- Scott Melker, known as “The Wolf of All Streets”, is an influential crypto trader and investor.
- Melker explains yield farming in decentralized finance and shares 4 of his favorite tokens.
- He also shared his thoughts on the current state of the crypto market and what investors should do.
As Bitcoin briefly dipped below $30,000 on Tuesday for the first time since January, even the most optimistic crypto traders and investors had to reckon with the possibility of another multi-year bear market.
Amid a fresh wave of mining crackdowns out of China, crypto outflows totaled $79 million for the third consecutive week, according to CoinShares. This is the longest bear market since February 2018.
Scott Minerd, Guggenheim’s chief investment officer, who said in February that Bitcoin could eventually hit $600,000, also warned of near-term bearish sentiment in a tweet Tuesday.
“Watch for further declines in cryptocurrencies as Bitcoin breaks support. The next likely level of support is $20,000,” he wrote.
Scott Melker, an influential crypto trader and investor known as “The Wolf of All Streets,” still views the recent sell-off as corrective price action that is likely to trend to the upside in the coming months.
“Whenever Bitcoin price goes down, we see the same recycled narrative being repeated. Whether it’s a China or India ban, something about the environment, criminals using bitcoin, it’s always the same stories,” Melker said in an interview. “But it also can’t go unnoticed that the price has dropped from $64,000 to $30,000, which is a significant drop, so I’d say it’s a good time to be a bit cautious.”
What is DeFi yield farming?
In a sign of the shift in sentiment, even billionaire investor Mark Cuban suffered losses on Titan, a DeFi token that plummeted from $65 to $0 last Thursday as Whale accounts reportedly sold their shares, sparking panic selling.
Cuban, who mentioned Titan in a recent blog post titled “The Brilliance of Yield Farming, Liquidity Provisioning, and Crypto Project Valuation,” said the episode didn’t change his belief in decentralized finance. Instead, he blamed himself for not doing his homework.
So what is really the space that Cuban thinks is so brilliant?
At the most basic level, DeFi yield farming, also known as liquidity mining, is just a way to lock down cryptocurrencies and receive rewards in the form of tokens. Those reward tokens can then be deposited into other liquidity pools to earn more rewards there, which means it can become a complex strategy fairly quickly, Melker said.
He recalled that yield farming was becoming fashionable at the time Connection, a DeFi lending protocol that allows users to earn double-digit interest on their crypto deposits, attracted a large number of users to its platform last June. From there, DeFi platforms boomed in what the industry dubs the “DeFi summer.”
Despite the craze for yield farming, many are saying the insane returns are coming to an end. Cuban’s experience with the Iron Finance project is also a reminder of how many unforeseen risks could derail a project.
“Because these are smart contracts, there could be errors in the contract, or you could have a dishonest person on the team,” Melker said. “Obviously, in an unregulated market, there’s risk, either for the programming or for a bad actor.”
Stick to the big tokens
As smaller and lesser-known tokens are often more vulnerable to scams, hacks, and scams in the DeFi market, Melker prefers to stick with larger tokens that are more liquid and established.
Specifically, he likes it Uniswap (UNIVERSITY), Connection (COMP), MakerDao (MKR) and SPIRIT (SPIRIT).
“I’ve never delved very deeply into the subject [yield farming] “I’m a rabbit hole myself because it’s so time-consuming and complex and really requires a level of understanding that I think very few people have,” he said. “But these are all tokens that I’ve either traded or invested in at some point. I find it very, very interesting.”
However, for the average investor, Melker recommends that before taking the long-tail risk and acquiring DeFi tokens, they should focus on Bitcoin first and then Ether.
“These bigger platforms are probably the next logical step if you want to gain notoriety,” he said, “but you don’t want to be actively yield farming yourself, which is a losing proposition for most people.”
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