress enabling innovative applications.
In the next cycle, major coin prices will depend on capital inflows and leverage. A key determinant of future prices for major assets is whether new asset classes emerge.
After the consolidation phase ends, ETH could reach $2,000–$3,000 by this time next year.
Audience Q&A
Question to Shen Yu: There's a view that new trading models like Unibot could replace CEXs. What's your take on Unibot and similar bot-driven trading products? And what about dYdX launching its own Layer 1 for derivatives?
Shen Yu:
Unibot currently improves user experience by offering a simple bot interface that allows ordinary users to engage in DeFi without handling complex cryptography or learning secure asset custody. However, it has serious security flaws, especially around private key protection. I believe the direction—using bots to simplify trading interfaces—is correct, but balancing usability with security remains a challenge. Given ongoing developments on Telegram for blockchain integration, this space will continue evolving, leading to new interaction paradigms.
dYdX essentially moves order matching off-chain while settling trades on-chain—a smart blend of CEX performance and blockchain settlement. But whether it needs its own Layer 1 is questionable in my view.
Question to Arthur: What’s your take on the recent surge in friend.tech?
Arthur:
I'm extremely bullish on friend.tech—I believe this is the most exciting product since YFI farming.
friend.tech solves social networks’ toughest problem: cold-start. Its economic model filters true “friends”—only those genuinely interested in interacting with you or valuing your content will pay for your Key.
Additionally, friend.tech uses a Web2-style frontend, allowing sign-up via email or phone number—lowering barriers—while ensuring users retain wallet control. Although friend.tech still has issues, these are solvable over time.
Currently, friend.tech is still nascent—its TVL is only $20 million—but it has vast room to grow. Reaching $50 million in TVL seems very achievable.
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