Hello everyone, let's talk about defi today. This will not be a long post but it does not need to be. A lot of people are hearing about crazy returns on these defi projects, they see the crypto news feeds filled with articles about the hottest food item shit token that making 2000% ROI. We can all say with common says that is not possible but when you dip your toe and see it yourself, it's easy to get sucked in and before you know it, your in deep with a bunch of shitcoins that have pumped and dumped and your thinking to yourself, where did my ETH go?
First off, let's get one thing straight. Yield farming, staking, mining projects are all part of defi but this is not defi. It's like comparing a slot machine to government bonds in the sense you put your money in hoping to get more back. There are real defi projects out there like nexo, celsius, crypto.com to name few that work under some form of regulation and your funds are safer.
Im not saying don't get involved in something like sushi mining, it's your money to lose if you think you can compound it and be a millionaire in a few months. The thing about all these governance tokens like sushi, hotdog, corn, etc is they are worthless and they will all eventually drop to $0 because why are they worth more? Im not saying there's no money to be made, im saying when you play with fire, you better have a plan going in.
1 - Never, ever, ever buy the reward/governance token
If you wanna mine some sushi, for example, that's cool but don't buy any sushi tokens. That's a waste of money because you can mine them for free, that's the point. If you're looking to use sushi to earn sushi, get it for free. I would advise you to get involved in a pool connected with a stable token and ETH. Buying unknown tokens for better rewards will lose you money after you buy the top and sell after the smart money (founders) exited the market and your unknown token will be worth 10% what you paid for it. Lastly, when you receive your sushi rewards, use these to enter the sushi wrap pool. At least this way, your playing with house money.
- Never buy the reward/governance token ever
- Try to stake stable tokens and well-known crypto to protect from price fluctuations
2/ Dump the shit token asap
My thinking is the people who make the most profit are the ones that turn their shit tokens into ETH, BTC or fiat the quickest. It would be nice to have 1 shit coin worth $6,000 but what about compounding it down until to have 5 shit tokens? Chances are by the time that comes around, your shit token will only be worth a single-digit percentage of what it used to be because all the money will have been flushed from the project by whales. Remember these tokens your farming for will drop to $0 in value, maybe not today are tomorrow but in 6-9 months I don't think many will still be around. People try to defend certain projects by saying about the smart contracts, but the smart contract only does what someone tells it to do. My advice is to take your profits, farming is not an ideal model for compounding for extended periods of time. Get in and out, take your small profit by selling whatever shit token you've earned and move on to the next [insert food item] shit farm. If done correctly, it can be very profitable but you need to get in on day 1-2 to get the best returns and it does go bust within the first 1-2 weeks. By that I mean, the shit tokens you earn during the first week will most likely be the most valuable if you sell them. This is because other idiots are FOMOing and buying the newest shit token to wrap it for better rewards. Make sure you're the guy selling them their shit token at ridiculous dollar values. If you compound from farm to farm adding 20-80% at a time, it does not take long to join a few hundred into a few thousand but chances are you'll lose you money somewhere along the road.
- Cash-out the shit token and take profits - You cant make a profit if you don't sell
Some people might advise doing a 50/50 split were you stake 50% and withdraw 50% of your shit token rewards. I would say, cash out the lot because these projects can go down quickly and funds can disappear overnight. This is an investment with your hard-earned cash, make the rules black and white, remove any thought and just do what you are suppose to do. I would never plan to compound are re-stake any amount into these pop-up farms. Sell the shit token and be done with it, find a new project.
So, there you go. They're not really any structure to the post but im sorta rushing it to be honest. Anyways, if you are thinking about are just starting out with farming and token staking, please be aware of the risks. I would guess that a lot of people you talk with big up what they tell you they make and a lot actually lose money because they get a boner for it and then jump in the deep end without sleeping on it.
Have a budget
Try to stake established token for staking
Sell your shit token when you claim it
Get out of the project with 2-3 weeks from launch
Rise and repeat and cross your fingers that you don't get exit scammed/DDoS attacked are something that results in your losing your crypto.