Hello SPIers, today we are only to look at chasing high defi APY's and how we all keep falling for the same tricks over and over. I've have been involved with cefi & defi investing from before the term DEFI became a buzzword. Most of us have to be honest and just dont know it. You ever power up STEEMHIVE? you've technically defi invested. HIVE is decentralized, you power up to earn a 3.3% HIVE from inflation and increase your vote which increases your curation earnings. A defi farm could say, stake your tokens to earn 3.4% and on top, you get a slice of a rewards pool every day if you make 10 actions like I dont know, say... voting on something. So you see, im my twisted mind, powering up HIVE is defi and we've all been doing it for donkey's ages already.
Moving on, what I see a lot of is people talking about high farming APY's and how they convert their good cryptos into shitty ones chasing them. Now, you should know before we get into this that im pretty single-minded on some views and I have some rules I just stick to, I will not change. The way I do things might not be best but mentally and financially, they work best for me.
It is possible to get 100% APY's on cefi/defi farming but you have you play the long game and understand that the quality of the crypto you use is much much important than advertised high APY's. The high APYs are hidden and easier to get.
Defi/Cefi TOP 5 SINS
#1 - Buying the farm token
You should never buy the farm token. I dont care what burns it has set up, what's being released, what the APY's are, I dont care if Elon Musk is tweeting about it, I will never buy the farm token. Why? Because you can get it for free!!
Why pay for something that is highly likely to drop in value over time? because of the high inflation? because it's issued for free and has no use case other than to mint more farm tokens? are because the APY is 150% and you pray/wish and hope it's gonna moon? How many times have you watched the price of a farm token remain stable all week and then drop 10-15% on your harvest day? Boom, there's a wrack of your profit gone. What good is 150% on a token that drops 90% in value in a few months? If you're looking to invest in the farm token, invest from harvests and lose your profits instead of your capital. Lastly, would you hold a farm token in a cold wallet? hell no because you know damn well, they are the worst store of value out there.
When a farming token value drops 80-95%, it's not going to recover. Some say this is not true for all projects but in reality, we dont live in 1 in a 1000 chance land and, it's not going to recover. You buy into a farm token within the first 2 weeks of its launching and you are pretty much guaranteeing yourself a future $ loss. I've watched it happen to countless projects, price booms for the first 2-4 days as people FOMO and chase 1000% APY's, then big price drop, donkeys FOMO harder thinking it on discount and not on the decline, prices levels off for 1-2 weeks and then slowly declines to almost nothing and then levels off. Buying the farm token will get you wrecked. You'll still do it with the hope of moonage and quick riches and then when you get wrecked again, I hope you remember reading this and slap yourself on the head.
#2 - Chasing high APY's
This is sort of connected to the first one as the highest APY's normally require an investment of the farm token but not always. The thing about these high APY's is, they get people wrecked. Proper truly wrecked. They convert $200 into some crypto they never heard of to earn 2000% in a token that is trading at $20 each. They pay the 2-4% deposit fee and start harvesting with high hopes. The next day, the token price has crashed and their holdings are worth $60, the APY on the farm has dropped to 300% and they feel pretty stupid. They panic, cash out at a loss and move on to the next money-losing millionaire-making venture.
This is FOMO at its peak and the marketing model is genius. The APY you see is not real. I mean it's real at that moment in time but there are way too many variables that make this not realistic. When people see a harvest rate of 150% per year, they dont consider what the value of token they are using will be worth in a 1 year are the value of the reward token they are going to receive in 1 year. Focusing purely on the APY will get you wrecked.
#3 - Not Researching
In defi land, things move quickly and I understand taking 1-2 hours or 1-2 days to research a project is not always the most profitable thing to do as time is money but FOMOing into projects cause you saw a bunch of people in a discord or telegram server saying it was the shit and they were making a killing will not result well for you as a latecomer.
You should always check for audits, check the main contract account wallets, google search it with the word scam to see what people have been saying on Reddit, youtube, etc. If the team is displayed, google search the top dogs and what you can find. Nothing too hard, all simple stuff to help you build a picture for what sort of platform it is.
Researching is key. It is very easy to invest in dead/rugged projects that appear to be live and still accepting deposits to find out you've basically just lost all your funds when you cant harvest or pull your funds. Researching and gathering up even basic information is the most profitable thing you can do long term and should not be overlooked for a quick buck. Not researching will get you wrecked.
#4 - Being involved with too many things
With new stuff being released every day, it's easy to feel we need to be involved with everything so we dont miss out. This is ok if you have 6 figures to play with but most people dont and spread their investment money too thin over too many different platforms/LP's. If you have $1000 to invest, you should pick 1 platform, 1 LP/den and stick to it. Chopping $1000 into 10 different LP's/dens over 3 platforms might sound very diverse and smart but it's not and I'll tell you why. It costs money to claim harvests ad it costs money to reinvest/convert are transfer those harvests. You'd be paying 10x fees. If you were earning 40% on $1000, each week you'd harvest around $7.70 worth of crypto. You wanna be diverse and pay $3 are 38% of your profit in fees over 10 investments are you wanna pay 30 cents are 3.8% to harvest 1 investment instead.
Being spread out puts you at less risk of losing all your funds in 1 go due to a hack or rug pull but on the flip side, it increases your risk to lose a portion of your funds all over as you are exposed to more platforms.
