7 “Captain Hindsight” DeFi Lessons

Watching the Luna debacle from the sky, ready to swoop in.

Captain Hindsight is one of my favorite Southpark side characters. His “superpower” involves telling people what they should (or shouldn’t) have done after a disaster.

Victim: “My house is on fire and all my valuables are destroyed!”

Captain Hindsight: “You should have gotten all your valuables out before the fire started! Also, you shouldn’t have let the fire start in the first place!”

Victim: “Thanks, Captain Hindsight!”

Life in DeFi is full of Captain Hindsight. Missed opportunities, tragic consequences for quick decisions, ignored intuitions, or misunderstood data — there are a million moments we look back on and think “oh damn, I wish I could have done that differently.”

Here are 7 of my most memorable DeFi lessons with some Captain Hindsight advice:

#1: Locking Away Liquidity (Especially in Experiments)

My first medium posts outlined many of my hard lessons from investing in Bunny Finance. Immediately following their 1st flash-loan exploit in May 2021, I was able to snatch up a bunch of cheap BUNNY tokens. In their compensation plan for the exploit, they invented the MND (Mound) token that would act as their “Ecosystem ETF”, providing yields in BUNNY and two other upcoming tokens POLYBUNNY and QBT.

Sounds great, right?

Well, I thought so at the time. So when they created an “allocation swap” system for MND with an “early-swapper” bonus, I jumped at the chance and allocated 500 BUNNY worth $20–25 at the time.

After 3 months, I received approximately 250 MND tokens. Someone created liquidity for it and it proceeded to slowly (sometimes quickly) dump from $30 to a stellar $0.08 now.

Captain Hindsight Advice: Don’t lock up your liquidity in experimental projects. Also, when you’re in the green with low MC coins, move to stables and hold.

I locked away my poor Bunnies.

#2: Buying “Dips” on Leverage

I thought I was being prettttty smart. I had a decent chunk of BNB (20 or so) that I was supplying on QBT for their Supply APY.

But here was that famous MND token “dipping” into sub $15 territory! A steal!

Alas, I didn’t have any dry tinder around to take advantage of this “once-in-a-lifetime opportunity”.

So how about this strategy? Since I’m 99% sure MND is gonna be worth $100 EOY, why don’t I just use some stables to buy it now and then use the MND yields to pay off my borrow over time? Win-win…win?

Again, MND is 8 cents now. (Doesn’t matter anyhow since my BNB was forever frozen by the Catalonian Crosschain Killer).

Captain Hindsight Advice: Don’t use “blue-chip” assets as collateral for shitcoin “plays” — no matter how confident you are that “you can make it back in yields” or “the price is such a steal right now!”

#3: (Buzzed) Investing Before Bed

Iron Finance was a debacle I’ve spoken about before. An algo-stable system on Polygon with extreme degen yields, it was touted by Mark Cuban as a great opportunity for profit. I had never bridged outside of BSC before at that point and I was eager to try out this “Polygon” chain everyone had been talking about.

After a couple cocktails to calm my nerves (for bridging), I took some Thorchain profits over to Iron and dumped it all into their “solo” vaults in Titan-based LPs.

Then I went to bed, eager to wake up the next morning and see how much yields I had accumulated with their 500B% APY.

One bank run, depegging and trillion Titan print later and I got nothing.

I repeated this same mistake by buying LUNA at $1 recently. Quickly it jumped back up to $4 or so as the market started to believe in a UST repegging.

I went to bed, eager to wake up the next morning and see how LUNA had regained its former glory and was rising past $50.

More bank-running, more depegging, and a trillion Luna print later and I got nothing.

Captain Hindsight Advice: Don’t make any risky purchases before bed. Make sure you’ll have access to your funds over the next 4 hours to escape with something. Also, no more algo-stables, got it?

#4: THE GREATEST DEFI EXPERIMENT EVER!

Snowdog seemed to make sense. It was being run by SnowBank (smart gitbook!), it had a recognizable UX (just like an Ohm-fork), it promised great APY returns (billions+), and they were going to do the greatest buyback maneuver ever done in the history of DeFi.

This, I told myself, was where “degen legends” were made. I used a Snowdog calculator to estimate my returns after this monumental buyback. According to the math, my $2k was about to become $80k, simply because I was willing to take the risk.

