DeFi is a DANGEROUS place. I studied my #trades in the last 3 weeks, I realised I have made $5000 softly. You won't believe the SECRET I discovered.

DeFi (decentralized finance),has emerged as a lucrative space for investors seeking significant returns. However, it is crucial to navigate this realm with caution, as the risks can be substantial. In this article, we will delve into the journey of how I made $5000 in just three weeks. Prepare to be amazed as I unveil the secret to my success and shed light on the critical factors that can make or break your DeFi investments.

The DeFi Food Chain:

To comprehend the dynamics at play, we need to understand the DeFi food chain. It consists of several key players, includin;

builders

VCs/insiders

whales

influencers and

individual traders.

Money flows from the bottom to the top, and if you want to avoid being an exit liquidity, you must grasp the inner workings of this ecosystem.

Seed/Private Sale:

Imagine a case study centered around a #crypto called $CP. During the seed sale, the token was priced at $0.02, and during the presale, it rose to $0.07, yielding a 3.5x increase for seed sale investors. Excitement builds as $CP is launched, with its price soaring to $0.84 and its market capitalization reaching $2.3 million. Trading volume stands at an impressive $763K. Influencers start promoting $CP, and the token begins listing on exchanges. However, an unfortunate turn of events occurs when the chart suddenly plummets just two hours after your purchase.

The Seed Investor Advantage:

Why did this happen? The answer lies in the significant gains experienced by seed investors, who were already 42x up. Given their substantial profits, would they patiently wait for individual traders to catch up? This situation underscores the importance of knowing the seed sale price, which can be determined by analyzing the whitepaper or engaging with the project's community. By comparing the current price to the seed price, traders can calculate the potential gains or losses.

Token Unlocks:

Another critical factor affecting the value of a DeFi token is the unlocking of tokens held by seed investors. When a sudden increase in token supply occurs without a corresponding rise in demand, it often results in a detrimental dump of the token's price. However, not all token unlocks are necessarily negative. The unlock size plays a crucial role in determining the impact on the market.

The Importance of Unlock Size:

Consider the example of $CP, with a maximum supply of 100,000 tokens and a circulating supply of 10,000 tokens. If 7% of the tokens are unlocked every two months, the release will be gradual and less likely to cause panic among investors. On the other hand, if a substantial portion of the tokens, say 62%, is suddenly unlocked, it can lead to a significant price decline, leaving traders in despair. Unfortunately, most projects do not explicitly announce their unlock schedules to avoid creating fear, uncertainty, and doubt (FUD).

Mitigating Risks:

To mitigate risks associated with token unlocks, diligent research is imperative. By carefully examining a project's whitepaper, traders can ascertain the vesting schedules and gain insights into potential unlock events. Utilizing relevant hashtags like #Tokenunlock or #tokenunlocks on social media platforms can also provide information and rumors surrounding upcoming unlocks.

Understanding the Cliff:

Additionally, traders should familiarize themselves with the concept of a "cliff." A cliff refers to a period during which no tokens are vested or released. While it may seem ominous, venture capitalists (VCs) who often utilize cliffs are not inherently malevolent. In fact, VCs play a vital role in driving innovation within the crypto space. By understanding the dynamics of cliffs and their significance, traders can make informed decisions and avoid becoming mere exit liquidity in the DeFi ecosystem.

Conclusion:

Making $5000 in the world of DeFi is undoubtedly an exciting achievement. However, it is crucial to recognize the potential dangers and intricacies involved in this space. Understanding the DeFi food chain, identifying seed sale prices, and keeping a close eye on token unlocks are key factors that can greatly impact your investment outcomes.

While DeFi offers tremendous opportunities for growth and profit, it is essential to approach it with caution and conduct thorough research. Analyzing whitepapers, engaging with communities, and staying updated on unlock schedules can provide valuable insights and help you make informed decisions. Remember, venture capitalists and other players in the DeFi ecosystem are not adversaries but catalysts for innovation. By navigating the complexities of DeFi intelligently, you can position yourself for success and avoid becoming exit liquidity in this dynamic and ever-evolving landscape.

Always #dyor .