This report is provided for informational and educational purposes only and should not be considered financial, investment, or legal advice. DeFi investments carry significant risks, including smart contract exploits, loss of capital, market volatility, and liquidity risks. Always conduct your own research and assess your risk tolerance before allocating capital to any protocol or strategy.

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Is yield worth the smart contract risks?

Over the last 5–6 weeks, DeFi has faced one of its most turbulent periods in recent memory. Bad actors extracted hundreds of millions of dollars across 28 protocols in April alone through hacks and social engineering, prompting billions in capital to flee as investors grew unwilling to take on unnecessary risk. 

Two outliers dominate everything. Kelp DAO ($293M) and Drift ($285M) account for roughly 97% of April's total losses. The Kelp DAO exploit had cascading consequences beyond the protocol itself: AAVE lost over $10B in TVL after allowing Kelp's re-staked ETH to be used as collateral in its main market, exposing how deeply interconnected DeFi's risk architecture has become.

The fallout has been particularly damaging to trust in lending markets. Users are now questioning whether a 3–4% annualised yield justifies the very real possibility of losing 100% of their capital. For yield-generating protocols, that is an existential question, and one the industry will need to answer convincingly if it wants that capital back.

Why are concentrated liquidity pools safer than lending markets? 

Despite the fear gripping DeFi right now, the opportunity is greatest precisely where panic and misunderstanding are loudest.

Concentrated liquidity pools (CLPs) are structurally safer than lending protocols because each pool exists as its own isolated contract. If one pool is exploited, the damage is contained, and it cannot spread. This stands in stark contrast to protocols like AAVE and DRIFT, where a single compromised asset in a shared main market can put every other asset in that pool at risk. With 10+ assets sitting in the same contract, one bad actor can trigger losses for everyone.

This is why, despite the widespread loss of confidence in DeFi, we remain strong believers in CLPs. Of course, the risks are real, but they are bounded and manageable. For those willing to do their homework, we believe the rewards still significantly outweigh those risks, provided positions are actively and thoughtfully managed.

If you want to understand CLP better, we have a very easy yet comprehensive deep dive here: 

With BTC hovering around $80k, here are some pools and ranges we think are worth getting into for passive income.

cbBTC - USDC (on Orca)

• Range: $65k - 90k
• Returns (Variable): 35.4% per year, 2.95% per month paid in BTC and USDC

This range allows for accumulation if BTC corrects over the coming months, but still retains the upside if BTC were to breakout from the bear flag (currently testing its higher range)

HYPE-USDC (on Project X)

• Range: $33-$45
• Return (Variable): 38.5% yearly, 3.2% monthly

Cryptonary’s Take

Concentrated liquidity pools continue to stand out because of their isolated architecture and more transparent risk profile. Unlike lending markets where contagion can spread rapidly across assets, CLPs allow investors to define exposure more precisely while containing downside to individual pools.

In the current environment, passive income opportunities still exist, but selectivity and active management matter more than ever. Sustainable yield will likely outperform reckless yield chasing as capital gradually returns to protocols perceived as safer, simpler, and more resilient.

At this moment, we would consider entering only these 2 pools that we shared above. Happy yield farming!