A high-rolling Bitcoin whale who is building a reputation for going against the grain says heavy losses are coming to new crypto traders.
The pseudonymous crypto figure known as Joe007 tells his crew of 34,000 that decentralized finance (DeFi) – the hottest trend in crypto right now – will likely follow the path of many ICO tokens. To emphasize his point, the high-stakes trader retweeted the warning issued by Synthetix founder Kain Warwick.
“DeFi is early and dangerous. We have all kinds of risks: hacks, bugs, scams, centrisation[sic], manipulation, front running the list goes on.”
Joe characterizes DeFi as a “quazi-ponzi” game which will eventually conclude in a chorus of exit scams. Although the crypto strategist claims that he already made a lot of money in a DeFi coin, he strongly rebukes the promotion of crypto assets that have little to no fundamental value to new investors.
In a tweetstorm, Joe explains that new traders dive into small-cap coins as they are often lured by the promise of get-rich-quick schemes. Along with the egging of the community behind the coin, new investors tend to hold on to their crypto assets as they hope for the moonshot despite news that the founders and the developers are already selling their holdings. According to Joe, newbie traders end up holding worthless bags and losing their capital.
One DeFi coin’s journey to zero seems to accurately illustrate Joe’s description of an exit scam. Yield farming platform YAM witnessed its market cap rise to nearly $60 million on August 13th only to collapse to $0 in a matter of hours, according to CoinGecko.
While investing in DeFi coins carries risks, Spencer Noon, head of crypto investment fund DTC Capital, believes that the nascent sector has more upside potential.
— Spencer Noon (@spencernoon) August 10, 2020
Messari researcher Ryan Watkins also believes that the DeFi boom is not yet over. He says that DeFi represents only 1.5% of the entire crypto market and the sector will keep growing without relying on new money flowing into the market. Watkins argues that all it needs is a reallocation of capital.
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Featured Image: Shutterstock/Valery Sidelnykov