The concept of Degenerative Trading, or Degen Trading for short, is what we will be discussing today.

It came into existence with the rise in popularity of decentralized trading.

In this post, you will learn about Degenerative Trading and why you should avoid it.

Let’s dive in.

What Is Degenerative Trading, a.k.a Degen Play?

“Degen” trading in cryptocurrency refers to a style of trading characterized by high risk, speculation, and often reckless behavior.

It is simple gambling on a new coin.

For example:

You buy a new trending coin with a low market cap aiming to triple your investment by the time more people buy the same coin.

The whole idea is to make quick money.

The term “degen” is short for “degenerate” and describes traders who engage in highly speculative and sometimes irrational trading practices.

Here are some key characteristics of degen trading:

1. High Risk:

Degen traders are willing to take on extremely high levels of risk in the hope of making quick profits.

They often trade in highly volatile and speculative assets.

2. Lack of Research:

Degen traders may not conduct thorough research or analysis before making trading decisions.

They rely mostly on rumors, social media hype, or “hot tips” to guide their trades.

3. Impulsive Trading:

Degen traders often make impulsive and emotionally-driven trades, rather than following a well-thought-out trading strategy.

FOMO (Fear of Missing Out) and FUD (Fear, Uncertainty, Doubt) play a significant role in their decision-making.

4. High Leverage:

Degen traders may use high leverage levels, amplifying profits and losses.

This further increases the risk associated with their trades.

5. Lack of Risk Management:

Degen traders often neglect risk management practices, such as setting stop-loss orders or diversifying a portfolio.

They might go all-in on a single trade or invest much of their capital without a clear exit strategy.

But what used to be an exciting activity of making insane gains has become a major drawback in crypto today.

I will list the 4 problems with Degenerative Trading below.

4 Problems of Degenerative Trading

1. Traders become attached to a coin

Initially, Degens buys the coin without researching, hoping for the best outcome within the shortest time.

But even when things don’t go as planned, they still hold on to the coin at their loss.

2. Prevalence of Scam Coins

Due to a lack of regulation and a flock of Degens hunting for the next 100x coin in this sector, there’s an abundance of scam coins or pump-and-dump schemes.

This has led to the exploitation of many degen traders.

3. Emotional Damage 

Degen play happens 24/7 and thus strongly impacts traders’ emotional and physical well-being.

They’re always distressed, having sleepless nights, constantly monitoring price movements, and going through the stress of making split-second decisions. 

Sadly, they lose good friendships because they’re always busy pursuing a quick profit and 95% of them end up finding none.

4. Congestion in the Ethereum Blockchain

Because most of these highly sort coins are created on the Ethereum blockchain.

Sadly, it is making Ethereum congested and unsustainable for people who came to build a trustworthy project.

5. Crypto Regulations

After observing the damage degen play has done to people, government and regulatory bodies started imposing stricter rules on the whole crypto market.

Most countries are trying hard to ban cryptocurrency as they believe it would solve the issue with degen trading.

Now, what’s my take on all of these?

Read that below.

My Verdict on Degenerative Trading

It’s important to note that degen trading is not a recommended approach for most investors.

It can lead to substantial losses and financial ruin.

Successful trading typically involves careful research, risk management, and discipline, rather than relying on speculation and impulsivity.

As with any investment, it’s essential to understand the risks involved and consider your financial goals and risk tolerance before engaging in it.

But then…

I cannot tell you not to venture into degen trading.

But if you must, have it at the back of your mind that there is a high risk you can lose everything in the blink of an eye.

Not getting too attached and knowing when to exit a trade is very important.

That said,

If you want to learn how to trade profitably, go ahead and create an account on Bybit.

Also, join our Telegram group to learn how to trade and get trade signals.

Till my next post, keep hodling!