Tips and Tricks on how not to get Rekt in Crypto — SECURITY SERIES

Rekt is cryptocurrency slang for ‘wrecked’. It originates from gaming but has since become popular in cryptocurrency. Getting rekt can happen when a trader loses out in a big way from a trade. The best way to prevent getting rekt is to avoid big trades. You should think a lot about your trades and how much you are willing to risk. The following are some of the tips and tricks you can learn in order to not get rekt.

1. Stick to trusted, well-used DeFi protocols

• As an investor, DappRadar can be useful here

• The more TVL and engaged users over a long time frame, the safer the platform

• Another step in reducing the danger of flaws, exploits, and hacks is to construct positions on tested procedures with respected teams working behind the scenes

• Compared to centralized platforms, decentralized financial providers are more transparent, providing you with more knowledge about the general health of a dapp

2. Understand where the yield or reward comes from

• Some yields serve as marketing gimmicks that temporarily motivate users but are ultimately unsustainable

• They may also be inflationary, where the protocol enables the creation of new tokens as necessary and these yields cannot be maintained

• It is essential to comprehend a yield’s internal generation process in order to evaluate its stability

• Ask yourself why if one procedure offers 5% and the other 10%, and keep in mind that bigger rewards frequently come with higher risks and can also be decreased suddenly

3. Don't forget gas costs when estimating returns

• Gas prices are simple to overlook but can ultimately reduce company margins

• Due to the potential for large gas fees on Ethereum, any position needing several transactions will consume a sizable portion of both the ultimate margin and gas expenses

• Investors playing with less than $1000 would be better to go to work on chains like Avalanche, Polygon, BNB chain, or Solana, where fees are minimal

4. Understand basic tokenomics

• Projects with well-planned tokenomics have a significantly higher chance of long-term success, whereas those with poorly designed tokenomics are certain to fail

• Due to their lack of understanding of the project’s tokenomics as well as their inability to distinguish between excellent and bad initiatives, new investors frequently receive REKT

• Understanding the token supply is essential since it has a direct effect on how valuable a token is regarded

5. Use leverage with extreme caution

• Although it carries a higher risk and necessitates attentive management, leverage can undoubtedly boost returns

• Leverage is the process of taking on debt in order to create larger holdings with the potential for benefits

• Miscalculations, however, may result in liquidations and receiving REKT therefore inexperienced or passive investors should not use leverage or borrowing

6. Understanding impermanent loss

• Your impermanent loss is the amount of money you lost as a result of a price fluctuation that occurs after traders deposit tokens into a liquidity pool and occurs a few days later

• For instance, stablecoins will have a fairly narrow price range so liquidity providers in this situation face a far lower risk of temporary loss

• Transaction fees for many liquidity providers are outweighed by temporary losses

• However, trading costs, such as those on Uniswap, can offset the transitory loss, allowing pools that are susceptible to it to continue to be profitable

7. Consider passive earning opportunities

• Those who lack the time to constantly monitor their portfolio should select passive investments that don’t require a large time commitment

• Since the majority of centralized and decentralized platforms now support it in some capacity, single token staking has grown in popularity among crypto newcomers

• The most well-liked method is stablecoin staking, which offers investors a return of about 5% and offers some protection against growing inflation and the depreciation of local currencies

• A great substitute for active yield farming is yield aggregators and with little work on your part, platforms like Yearn can provide a risk-adjusted return for you

REFERENCE:

1. https://trading-education.com/how-not-to-get-rekt-trading-cryptocurrency

2. https://dappradar.com/blog/how-to-avoid-getting-rekt-in-crypto-defi

DISCLOSURE:

None of these articles constitutes financial advice. Articles are highly summarised to make it easy for the reader and save time, so please DYOR further before putting your hard-earned money into any product mentioned.

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