Current Thoughts On Defi Gamble Plays
In case you didn’t hear, there was yet another rug pull which took down some prominent YouTube influencers and their followers. The name of the project was Circulate Money. This involved the dev named “James” even outright lying on an AMA. Not only this but “James” limited the amount of capital that could be put in. This scammer was obviously aware of the criticism that ponzis need new capital to be sustainable. After raising more than $2.1 million, the scammer transferred funds out of the project wallet then moved funds to the Ethereum network and distributed it through the Tornado mixer.
How Did It Happen?
“James” reached out to some YouTube influencers to present a great opportunity to invest in a project. He pretended to offer access to trading bots and got on an AMA to convince people that this was legitimate. It worked very well. After the funds got in, the rug pull happened and all those that “got in early” have lost their money.
The Root Cause
Most defi projects are struggling to attract and retain capital right now. There are plenty of legitimate (but high risk) projects that are going through a hard time in terms of price performance and capital retention. Meanwhile, there are all these degen products launching where people go to do gamble plays promising higher short term daily returns. The mindset is that you go in looking to make a quick return and ROI your investment. Those that come in too late or compound a bit too long are left carrying the can.
The problem is that by participating in these, it brings legitimacy to these plays where it is virtually guaranteed that many will lose money. It’s a game of musical chairs and some are left without a seat when the music stops.
Use and Abuse Of Influencers
A key part of these projects being empowered is through influencers. I’m not against influencers. If you know anything about how the stock market works, there are pre-sale deals that are the exclusive domain of privileged people that get special discounts when they already have a tonne of money. I should know, I used to approve credit for these transactions. However, I would never get anything like the access they get and a wall of compliance stopped me from benefitting. Influencers can help ordinary folk like you and me benefit from these opportunities so I’m not against influencers.
I would consider myself an influencer even if my reach is limited. But some things I have noticed is that the big influencers will get harassed by these (at best shady) developers until they agree to do an AMA. I have also seen it justified by saying things like “documenting my journey”, “risk capital only”, and “I get more views for these projects”. I am not naive to think I am going to change that, but I will look at this more and more. I’m becoming more willing to enter the fray to warn new entrants against these types of plays.
I was previously not in favour of outright opposing projects but I am getting sick of seeing the same old thing over and over. I have already railed against ROI dApps being backed by trading bots. I would prefer trading bots that pay the actual returns but of course this would be less attractive. What I am opposed to, are influencers promoting (in any way) projects where even the influencer admits that they aren’t sustainable. They are free to do it. I can’t stop them. I believe strongly in free speech but I will also exercise my right to free speech by advocating against this kind of project.
Final Thoughts
I heard one of the influencers who covers these degen projects (among other things) say that you will not make life changing gains from these degen projects. I agree with this. This is the domain of people with a lot of capital who can use it to generate additional income. Right now you have projects like RelyFund and YieldRobots but I’m sure there will be others. Good luck to them but most likely they are getting it from someone like you or me. If you are putting $1000 into these projects then I would suggest you stop wasting your time. I admit I am talking to myself with a lot of this and second guessing what I am or have been doing.
Disclaimer: None of what is written in this article constitutes financial advice. Investing in cryptocurrencies, and in particular decentralised finance, is high risk. What I write is not a recommendation to invest in the projects I discuss. I am not aware of your personal circumstances. Only invest what you can afford to lose. Make sure to do your own research rather than relying solely on my content.
An Important Note
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