Dubbed the wild wild west of cryptoverse, DeFi (Decentralized Finance) has made investors millionaires, whilst others wish they never heard the word DeFi. Let’s dive into the rabbit hole, feet first of course.
DeFi is trying to prove to the traditional financial system, we can be “our own bank”. Lending, borrowing, farming all the benefits traditional financial systems provide but MORE!!
We have come a long way with the ever-growing nature of the blockchain technology. DeFi has not been stagnant either, currently at DeFi 3.0 with protocols providing insane fixed APYs. Mostly degens prefer DeFi because of the wide range of possibilities their huge capital can accrue. Here is the three faced investing outcome of DeFi:
The Good
Smart investors follow the two simple rules of DeFi: DYOR and invest what you can lose. Yeah, this is crypto 101, and it does help. Cryptocurrency is unregulated in most nations, so don’t expect to take someone to court because you made a bad investment.
When protocols have presale, these investors go in first, sell when it is high enough and just leave. They make their profits and because they did their research they know when to get out. No losses made. The project will still be solid even if the initial investors are out.
The Bad
I would call them the “lucky investors”. They, like the smart investors did the research and put in an initial investment they can lose, but the project just does not work. This makes them break even or sell at a minimum loss. In crypto, I would say that’s a win for a collapsing project. This is just a badly managed project and won’t survive a quarter.
The Ugly
Here comes the FOMO investors. They really want the quick buck because the neighbor across the street showed off his new VR purchase with crypto profits. According to a survey, conducted by yours truly,these investors are mostly students. They do not do any research, but invest their last capital, student loans and mortgages then get angry because they lose it all. Such investors are rugged by devs (developers) who takeoff with their money leaving them with worthless tokens. The devs of such projects always rug their investors, and they rinse and repeat. They are not KYC’d to any organizations and sometimes have no answers to questions asked about their projects.
DeFi is still new and has insane possibilities if implemented right. I myself have been rugged a couple of times because I ignored the red flags. There are tons of influencers who also knowingly or unknowingly hype scam projects. So yes, do not base your research on influencers they are not financial advisors just like moi.