"I want to make money in crypto but I have no idea where to start"
If you find yourself saying this
Then this is for you
This thread will handhold you across your crypto journey from making your first dollar to collecting yield on 6 figures +
//THREAD//
If you find yourself saying this
Then this is for you
This thread will handhold you across your crypto journey from making your first dollar to collecting yield on 6 figures +
//THREAD//
For beginners with no experience using DeFI or GameFi, I usually recommend taking $500 and lighting it on fire for tuition. What do I mean? To understand how the infrastructure works on perps, dexes, options, games and lending, you need to get your hands dirty.
When I first started I took $500 and started taking out loans on AAVE, played perps on GMX, rented crabs on CRA, walked around Decentaland, bought puts on Dopex, bridged to FTM, AVAX, etc.
The investor who knows the user experience and journey across all use cases and chains will be able to discern if a project is innovative or if the product is crap.
Next I would start interacting with communities of projects I find interesting to feel out the strength of the community, or if it feels scammy. Looking thru token terminal, and dune analytics to get an overview of a project.
When influencers talk ab projects, they overdo technical stuff about composability, scaling trilemma, etc. If you can break down what it means in laymans terms and why someone will use the project or chain, then you at least know what you are getting yourself into.
There are a lot of ways to make money in crypto, but the key buckets come down to:
1-liquidity farming (LP yield farming) - which in simple terms means you are getting fees + incentives as a "market maker" for a certain token pair.
1-liquidity farming (LP yield farming) - which in simple terms means you are getting fees + incentives as a "market maker" for a certain token pair.
LP farming comes with a couple risks. (1) is just straight up exploit/contract risk (the project is hacked and your investment goes to zero). .
(2) is impermanent loss risk. Which is just a fancy way of saying you may lose tokens on one side of the trading pair if said token goes up too much. Play with a impermanent loss calculator to better understand this. In a nutshell, it just means you are losing upside
(3) if the LP farm is heavily incentivized with tokens in your LP, then the supply and demand structure of the token over a longer time horizon is likely poor, and will get pressured over time. So when you drool over a 200% APR, the token you are both providing liquidity for
And its native token rewards are going to lose value over time.
2 - the next way to make money is farming stables. You can do this on Anchor, Rari, GLP (kind of) and Convex, among others. You are taking protocol risk on each of these, so NEVER view it as a risk free return. Additionally there is stablecoin de-peg risk
Meaning that the stable could depeg if the mechanics are unsustainable (ie $1 goes to 80c). The yields you can get on some of these farms are high enough (mid teens) to compensate for some of the risk, but you also need to appropriately size risk.
The best way to hedge these risks are 2 fold. First, never dump more than ~10% of your crypto stack into a single protocol farm. That way, if its exploited, you are hurt, but not out of the game, and can make it back. Secondly, if there are stables you view as unsustainable
Like UST for example (not my view, but some others). You can make moves like borrowing UST against USDC -> farming UST, and dumping rewards back into USDC. In this way, if UST depegs, you are "making money" bc ur loan value is collapsing.
3 - appreciation. This is your standard swap on a dex into xyz token hoping it goes up, which I've covered frameworks on how to find them, and time them into catalysts.
4- games. You can yourself play games, or create bots or hire people to play games for you to create yield. On CRA for example, if you have ~$1,500, you can buy 1 crab and rent it out for ~400% APRs.
Ok Wizard, these are the ways to make money, how would you structure a portfolio? I get this question, and its hard to answer. It comes down to how much capital you have, and how much risk you are willing to take. If ur starting at $5k, I wouldn't recommend stable farms
As the yield is too low to make a difference. If ur starting with something more like $50k, you want to be using all of the strategies. So a mock portfolio would be something like:
-$30k in stable farms
-$10k in LPs of projects that you like long term
-$30k in stable farms
-$10k in LPs of projects that you like long term
-$10k in GameFi yield strategies
-$10k in straight spot dex holdings.
And then manage your allocations based on where we are in the speculation cycle (ie right now euphoria is coming back).
-$10k in straight spot dex holdings.
And then manage your allocations based on where we are in the speculation cycle (ie right now euphoria is coming back).
Running a diversified portfolio like this is giving you base yield, LP yield, game yield, and potential appreciation from your spot holdings. And the diversification will keep you from getting wiped out. While being diversified like this will make it hard to 30x your portfolio
in a few months (which is extremely hard anyway). You can keep growing it, and compounding over time, with less risk. This is why I typically tell people to go easy on the concentration, especially if you have a day job, and can't stay up to date on all the various protocols
Everyone has their own way of moving the allocations around, but I think its smart to take stable rewards and put them into spot holdings you like. Take LP rewards and put some towards spot, some towards the stable. Game yields need to be diversified away from the game, etc.
Diversification doesn't make you rich, but keeps you rich. So once you start having something closer to 6 figures. You will be giving up potential gains by not going "all-in" but you also don't have the risk of getting wiped out to zero - which I've heard horror stories of.
For example, had friends make $2m on SafeMoon, but keep riding it thinking it will go to $10m and then it falls 90%. Hopefully this gives you some flavor on portfolio construction, the ways to make money, etc. If you have questions, feel free to ask me - i'm an open book!
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