I've done O.K. out of DEFI on Binance Smart Chain over the last couple of months, but it's not been all happy dayz and moon-profits all the way.
I have fallen foul of three DEFI traps along the way....
- The classic Impermanent loss
- The overnight drastic reduction in APY
- The drastic fall in value of the platform token.
I've had a couple of losses along the way, for example...
Losing through Impermanent Loss
I don't even want to calculate how much I'm down from having my ETH drained by being in the WLEO-ETH pool - I think it's something like $1000, even factoring in the WLEO 'geyser' pay-outs, which hardly gushed when you factor in the loss of ETH, drained and replaced with WLEO which has declined in value while the former has soared in the last couple of months.
And because I don't learn my lessons easily, the same happened all over again with the BLEO-BNB pool, not as bad in terms of losses as I swapped my bleo for BNB on the way up.
LESSON: Don't pool yer mother tokens (ETH/ BNB) - hodl them - which is what I'm doing (mostly) with my RUNE. I'm also now completely out of the WLEO-ETH pool and mostly out of the BNB-bleo pool.
The overnight reduction in APY
I put about a $1000 into the SXP-BUSD pool on Panda Swap via the swamp finance aggregator a couple of weeks back when the APY was 200 odd percent.
When I checked a few days ago, the APY was down to 10% (currently 12%). I pulled out, which was painful given the relatively high gas fee for entry, I don't think I even made that back due to the minimal time I spent in the pool.
LESSON: Be very wary of high APYs on 'fringe' pairs and check the APYs frequently and be prepared to get out if they drop!
The drastic fall in value of the platform token.
This happened with one of my punts - on NEON - here I just bought (thankfully only a little) some NEON at I think $0.70 and just dumped it in a den at 300% APY, but the price has since dropped 50% to around $0.30.
SO the return might be good, but I'll have to leave it in that Den for a few months to make my money back if the price stays the same.
LESSON: Only punt small amounts of yer funds into degenerate DEFI platforms.
There are some good profits to made in DEFI world, but you need to be careful of the traps you can fall into that result in you making a loss in relative terms compared to what you would have made just holding.
Ultimate Lesson: pool stables to avoid IL, stick to DEFI platforms you trust with 90% of your stake (like Cub, and BEPSWAP for me ATM) and only ever punt 10% into degenerate DEFI!
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