Common Rebalance Scenario

⦿ Sideways Movement – a simple sideways movement which takes place for a prolonged period. During this time, there are typically micro fluctuations, although the total value of the portfolio remains relatively flat.

1. 1.Rug Pull

Rug Pull is an analogy like we stand on a rug and then was pulled out causing him to fall unexpectedly. The owner himself took all the coins on the platform by writing a smart contract to create a loophole in the Rug Pull in the first place.

1.  
2. 2. Exit Scam

Exit Scam is where the owner leaves the project or no further development due to many reasons such as unfixed problems. The recent incident happened to Merlin, the announcement to end the development resulted in DeFi’s governance token dropping quickly, and the Exit Scam may also include a Rug Pull in some other cases.

1.  
2. 3. Hack

Being hacked is a non-intentional act of the owner. But someone outside can hack the smart contract code to fix something, since all source code on DeFi must be public. If the code written contains bugs or a small loophole it can be hacked. For example, the Icecream platform was hacked by a hacker to change the ownership to himself and mint more coins before selling and collecting other coins in this case.

1.  
2. 4. Decrease in value

Another big issue many overlook because they pay attention to APR and APY. The token can have a decrease in their value. Especially when it comes to pairs with high APR, such as governance token, there is a high probability of falling.

1.  
2. 5. Impermanent Loss

Farming users will eventually face impermanent loss or profit loss when there’s an involvement of coin pairs. For example SIX-BNB the deposit value was $1000 by holding individually one might gain whole profiting when the coin goes up. By farming in a pair it might lose its values due to AMM calculation creating divergence between price of the asset within the liquidity pool.

6. Hacked Wallet or Seed Phrase

The important part which requires high responsibility of the users to keep in mind and keep it securely is the decentralized wallet such as MetaMask, Safepal, Kaikas, or D’cent and more.

Usually people are hacked from the phishing action of a seed phrase or being hacked on a computer due to saving a file for their seed phrase.

1.  
2. 7. Phishing Scam

This pattern is an alternative for hacking by deceiving the victim into being trapped such as opening a source to fake MetaMask browser. Pretending to giving out a link claiming user will receive a special price, but losing all the assets from the wallet.

1.  
2. 8. Wrong Transaction

This classix human error causing a huge amount of loss by transferring to the wrong final address such as to the wrong person or to the token address, burning it without any way to retrieve.

It can be broadly categorized into four: Risk/reward ratio, stop loss & take profit, position sizing, and rebalancing portfolio.

▸ Risk/Reward Ratio 

In trading it is recommended to not trade under the ratio of 1:1 and should be starting from 1:1.5. This formula, R = (Target Price – Entry Price) / (Entry Price – Stop Loss), will enable you to know when to enter and when it is unprofitable.

▸ Stop Loss & Take Profit

Stop losses is an execution which closes an open position when a price decreases to a specific alignment. Saving you from trading in unprofitable deals. Taking Profits lets you get out of the trade before the market can turn against you.

▸ Position Sizing

Is where you position your margin of portfolio by dictating the possibility of coins or tokens that are willing to be bought by traders. It is wise to never invest all of your money in one place. The volatility of the cryptocurrency market means that any trade, even a seemingly perfect trade, can collapse and result in a significant loss. There are strategies involved. Read more.

▸ Rebalancing Portfolio

The process of realigning the weightings of an asset portfolio is known as rebalancing. Rebalancing entails buying or selling assets in a portfolio on a regular basis in order to maintain the original or desired level of asset allocation or risk.

Centralization of money is a concept which we all understand but we do not have the capability to express it in easier terms. We will do that for your benefit. Whenever you are keeping your money at any bank places which include public funds or banks, you are prone to the centralization of money. This means that your money is not only yours. It will get passed into the hands of several users and they will decide the fate of your money. Although your money will always remain yours, it will be decided by the central forces whatever will be the fate of your money. Read more.