Crypto has a lot of terminology, one of which is “DeFi Degen”. These reckless DeFi players are gaining and losing “monkey” money in their trades.
An interesting term that floats around the crypto space is ‘DeFi Degen,‘a title granted (and often proudly worn by) people whose activities on decentralized finance (DeFi) applications can only be described as a reckless game. Many protocols in the DeFi industry are specifically designed for people with high-risk behaviors who know they have a good chance of losing their deposit and accept the risks of doing so.
Blockchain smart contracts are widely used to create new forms of financial applications, and they provide extended functionality that enables an interconnected ecosystem of decentralized applications (dApps) to exist. While this feature is great for innovation and experimentation, it can also be misused to create scams and automated Ponzi schemes. It is possible to create experimental DeFi projects that offer massive gains to their early adopters, but these projects tend to be unstable and eventually collapse, and the gains have to come from somewhere or someone.
CoinGecko describes a ‘degen’ (short for ‘degenerate’) as someone who “buys an asset not because it sees value in it, but rather in the belief that others will join in and speculate on price fluctuations.“While some DeFi Degens can make tantalizing returns on a few lucky moves, most of them will be destroyed by crypto due to their own greed and FOMO, and would probably be better off playing in a casino. Either way, there are plenty of DeFi protocols that cater to this type of trader, and leveraged trading is one of the riskiest and most popular activities they engage in. DeFi Degens is always looking for the highest returns and the highest risk, and will dive into obvious Ponzi schemes. and pump and dump crypto scams with the plan to sell before the crash.
‘Aping In’ is the DeFi Degen way
Since DeFi is completely unregulated, it is easy for new protocols and liquidity pools to appear offering 10,000% APY paid in a new cryptocurrency that can be sold on a decentralized exchange (DEX) like Uniswap. These very attractive (and temporary) gains lead to a behavior called “monkeying”, which means piling everything into a new token or pool of liquidity. Most people who “ape” do so because a token’s price is already exploding and they don’t want to miss out on the epic wins, which fuels the token’s price rise. Experienced Degens can manage their monkey-like investment strategy to slip, make modest gains on others’ FOMO, and pull back before the inevitable crash, while most Degen traders hold on too long and become Degen’s withdrawal liquidity experienced. .
Most people are better off just play in an online crypto casino, where the odds of winning or losing are known in advance and the take-profit strategy is simpler. Gambling on DeFi protocols is usually only profitable during a crypto bull market because anyone can throw money at a small token that has a decent website and an attractive logo and expect to make it at least 3x back during cryptocurrency altcoin season, but most people get attached and don’t sell until the price crash crushes their gains. During a crypto bear market, short trading is the only way to make big gains, but most people can’t manage their emotions enough to make a short-term strategy work.
“Degen trading” has become a meme in the crypto space and conjures up images of addictive gamblers chasing gains with the caution of an excited monkey, 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 with less experienced traders, but only a few can win at a time. However, DeFi Degens who stay too long in any position eventually learn how quickly things can spiral out of control.