The day came, the buyback was suspiciously “exploited”, Snowdog was dumped, and I got nothing.

Captain Hindsight Advice: Don’t try get-rich-quick DeFi schemes. DeFi already is a get-rich-quick scheme — there’s no need to increase that stupidity.

DeFi experiments all end up like this

#5: Never sitting on my hands

This is a common expression in DeFi and investing. It essentially means “holding yourself back a little before making an investment decision”, which in my case usually means “holding stables”.

I hate holding stables. I can’t seem to do it…at least for any reasonable time period (1+ days). Every time I get a chunk of stables from something, I feel the urge to “put them to work”: I want them to “gain yields” or “make a quick 2x” or anything at all except sit there in my wallet.

Worst of all, I never move stables slowly when I do. I just dump them all into something in one big purchase. $16k USDC for Invictus Redemption. $16k into Step token (at $0.18, now $0.07).

Captain Hindsight Advice: When you’re looking to move stables to an altcoin (especially small cap ones), it never hurts to wait. Even if it pumps, it will come back down eventually. If you’re going to move into alts (or anything really), DCA!

#6: Never sitting on my hands…except when I needed to sell

I am reluctant to hold back on buys. And I’m equally reluctant to act on sells.

So many times now that I should have “taken profit” but instead I kept holding for that elusive “big win” aka “moonshot”.

I mentioned the LUNA one in #3 and the BUNNY one in #1. There was also QBT at 10x, COMFY at 3x, JEWEL at 20x, CAKE at 4x, MMO at 3x, INVICTUS at 0.5X and many many more.

Each time, I thought to myself, “yeah but I’m gaining yields on this, so it’d be crazy to sell my nice passive income.” This is what many of us seabunnies are thinking. Just a nice passive income, plz.

You know who doesn’t think like this? Krakens with real money. They are going to dump on us at the first sign of price instability.

Captain Hindsight Advice: Take profits or at least take out your initial. There is no such thing as “steady passive income” in DeFi. Not for you at least. Don’t fall into the gamification trap of DeFi: “In 6 months, I’ll level up my farm so that I’m making $100 a day!” No, ser, you won’t.

#7: Listening But Not Listening to my Macro Friends

I could have easily avoided this recent BTC + market dump. I could have “sat in stables” after this last winter’s dead cat rally and then waited to “back up the truck” come late Q3-Q4. Arthur Hayes said as much. Ben Cowen said as much. My Discord friend “Chef Crypto” said as much. Every macroeconomic indicator said as much.

Naaah. I hear you all, but what’s the fun in sitting in stables for months? What can I do to entertain myself and make money if not in yield farming, leveraging and profit hunting?

Well, it would have been entertaining and fun to sit with my stables now and try to find the bottom for a buy. It would have been fun to have money ready for when smart investors can actually make real money. That would have been cool too.

Captain Hindsight Advice: Listen and at least hedge on the side of your macro friends. Always keep some dry tinder (not UST) on the side ready for the real market dip. Practice a little bit of patience, ser.

Final Honorable Mentions for Captain Hindsight Advice:

  1. Don’t use small MC tokens as collateral for borrowing (especially stables). You might think you’re leveraging a “safe” amount, but you’re not. Small MC tokens can drop 50%+ in a single day. Liquidaaaaated (twice).
  2. Don’t invest in exploited projects. Just don’t do it. There are plenty of good solid projects that don’t have the investor bad blood or history of mistakes.
  3. Don’t try a new type of protocol with any serious amount of money just for “research purposes”. It’s quite possible to “research” a new protocol without dropping a few thousand into it.
  4. Don’t invest in NFT projects that have an immature or unprofessional userbase. It’s not going to work out.
  5. Don’t invest in a trillion supply token with the hopes of “if it just goes to 1 cent tho”. The moment you are in profit. Sell.

What do you think? I feel as though I could write 100 more of these things, but I’d finally lose my “enjoyorer” spirit before I got there.

What are some of your “Captain Hindsight” moments from DeFi?

Come share them with me and my friends in both my favorite DeFi discords:

Passage Finance, coming soon to Cronos: https://discord.gg/wp25J74Yx5

NomDAO on Solana: https://discord.gg/vgBsrvbM42

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A place for quiet reflection on all my DeFi experiences.

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