My Defi adventure 7: Breaking even in opportunity cost

Defi's never boring... adventures never end.

It has been exactly 5 months since I became "degen" and embarked on Defi. I onboarded Ethereum main-net with ETH, subsequently bridging over to Polygon and other blockchains.

As I bought the native chain token at its all time high (swapped from ETH) to engage in on-chain farming, and got farm-wrecked at some point in time too, my returns when benchmarked against my initial ETH capital outlay has been sub-par.

Leaving the July crash behind, the new L1 and L2 chains seemed to be having all the limelight. As more people onboarded, and perhaps whales did their capital shift, it is soon altcoin season once again (you know it when even meme coins start pumping like crazy). With that, I am finally breaking even in terms of my opportunity cost (if I have held on to all my ETH bought in the period of May till date). 

Looking from a different perspective, if I had just held on to my ETH doing nothing, I would have learnt nothing about the exciting Defi space and the prowess of Defi protocols which can flip Tradfi's rigid banking system. (The complexity, due to the composability of Defi protocols, might be mind-boggling for some but mind-blowing and money-churning for those who know how to board the right boats. Few days ago I wanted to write a post about Convex finance and now CRV tokens are on fire, coincidentally or not.) I have got my many moments of crash got sound!

Crypto, in a nutshell, is "global money". Smart, free-flowing and, of course, highly volatile! Come the FED regulations starting with stabelcoins, perhaps things might change... We shall see.

There are certain obvious patterns from the charts for those who trade. Some tokens get pumped and dumped very quickly but may pump in successions. The protocols that distribute these tokens need to keep innovating and maintain competitiveness to retain existing users, avoid mass token dumping and attract new users. You can look at them as though they are companies offering users products. 

There's usually some sort reasons for their price pumps, although the initial pumping phase it may be simply due to people flocking to novelty - FOMO. It may also correlates to the platform / chain that they are on and TVL.

Quickswap's price chart. Quickswap is an AMM on the Polygon network.

Sheer luck in trading crypto may happen when the big caps pumped and tide of euphoria lifts all boats. However, I think much more money goes to those who bother to hone their skills and do homework - as they would have the conviction to "hodl" the coins / tokens from their bottommost prices all the way up (and stomach roller coasters along the way.) 

Again, the analogy about eagle and bunny holds true even if the said investment asset class differs.

Side reading:

Luck vs Skill in Investing

You did something and gotten great results - how do you know it was due to skill or just luck?

TLDR / Highlights by the author:

- Check track records (decades versus years versus months...)

- Focus on the process to judge soundness of predictions

- Find a larger data set

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Disclaimer: Contents of this blog are personal opinions and NOT financial advice to buy or sell any securities, commodities or assets.


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