My most successful crypto investment has been in the Drip Network. I have written several articles about Drip, and I’m happy that many people who used my referral code also made nice returns from Drip. I was at the right place at the right time and seized the opportunity. Unfortunately, I understand this is only the case for some. If you are in the disappointed crowd, I urge you to read this entire piece!

Recently, I got to experience the hopeless feeling of investing in a daily ROI project and getting shafted with Furio. I wrote about my frustration here: Furio Development Team Opts For Death By 1000 Papercuts. It’s too bad Furio’s collapse coincides with Drip running on fumes.

I’m not writing this piece to FUD daily ROI projects, miners, or yield funds. I would be ecstatic if Drip, Furio, Piston, fill-in-the-blank yield fund, or miner bounced back. However, having these Degen dApps bounce back seems less likely every day in a bear market.

And while all these Dev teams give an illusion of creating utility, the truth is that the developers have no real incentive to provide utility. Let’s face it. They made their money. Whether the project gets utility or not, they were on ground zero of the project. They got paid first. Some built better mousetraps than others.

And I’m not trying to hate on this either. Yes, some developers have an easier time lying than others. Still, when investing in a Degen dApp promising 1% or higher daily returns, you have to assume you are taking on high risks and kissing all of your money goodbye.

But what if you could invest in a project that offers insane yields, has a supply cap, doesn’t rely on locking your tokens away indefinitely, and doesn’t have punitive taxes? Better yet, what if it has a utility proven in the DeFi space? What if you can participate like a venture capital investor in a real DeFi project less than two weeks old?

This and my follow-up article will have no referral codes. I’m not going to paint a scenario where you can retire in two years. But, I will share why this project can outperform other opportunities in the next bull market.

This is going to be a painful article that, unfortunately, many of you can relate to. But, I am supporting the truth The follow-up will be about a new opportunity that can empower us, as a community, to succeed in this treacherous market.

Why the daily Degen dApps aren’t working in a bear market

Nearly all of the high-yield projects that many consider DeFi aren’t truly DeFi. The developer team has full control and autonomy over the platform. BitConnect was the first iteration I heard of. Then there was Hex. Then Drip and all of the Drip copycats.

I never got involved with miners or yield funds because I never trusted any of their platforms, but I did fall for some high ROI schemes like Wonderland and its copycats. The ways to make profits are to get in early and cash in quickly, and if you can get referrals, you can increase your performance.

The problem is that, in a bear market, there’s no excess money coming into the space. As a result, investors can’t make gains from other projects and throw caution to the wind trying to find the next big thing. Worse, investors need to withdraw funds to pay bills or try to get some returns before the liquidity pools dry up or the devs change things up.

In effect, we are seeing slowing growth of new members in the community. All of this is apparent when looking at the statistics.

The graph above shows the number of new wallets coming into Drip monthly. The number needs to keep growing for the Drip price to maintain the same level. Unfortunately, it peaked early last year along with the Drip price.

This isn’t unique to Drip. Here’s a similar graph for Furio.

In the Furio graph, the red indicates the number of new monthly wallets, and the blue reflects the total number of wallets. Like Drip, the FUR price began dropping after the number of new wallets peaked.

Piston, Ooze, and all the other daily ROI dApps experience the same peak, followed by a decline. Yes, there are new projects out there that have yet to start their decline, but without new investors coming in, it’s probably a matter of time before their best days have passed them by.

Why it’s so challenging for Degen dApps to bounce back

There is no shortage of cheerleaders claiming that the price of the tokens will bounce back with the next bull market. And they may be right. I sure hope they are! However, mathematics tells us a different story.

I hate to be the bearer of bad news. But what I’m about to share will be sobering for many readers clinging on to hope. There’s a rule in mathematics called the rule of 72. It states that you divide your compound percentage rate into 72 to determine how long it takes to double your money.

