Crypto trading is a lucrative sector for many people. However, for you to get started, there are many things you must put into consideration. If you’re not successful in your trading career, you risk losing money. In crypto trading, the term ‘rekt’ mainly refers to severe financial loss from bad trade or investment.
After careful research, we found 4 traps you may need to avoid if you don’t want to get rekt in trading.
High Annual Percentage Yield (APY)
Some crypto platforms offer sky-high interest rates. Higher APY, as we know, brings on higher yields on investments. However, these projects are often too risky if the number is too high. They mainly indicate a scam or a project desperate to lure because sustaining the high APY is not economically feasible most of the time. If you invest in high APY projects, there is at least an 80% chance you will get rekt
The lock-up period is a duration of time in which token holders, following a token sale, cannot sell their tokens. It is usually a means of avoiding liquidity problems that may be inherent in the project.
Such tactics mainly involve false staking, where projects offer staking as a way for holders not to sell. If a token’s main utility prevents sell-pressure, it is a way of catfishing. Crypto assets should have inherent value that incentivizes investors to hold of their own free will.
All tokens are optimized for different things, but they all compete for price. There is a need to check the current token supply vs. max supply. For instance, if 80% of the tokens are already circulating, it is safe to assume that 20% will not crash the price. However, if only 20% of the tokens are circulating, then the 80% remaining can crash the price.
Inflation Masked as Incentives
All projects have a way to mint or release new tokens, where percentage gains look big, and token prices are low. Some artificially sneak newly-minted tokens into their incentives and staking rewards to increase their APY.
If a token rewards you for a service their project carries out, the rewards are not usually inflationary. It is essential to note that locking tokens up is not a service; it may be a trap.
Note: There are exceptions to every trap given in this guide. But in all means, to avoid being rekt, avoid such traps. Aim at winning based on averages and not outliers.
Vincent Munene is a freelance writer and a great blockchain enthusiast. Blockchain has changed his life in terms of financial freedom and in return, he likes to educate people and keep them up to date on everything blockchain. He is a Biochemist by profession and also loves to play the piano.