What Does The Term “DeFi Degen” Mean In Crypto?

Crypto has a lot of terminology, among which is “DeFi Degen.” These reckless DeFi gamblers make and lose money by “aping in” to their trades.

An interesting term that floats around the crypto space is ‘DeFi Degen,‘ a title granted to (and often proudly worn by) people whose activities on decentralized finance (DeFi) applications can only be described as reckless gambling. Many protocols in the DeFi industry are specifically designed for people with high-risk behaviors who know they stand a good chance at losing their deposit and accept the risks of doing so.

Blockchain smart contracts are used heavily to create new forms of financial applications, and they provide extensive functionality that allows for a whole interconnected ecosystem of decentralized applications (dApps) to exist. While this functionality is very useful for innovation and experimentation, it can also be abused to create scams and automated Ponzi schemes. It is possible to create experimental DeFi projects that provide massive gains for their early users, but these projects tend to be unstable and collapse eventually, and the gains have to come from somewhere or someone.


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CoinGecko describes a ‘degen’ (short for ‘degenerate’) as someone who “buys into an asset not because they see value, rather they do so with the belief that others will join in after them and speculate on the price swings.” While some DeFi Degens can make eye-watering returns on a few lucky moves, most of them will get wrecked by crypto due to their own greed and FOMO, and would probably be better off gambling at a casino. Regardless, many DeFi protocols exist that cater to this type of trader, and leverage trading is one of the riskiest and most popular activities they engage in. DeFi Degens always seek out the highest yields and the highest risk, and will dive into obvious Ponzi schemes and pump and dump crypto scams with the plan of selling out before the collapse comes.

‘Aping In’ Is The DeFi Degen Way

Gorilla holding a fan of hundred dollar bills

Because DeFi is completely unregulated, it is easy for new protocols and liquidity pools to pop up offering 10,000 percent APY paid out in a new cryptocurrency that can be sold on a decentralized exchange (DEX) like Uniswap. These highly attractive (and temporary) gains lead to a behavior called ‘aping in,’ which means piling everything into a new token or liquidity pool. Most people who ‘ape in’ do so because the price of a token is already exploding and they don’t want to miss out on the epic gains, which fuels the token’s price rise. Experienced Degens can manage their ape-like investment strategy to slip in, make some modest gains on others’ FOMO, and slip back out before the inevitable crash, while most Degen traders hold on for too long and become the experienced Degen’s cash-out liquidity.

Most people would be better off just gambling at an online crypto casino, where the odds of winning or losing are known beforehand and the take-profits strategy is simpler. Gambling on DeFi protocols is typically only profitable during a crypto bull market, as anyone can throw money into a small token that has a decent website and attractive logo and expect to make at least a 3x return out of it during cryptocurrency altcoin season, but most people become attached and don’t sell before the price collapse crushes their gains. During a crypto bear market, short trading is the only way to make big gains, but most people cannot manage their emotions enough to make a short strategy work.

‘Degen trading’ has become a meme within the crypto-space, and invokes the image of addictive gamblers who chase gains with the caution of an excited ape, and some experimental DeFi protocols are designed for this type of trader. Degens with better risk management practices who understand how DeFi protocols work can make massive profits off of less-experienced traders, but only a few can win at a time. However, DeFi Degens who stay in any position for too long eventually learn how quickly things can death-spiral out of control.

Next: How Crypto ‘Rug Pull’ Scams Work, And The Warning Signs

Source: CoinGecko

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