I heard a really interesting investing story recently. You see, a really close friend of mine invested in a cryptocurrency and was yield farming on what he thought was a relatively safe investment. He was doing really well for a few weeks in a row. However, someone found a way to abuse the ecosystem he was invested in. They basically drained the collateral tied to his investment and he quickly lost all his profits – then some.
He managed to get out with only a 20% loss, when it was all said and done. I was watching the token price that was causing all the drama and boy, was it a wild ride! The value basically shot up in two weeks from less than $1 to $60. Then yesterday it went from $60 to $28 practically instantly, shot back up to $50, and then fell all the way to $0. The whole episode happened in a matter of hours. There were billions of dollars in value created and then evaporated. Tens of thousands of people’s fortunes were made and then reversed. As you can tell, this was hardly a safe investment for my friend.
My Friend Was Actually Lucky
How do you consider losing 20% of your investment to be lucky? Well, he was lucky in the sense that it could have turned out much worse for him. I belong to some group chats and other online communities where some people essentially lose their live savings on this risky venture. My friend was lucky to not be completely wiped out.
Still, the 20% loss hit his psyche pretty hard. Those kinds of losses are tough to stomach, especially when they happen so quickly. Luckily, my friend is still young, earning a good income, and has plenty of years to bounce back. It was a risky play, but he knew that from the start. If he was older and closer to retirement, he likely wouldn’t have gambled on such a volatile investment.