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 space, due to the composability of Defi protocols, might be mind-boggling for some but a mind-blowing and money-churning experience for those who know how to navigate the treacherous landscape. A 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". Encrypted, free-flowing, and essentially highly volatile since it's not "owned" by any nations. Come US FED regulations, starting with stablecoins, I foresee more use cases. We shall see.
For those who trade cryptocurrencies, certain chart patterns and signals tend to emerge. Some tokens experience rapid pump-and-dump cycles, sometimes in repeated waves. This is especially so for low-market-cap tokens or certain meme coins due to low liquidity, concentrated ownership (“whales”), hype waves and coordinated social sentiment.
To maintain momentum, the protocols behind these tokens must continue innovating and staying competitive—this helps retain existing users, reduce large-scale token dumping, and attract new participants. In many ways, these protocols function like companies offering products to their users. White papers would give an idea of their tokenomics, governance and treasury management.
There are usually reasons behind a token’s price surge, though the initial pump is often driven by novelty and FOMO. Tokens in DeFi protocols often correlate with TVL— as higher TVL usually signals more trust and utility. Ecosystem tokens (e.g., tokens native to a particular chain) may rise with the chain’s activity. Meme tokens with no utility are mostly driven by hypes.
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| 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 the ones who can make it are those who do their due diligence and have the cash power (or conviction) to "hodl" the coins / tokens from crashes all the way up (stomaching all volatility).
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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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