The thing about crypto are investing, in general, is there's always the next big thing coming. You cant be involved with everything so dont try. Cherry-pick the best investment and build it. Set a target to where harvesting fees dont really factor in that might take you 2-6 months and stick to it. When you hit your target, that's 1 egg done. Start a new egg. Boring but easier and more profitable. Spreading yourself too thin and losing profits to fee's will get you wrecked.
#5 - Getting in on launch day
The biggest profits are available to us on launch day but the biggest risks also. People think they need to get in early to make the most money. These people will get rugged and lose much more than they make long-term. If you can hang back and watch a new platform operate for 1-3 weeks before putting your money in, your much less likely to lose your funds. It's not easy starting from zero again. You'll not get the best APY's but you are more likely to keep your funds and 5% on anything is better than 500% on something that gets rugged or hacked a few days after launch.
I make an exception for CUBfinance on this one and say it's launch day safe but only because it's cefi and LEOfinance is its parent. The rest, be very wary of getting into a new platform within its first weeks. The longer they last the worse the APY but they last longer.
Your APY depends on how much your investment is worth in dollars. Let's look at an example. Let's say you have $1000 and split it between CUB den and BTC/BNB LP on CUBfinance's launch day. Im not hating on CUB, just using it as an example because we all know it. The numbers im using are rough but credible as alot of us have been using it from day 1.
CUB launched at the start of March. The CUB price launched at around $3-4 and climbed to over $12 at one point. Bitcoin was trading at around $50k and BNB at around $250. To keep things simple, we'll say $500 got you 100 CUB and the other $500 got you $250 worth of BTC and $250 worth of BNB. You stake CUB to earn 1200% and you stake BTC/BNB to earn 160%
Fast forward to today. Forget about the crypto crash, all the news, FUD, whatever you've seen and whatever has happened in the world over the past 4 months. Today, 100 CUB is worth $60 but the BTC/BNB is still worth around $500 because BTC is down around 20% but BNB is up around 20% so they cancel each other out. Your CUB is now earning 100% APY and BTC/BNB is earning 30% APY.
Here's the trick
- 100% of $60 is less than 30% of $500
Seems oblivious but most people will not consider this while thier dick is hard from earnings an advertised 400% APY.
Getting in on day 1 can be very profitable if you deposit funds like BTC/ETH/BNB into dens or LP farms and convert all the farm tokens while the price is mooning. When CUBfinance launched, I know of 1 person who deposited 0.5 BTC and by converting harvests to more BTC and compounding, they exited after around 8 weeks with 1.4 BTC and a bag of 300ish CUB tokens. That's what smart money is doing.
Falling into the "getting in a ground-level" trick will get you wrecked.
- My advice to newbies
Dont bother with under $500. Im not saying you cant, Im saying dont bother. The time required could be used in more profitable ways. Research the farm platform for ideally 2-3 days to get a good feel for how it works, what others are saying on social media. Pick an LP/den with good time served cryptos like BTC/ETH/BNB, have a plan with a set target and then do your plan until you achieve your goal. That's it. Dont change your plan until you hit your target and then have the next play already planned to move into.
Just do something simple.
Investing $500 in the BTC/BNB kingdom on CUBfinance earning 35-40% per year is long term a much better investment than $500 into the CUB kingdom earning 100% per year. Forgetting about the APY's, which is a better investment? BTC&BNB or CUB tokens? Im talking 6, 12, 18, 36 months from now.
Putting $500 of either BTC or ETH onto a cefi lending platform that pays out 4-5% per year is even safer. Earning 5% might sound shitty to you but think of it this way. $500 worth of BTC today will get you around 0.01 BTC and you can earn 5% per year in BTC. You leave it there for months, years and watch Bitcoins value increase into 6 figures. Your $500 BTC investment grows and your interest payments in dollar value grow and are automatically compounded into your wallet. If 5% earns $10 of BTC in interest payments when BTC was worth $10k and you sell those BTC interest payments when BTC is worth $50k, you really earned 25% on your investment. If you were using a defi farming earning 20%+ and converting all harvests back into BTC, your ROI would be much higher and grow into the hundreds and maybe even thousands of per cent given enough time. Earning 200% per year on something that loses 50% of its value every year is compounding shit. We have BTC and ETH.
You gonna be rich someday are at least give yourself a chance? You gotta get your shit together and fuck all these shit tokens and take the safe route. Get yourself some BTC/ETH/BNB and use them to earn 20% APY somewhere. Your long term profits will come from your crypto, as the price of BTC/ETH/BNB grows over time. Earning 20% on crypto worth $500 will pay you $100 per year. Left alone for 3-5 years, this $500 investment into low inflation tokens like BTC/ETH/BNB increases and could be worth $5000 and earning $1000 per year.
You think a $500 investment in any farm token will yield the same results over 3-5 years?
You can earn 100's are 1000's of % from defi but like everything, quality over quanity is always best.
To round up, be careful out there. Everyone is trying to get your money and people will stoop to unthinkable lows to get them. Plan each move and be aware and prepared for whatever happens. Minimize your risk as much as you can and never buy the fooking farm token, I can't stress this enough.
Anyways, I hope you find my ramblings at least entertaining. Drop some feedback, sleep the upvote, give a great day.