Thread by @SoundsTricky

DEFI CAN BE CRUEL: DON'T LOSE YOUR INVESTMENT!

Using DEFI institutions is an up and down rollercoaster 🎢 of wins and losses.

I’ve lost a few - and I’ve won a few as well

What I have learnt over my journey may be useful to others but hopefully, if nothing else it can save u some of the dollars I have lost along the way 🙏

#DEFI and #StakingRewards tend to work as follows
1). Token launch and high APR brings in new investors
2). New investors flock in for high APR and this drops the APR
3). Initial investors dump their tokens on the late comers and the price of the token plummets.

All the late comers lose money on the token value dropping and no level of APR can save this loss.
Sadly this is happening time and time again with countless people losing their life's savings. Take the @Wonderland_fi phenomenon for example.

This happens for 1 simple reason - Human Nature. As humans we want more for less, the best houses for our families, the best education for our children and these exorbitant APR's on these crazy protocols are promising us potential financial freedom.

Here is an example where I have learnt the hard way: QUBIT.
When they first launched their QBT token they incentivised a pool on Pancake bunny ::: 1200% APR paid in QBT - so I did the math - $10000 x 1200% over 1 year - Ill have $120K - 🤯

I invested $7500, all I could scrape together at the time - in the first few weeks I was making about $60 a day, HOW AMAZIG AM I !!
WRONG WRONG WRONG, within the space of 10 days the token value went from 0.56 down to 0.07 dragging my $7500 down with it, I was left with $1500

👆👆This above chart is one of the most common looking charts with all new protocols emitting rewards tokens. The dreaded REVERSE PARABOLIC CHART.

After the QBT drop in price I was STUNNED ::: SHOCKED::SAD:: What has happened to my $120k? Actually, what the F$%^K has happened to my $7500!!! That was my savings! What have I done, was my first thought. After being butt hurt for a bit I started to think:::

How could I have stopped this loss?
What could I have done differently?
What have I learnt from this?
I WAS DETERMINED TO NOT LET THIS HAPPEN AGAIN. So I did some research, made some rules and most importantly came up with a strategy:

Firstly: NEVER APE INTO A HIGH APR

Secondarily: SPREAD YOUR RISK

What if I had kept some of my capital intact instead of aping into QBT for this high APR?? Well, I'd be much better off!

So what am I ACTUALLY proposing here?

ITS SIMPLE REALLY

ALWAYS Split your capital across various pools spreading your risk. NEVER INVEST EVERYTHING IN ONE PLACE. I know we always talk about this in the crypto world but its harder to practice than to preach - especially when your looking down the barrel of a 1200% APR!!

But I want a super high APR - Im a degen, I hear you say.

Well here is my new tactic:

It gives you exposure to high APR's while maintaining a solid foundation, it mitigates the risk of token value loss while also taking advantage of all that #defiyield has to offer.

So how do we do this? I'll make this easy by using an example of a $3000 investment.

We split our investment over 3 pools:

$1500 into stables - 32% APR

$1000 into medium risk - 70% APR

$500 into high risk - 317% APR

Each pools rewards feeds the next pool.

In this example, the strategy gives us a total APR on our $3000 investment of 92.16%
See my chart and breakdown - I have run this over 3 weeks so you can see how it grows:

Please keep in mind you can apply this strategy to anything you choose, not just what I show you. This is the blueprint to mitigated risk.

The 3 KEY points of this strategy:

1). 50% of your capital will remain in stables protecting you from volatility. LOW RISK

2). 30% of your capital is in a token YOU believe in long term. MEDIUM RISK

3). By feeding the next pool in the chain you are building your positions across the entire strategy. This means that your stables, high risk and low risk tokens all grow over time.

So here is a real life example, @beethoven_x is the perfect place to run this strategy from start to finish on one protocol.

1). Stable pool : $DEI - $USDC 32%APR

2). Medium Risk high conviction : Pirate Party - $LQDR - $FTM 70%ARP

3). High risk pool : The Desert Sonata - $SCARAB - $FTM 317%APR

TOTAL APR ON INVESTMENT = 92.16%
@Scarab_Finance @LiquidDriver @DeusDao

Although this type of strategy won’t net these crazy 3000-10000% APR’s, it will protect part of your investment while helping other parts of your investment grow.

If I had understood this concept in the beginning, I would of saved myself a lot of heart ache and a lot of money.

Let me know what you think, give us a share and some of your own some ideas on similar strategies you may have.

*since writing this thread some ARP's have dropped. This is the defi way.