Stockhead: Sh*tcoins, staking, airdrops and NFTS - how crypto calls to ‘degen’ gambler in us all

Crypto is a gamble, but there are opportunities and various ways to approach them – but be careful when you ante up.

Crypto can be a great deal, when the cards fall your way. Picture: iStock

Crypto has more pitfalls than an ’80s side-scroller, but the meme-loving asset class still has potentially attractive opportunities, and different ways to approach them.

The chair of the US Securities and Exchange Commission Gary Gensler labelled crypto the “Wild West” of finance late last year – a fairly obvious, go-to metaphor.

But, largely unregulated as it still is for now, it does the industry a huge disservice to tar it as one big gambling den.

With institutional investment increasing and a shifting narrative globally towards innovation-friendly regulations, the space is maturing.

That said, many a crypto trader, flipper and even some HODLers do tend to refer to themselves with some pride as risk-embracing “degens”.

Degens and dollar-cost averagers

Gotta risk it to get the biscuit? Crypto has historically been as volatile an asset class as you can find, so it’s inherently risk-on.

But, as with all investing, there are different risk-level strategies to assume within that arc. Here are two of the more commonly known, sometimes employed in tandem …

The degen strategy is probably better described as a mentality.

Short for “degenerate”, a crypto “degen” generally describes investors and traders who frequently “ape” in and out of various “sh*tcoins” (a loose term for mostly lower-cap altcoins), spending next to no time researching the investments.

That might sound a little pump-and-dumpy, but it’s not necessarily as darkly orchestrated as that (or quite as stupid as it sounds).

Because investment narratives in crypto and NFTs can shift at lightspeed, some do this as a spray-and-pray thesis, hoping the hits outstrip the many misses, or even scams.

It’s worked spectacularly for those who managed to catch on to bafflingly successful meme coins early, such as Shiba Inu (+1590% over the past year).

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Or for that matter a Bored Ape Yacht Club NFT, or more recently Moonbirds (which has a floor price quickly risen from 2.5 ETH to 35 ETH at the time of writing – about US$100k).

Easier said than done – time in the market helps, to gain a certain feel. As does luck.

As for dollar-cost averaging (DCA), this is by far the more conservative route, and involves investing a set amount of money in manageable increments at regular intervals.

It’s commonly done with “blue chip” coins, particularly Bitcoin (BTC) and Ethereum (ETH).

For example, if you’d invested $20 AUD per week into BTC over the past four years, through the ups and downs, you’d have turned $4,160 into about $18,000. The same equation with ETH would put that investment at around $43,000.

Admittedly, the figures don’t look as hot if you adjust the time period to only the past 12 months. But for those with a longer-term bullish crypto outlook, it’s probably a more sensible play than flipping jpegs on OpenSea.

New around here? Five things to consider and look out for:

Staking

One of the biggest boons that crypto offers investors is the ridiculous levels of interest or yield that can be earned through DeFi.

We’re talking 5%, 10%, 15%, even 20% and higher per year on some cryptos and stablecoins.

There are various means to do this, with, again, various risk levels.

Many top exchanges (eg. Binance and Coinbase) offer crypto staking, which makes things easy, although it means handing over your crypto plus fees.

Decentralised options (e.g. staking directly into protocols such as Avalanche and Cardano) provide more freedom and ROI potential.

Airdrops

No free lunches … but keeping your ear to the ground can help you find occasionally very lucrative opportunities.

For example, the decentralised exchange Uniswap air-dropped a minimum of 400 UNI tokens to every crypto address that engaged with its protocol by a certain date in 2020.

At its peak, UNI was worth US$44.92 per token. That’s nearly US$18,000 if you’d sold at the right time.

From time to time, Stockhead lets readers know about potential airdrops, which are essentially ways to receive free crypto tokens from decentralised projects either launching and dispersing or using the method as a marketing strategy.

Be careful who you follow

If it sounds too good to be true in crypto … it’s usually being enthusiastically shilled to you by a Tweeter or YouTuber who uses Home Alone-style shocked/amazed faces for video thumbnails.

There are some great crypto influencers, of course, but sorting the wheat from the chaff can be hard work.

Be wary of the HODL trap …

You gotta know when to HODL ’em, know when to … FODL ’em?

This is one of the hardest things to figure out in crypto, although following an unemotional strategy of selling at set targets is one way forward.

Made a 3X, 10X, or even 20X profit or more on a sh*tcoin?

Yeah, probably best to at least pull out that initial capital.

… unless you’re stacking those blue chips

Of course, if you’re truly set on the Bitcoin and/or Ethereum long-term, financial freedom, inflation-hedge thesis, then HODLing and dollar-cost averaging is pretty much speaking the same language.

This content first appeared on stockhead.com.au

The author is not a professional financial adviser. Instead, he’s more set on making just about every mistake in crypto as a kind of ongoing social experiment.

The views, information, or opinions expressed in these articles do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in these articles.

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