DeFi: Returns and Risks
A lot of people ask me how can we make 100x, 200x through DE-FI?
I don’t want to demotivate you or something, but chasing such returns will get your REKT.
I’m writing this article out of love to make you all understand what to expect through DE-Fi
There are 3 important things in DE-FI-
A. WE SEE HOW SAFE IT IS, DE-FI ISN’T SAFE BECAUSE-
- You can get scammed at anytime.
- You can get hacked anytime.
- The token can go to zero anytime if devs rug pull.
We say safer in comparison to diff platforms, we say safer based on a few parameters like-
- Whether they have got any audits done.
- Whether they have published their code on GITHUB.
- Community sentiment.
- How the developers are with the community.
- Price action of token & some other factors…
Safer for me could be something else, it could be something else for you.
But to understand DE-FI, you need to understand these things.
B. HIGHER RETURNS-
You can get higher returns but in comparison to what?
I’d prefer medium returns which are sustainable.
Game theory of money says, if you’re gaining money, then somebody is losing money at some time.
Higher returns can be there but they are not sustainable.
For eg- When I started staking cake it was $20 but right now it is $7.36.
So even if I received 125% APR, that wouldn’t be profitable if the token price itself dropped by 65%.
Now i am breaking even after 125% returns, so now i have to only wait in order for CAKE token price to go back up.
DIdn’t understand properly?
Luckily, we’ll never go out of methods to explain it to you…
1 . Let’s take another example of DIBS-BNB pair-
If you refer to the image above,
I sorted everything by max APY returns & we see the DIBS-BNB pair on top with a max APY of 40.23K% APY, looks amazing right?
But here’s the catch..
Let’s look at the chart of DIBS/BNB -
It has lost a whopping 93.2% of its value in the last 28 days.
What are you gonna be doing by collecting a token which at the end loses 93% of its price?
Instead you’ll be in a loss!
Therefore chasing high APY is a sure short way to get REKT in crypto !
Let’s calculate the impermanent loss of this PAIR now, keeping the price of BNB the same…..
2. Let’s take another example of the USDC/OXD pair, which is a token launched by one of the Fantom chain founders …
They’re providing a very high 2.462% daily APY for providing liquidity to OXD-USDC.
But if we go ahead and look at the OXD token price, you’ll see the same pattern..
The OXD token price dropped by 88.73% & 18% drop in the last 24 hours.
Therefore we request you to never chase high APY, you’ll get REKT FOR SURE!
*** For me DE-FI returns priority is in this order-
Sustainable > Safer > High .
3. Similarly, if you look at the GRIM token chart below-
You’ll notice that it lost 78% of its price, so what’s the point of taking such tokens even if they give you high returns.
They’re giving you 1.61% of daily returns, that’s so freaking high!
But that doesn’t matter since the token price is decreasing by a lot.
It’d have been nice if the token price hadn’t fallen & would’ve stayed the same.
Your initial $1000 investment would’ve become $8,319.41, if the token price hadn’t changed.
But since it did & we saw some impermanent loss, therefore your initial $1000 investment dropped down.
Due to the 23.3% impermanent loss, your investment value dropped down to $467.24.
So, that is why rather than being greedy, if you are able to get 100% return compounded annually for next 10 years on a base investment of $10,000, then you’d have $10.24 million at the end of 10 years.
*** Therefore I prefer sustainable average returns over a long period of time, rather than high unsustainable returns for a low period of time. ***
Also if you don’t have $10,000 to begin with, you can start with $1000, and you’d have $3 million at the end of 10 years.
Also the rupee can depreciate with respect to the dollar let’s say by 30%, then that way you’d have 30% more money.
Now you have to understand, that de-fi returns which are all -
It is difficult to achieve, you can only have any 2 of the above.
You need to understand that this is a trade off, you can either have-
- Sustainable & safer returns but compromising on higher returns.
- If you go for sustainable higher returns than safety is compromised.
- If you go for higher safer returns, then sustainability is not there.
Know that a long time frame is a must, you need to have time on your side.
Warren buffet’s 80%–90% of the wealth came in the last 10–20 years because he spent time at his side.
DeFi can make you filthy rich but also can make you go broke or bankrupt. Play wisely.