Trading/Investing Thread - Page 75

Some things (electronic goods, food) are resistant to inflation, because technology has improved the efficiency and caused costs to come down.

On July 19 2021 08:10 BlackJack wrote:
Can anyone explain to me what crypto "staking" is? A friend of mine was telling me about how he makes money on this site called shibaswap. I told him to explain to me how it works and the more he tried to explain it the more clear it became to me that he had no idea what the fuck he was talking about. Something about "providing liquidity" and pairing coins, etc.

On July 20 2021 02:13 BrTarolg wrote:


Basically a lot of the stuff i do for a living involves this kind of thing

There's two parts - first is what it is, second is where the edge is

1. you're basically providing liquidity to an AMM, (automated market maker). You provide in a pair, in a 50/50 ratio (i.e USD/ETH so say 2000 usd of usd, and 2000 usd of eth)
As the market moves up and down, people trade against the AMM and you capture some fees, but in return the ratio of the crypto you deposited changes, and if there's a big movement you suffer "impermanent loss" (terribly named, divergence loss is my preferred)
https://academy.binance.com/en/articles/impermanent-loss-explained

The shortcut to calculating is a 1.5x move = 2% loss, 2x move = 5.7% loss, 3x move = 13% loss

2. In reality what is going on is that often there are these DEX (decentralised exchange) which live on chain and in order to bootstrap liquidity they offer rewards to people who provide liquidity, since the fee capture is usually very minimal (with a few exceptions in the most commonly traded liquid pairs like ETH/USD). These rewards are usually paid in a token that governs the dex (example: uniswap has uni token, curve has crv token, pancakeswap has cake token etc). These are usually useless governance tokens, sometimes they have a bit of fee capture (and don't get me wrong, these protocols can generate billions of revenue so it's not exactly fake either)

What i can advice for you here is if you don't know what you're doing, don't play. The liquidity provision game is FULL of extremely sharp traders and arbitragers (and people like me) who basically mercenary with liquidity and hunt yield/returns, and generally we just dump the reward token on the market.
The yields are pretty extreme (anywhere from 20% to 1000's of % and even more... i know lol) and the general rule is "if you don't know where the yield is coming from, it means you're probably the yield"
A lot of the game is a huge psyops in order to trap noob traders into providing liquidity in the wrong places and they just get hosed

Esp when it comes to shibaswap, which at this point may be a full on outright scam, if you are not a professional or know EXACTLY what you're doing, you're almost garuanteed to lose money.
That being said, i do this kind of stuff for a living and it's very profitable. I do teach people in private coaching about it if you're really desperate to learn, but in general it's just not for the average investor

On July 20 2021 11:26 BlackJack wrote:
One guy compared it to earning interest at a B&M bank and you compare it to options trading. Seems to me that those things are not very similar. That's what doesn't make sense to me. It sounds like this is being pitched as something that is low-risk and high-reward which typically doesn't make sense unless you're investing with Bernie Madoff, if you catch my drift.

On July 20 2021 12:01 BrTarolg wrote:
There is also single sided staking, which also does exist (usually on lending/borrowing protocols) which is much more akin to earning interest in a bank, though again unless it's a direct yield on your lending, the yield is often some governance token of some kind which is where the apr comes from

On July 20 2021 15:23 Acrofales wrote:

Err, they are two different people. One who is clearly intimately involved in this. He's saying it's very high risk, but he makes a shitload of money.
Blitzkrieg says it's like giving your money to a bank, which from the offering liquidity point of view is apparently true, but the situation is different enough that the risks and rewards are incomparable. If you gave your money to the bank and the bank said "right, I will go and play high stakes roulette with this." It'd maybe be a better comparison, given what BrTarolg is saying.

On July 20 2021 17:49 BlackJack wrote:


So this "governance token" you get back is not either of the cryptos you are staking, correct? What is the governance token? Is it like another crypto? Can you trade it or exchange it for USD$? This is the thing that's created out of thin air?

So let's say you have a bitcoin and some ethereum to pare 50-50. You stake it which provides liquidity for other people in the exchange and as a reward you get some governance token which has some value. Am I getting that right? If so what's the risk? What's the downside? According to that shibaswap site I referenced earlier of all the parings you can make the lowest has a yearly ROI of 6% and the highest is 200%+. You can't actually lose your coins from staking them, right? Is the risk from holding crypto that might go down in value? It seems like like in the long run you'd almost always be better off staking your crypto instead of just holding it so shouldn't everybody be doing that at such a scale that it would flood the market and you wouldn't have to offer so much governance tokens to create the liquidity you need?