For example, let’s say you have a daily ROI dApp paying 1% daily. You take 72 and divide it by 1. It will take 72 (72/1) days to double your initial amount. Let’s change the figure to 2.5% daily. You would double your initial amount in 28.8 (72/2.5) days in this example.

You can use this trick to determine the ROI period of any investment. For example, if you have average returns in the stock market of 10.5% per year compounding, you will double your portfolio every 6.86 (72/10.5) years.

Unfortunately, this is why the ROI dApps, miners, and yield funds can’t bounce back. The debt grows substantially during the bear market. Let me share a couple of examples from projects I am in.

Let’s pretend half of the community agrees that it doesn’t make sense to sell at these prices during the bear market. The platform is paying out about 1.22 million daily. If half the faucet holders compound daily, the compound interest rate is 0.5% daily. According to the rule of 72, the amount of Drip in faucets would equal 242 million in 144 days or about five months.

Imagine how many new users need to join the ecosystem to compensate for this inflation. It’s probably not likely during a bear market.

The numbers are even more alarming for dApps paying higher daily reward rates.

Furio pays out 2.5% daily in FUR rewards. There is 32 million FUR in the vaults right now. Assuming that half of the players compound daily at 2.5% means that the FUR in vaults will double in 58 days (72/1.25)! Meanwhile, the liquidity is being drawn down by the other half. Further, we have seen few new investors coming into the project during a bear market.

I can’t tell the future, so I can’t say every project will end up like this, but I’m confident the math is the same, and new investor acquisition isn’t improving.

The false carrot of utility

All of these projects promise utility. But, unfortunately, the utility never comes. The developers have no incentive to deliver the utility. They have already made their profits.

And if utility comes, it’s often to the detriment of the project. Sticking with these two projects I am invested in, Drip launched Animal Farm, and the price of the Drip token crashed. It’s safe to assume that investors took funds from Drip and allocated it to Animal Farm.

Furio promised all sorts of new utilities delayed at the 24th hour. Unfortunately, the one they delivered on is a bot that has had a losing record (after promoting 8–10% monthly gains) and removed all the liquidity from the contract.

The problem is that even if these developers come up with some magical utility, the inflation rate and liquidity drawdown will have caused so much damage that it will be challenging, if not impossible, to bounce back.

I’m not saying it can’t be done, but I would take an even money bet for $10,000 that neither project will reach its 2022 average price in 2023 with the same version and tokenomics. I’m sharing this to provide the reality for investors caught up in the theory that the prices will return to all-time highs again. Unfortunately, there need to be more people in the degen DeFi space to consider the possibility of returning to glory days above 10%.

Even worse, think of all the investors burnt by these projects. They aren’t running to re-invest more funds and double down on their losses. When prices are going up, it’s easy and human nature to be willing to commit more money. But, when things are crashing, everyone wants to run for the hills.

The future for Degen dApps

More new ROI projects will appear in the next bull run, and I’m certain many will do well and make many excellent returns. However, why would an investor risk capital on an existing Degen dApp burdened with huge debt if they can get into a new project in growth mode? They won’t.

A New Hope

If I am providing you with a harsh reality, I’m sorry. I don’t like it either. I miss the days of collecting, compounding, and recruiting for rewards. I miss the hope of a new utility promise that conveniently always gets delayed. And like I said, I believe the Degen dApps will have their time and place again when the market is more robust. Degen dApps are like shorts and T-shirts. They are great when sunny but not so helpful in a blizzard.

In the meantime, I’m not here to just take a shit on everyone’s porch. I understand this will be labeled FUD, and many community members may ostracize me. However, I’d rather be the friend who tells you that you have food stuck in your teeth than pretend it’s not there. Sometimes being real is more important than being popular. All you have to do is look at the math, reflect for two minutes, and anyone with some reason can draw the same conclusion.

Now for the hopium! I have found another project in that I see tremendous potential. If you are interested in reading about a new community-driven platform launched on January 23 with less than a $1.5 million market cap (at the time of writing) with no presale, venture capitalists, advisors, partners, or other BS that will dump on you.