Stop Chasing DeFi Yields and Start Doing the Math

💡 DMK Insight

DeFi’s obsession with headline APYs can mislead traders about true profitability. While high APYs attract attention, they often mask hidden costs like gas fees, slippage, and impermanent loss. Traders need to dig deeper into the net returns after these costs. The current market is rife with projects boasting unsustainable yields, which could lead to significant losses when the hype fades. As we approach the end of the year, volatility in the crypto market could exacerbate these risks, especially for those relying solely on flashy APYs for decision-making. A more prudent approach would be to assess the underlying fundamentals of DeFi projects and their actual performance metrics. Traders should keep an eye on the liquidity pools they engage with and monitor transaction costs closely. A sudden spike in gas fees or a downturn in liquidity could drastically affect returns. Look for projects that provide transparent cost breakdowns and sustainable yield models, as these are likely to weather market fluctuations better than those relying on inflated APYs.