Preserving your profits is a whole different ball game than finding your profits.
2021 has been an extraordinary year for me. I learned more about crypto, defi, and finance than I ever thought possible. During this year, I made the equivalent of my entire years salary in 6 months off of trading, staking, NFTs, etc. I am an entire 1.5 years in the future financially.
This is not a post to brag about my winnings. It's a post about the change of mind I had when I finally did get those winnings.
Investing is as much about understanding "opportunity cost" in dollars as it is about understanding "opportunity cost" in mental power.
Volatile up, Volatile down
I am now in a state where I am feeling unwilling to return to "volatile" coins for the foreseeable future. By volatile I am referring to any coin that is not pegged.
After a bull run as massive as 2021, I am considering the likely hood of another wave of retail to come and pump prices to be minimal. This is mostly based on Google Trend Data, anecdotal evidence, and a gut feeling that although crypto may lead us to a new financial revolution, it's not going to happen immedietely.
"When is X going to pump again?"
"What's the next big coin?"
"The X short sellers are afraid of the pump!"
These are real comments I've heard over the past few months and something strikes me about all of them - a constant yearning for some unknown source to come and buy up all the supply.
To me, this was a sign to back out of the volatile market. So I did.
This subject could be another 500 articles. I'll cut it short. Stablecoins provide the safest way for high interest saving and is changing the world. Whether the platform pays you in crypto, more stablecoins, or a mixture of both, you're sure to find a platform that fits your needs.
I'll be writing more about this in the future but for now - you can check out my "Stablecoin Snapshot" to get a good starting point for reliable, high interest dapps.
For this article, I will be comparing 2 hypothetical staking platforms with a major difference in APY and discuss how I mentally weigh them out.
You could get 10% APY here but also 30% APY over there. If you don't move, you stand to lose a potential 20% APY over the course of a year.
In Crypto, it is not uncommon to be bombarded with seemingly endless choices of DAPPS(Decentralized Applications), promising you a high rate of return for staking your crypto with them.
I will be going over the 2 ways I determine whether a protocol is "trustworthy" enough for me to stake.
Before taking a look into tokenomics, take a look into the developers and the community first. Tokenomics only works out when there's players in the game.
No players. No game. No gain.
Take a look into how the developers react to community feedback and whether or not the community is busy discussing possibilities of the project vs spamming about the next upcoming ATH (All Time High). This is not a condemnation but more likely than not, those calling for pumps or ATHs, are the same people who dump on new comers.
A community that aims to steal from it's members is not a community I wish to join.
Do your best to understand that the higher the APY the higher amount of risk you are putting on.
Trust me in the fact that is there was a protocol that could literally double your money in a way with very little risk, it would've already been exploited by someone far smarter than you and I.
More commonly, the pools you see with higher % APYs are achieving the high APY by including their own governance token to the rewards.
This is not strange in the DeFi world but if you are receiving a substantial amount of governance token for your interest, it is wise to read up on that coins tokenomics to understand pump and dump potential.
For example, a protocol like Curve has been around for years and the price has been stabilizing. With this piece of information, you now know that investing in Curve and receiving their governance token is an okay trade off as long as the % APY remains high.
If a protocol is aimed towards DEGEN farmers, the very second the coin can be dumped, it will.
Investing is as much about understanding "opportunity cost" in dollars as it is about understanding "opportunity cost" in mental power. If you feel like crypto investing is taking over the majority of your mental power, it's probably a good time to take a break. An overloaded mind rarely makes sound calls.
Taking a break doesn't have to mean withdrawing to FIAT. It just means investing in a way that reduces volitility and adds the stability in your portfolio and your life.