What is Degen in Crypto? A Detailed Guide for Traders

Degen is short for “degenerate gambler”. This term is popularly used for retail traders who often make impulsive and high-risk bets in crypto, without proper research and minimal due diligence. 

This term was originally not a term of admiration but instead was used to express disdain and came from traditional sports betting communities. Over time, however, the term has become a ‘badge of honour’ as degens are early adopters and those who seek thrill. 

Who is this for? Best for curious crypto beginners who see the term ‘degen’ in the crypto space and want to understand what it truly means before they dive into it. 

Key Takeaways

• A degen is an individual who makes high-risk bets, with little to no research, mainly driven by FOMO and social hype to get massive gains.
• Degens operate where opportunity and volatility meet, such as viral memecoins, unaudited yield farms, NFT projects that are hyped up and more.
• There are several risks to be mindful of, which include honeypot scams, rug pulls and emotional decision making.
• There is some upside to the degen behavior as well, as they discover 100x tokens before anyone else, provide early liquidity and also drive crypto innovation in some cases.

What Does Degen in Crypto Mean? 

Degens, short for “degenerate” is not just an internet slang. Understanding what it means is important for exploring and learning how the crypto market works today.

In the crypto market where memecoins can become billion-dollar assets in a matter of days and decentralized protocols can attract massive liquidity overnight, the degen culture plays a major role in trading activity, driving market sentiment and even retail engagement. 

Degens are hyper-active traders who habitually and unapologetically enter high-risk trades with little to no research. The term is originally a gambling slang, as gamblers are known to have careless and risky tactics where they can leverage all of what they own to make maximum profit. In the crypto world, the term is used for individuals who aim to make significant profits by taking advantage from the market volatility. These impulsive individuals are thrill-seekers and sometimes can turn their $200 into $200,000 overnight. However, this is never guaranteed and if it goes south, they can also lose everything overnight.

Casual Vs. Hardcore Degen

The term ‘degen’ covers over a wide spectrum of individuals that are either casual or hardcore in their impulsive behavior. 

Casual degens are less impulsive when it comes to throwing money in new and upcoming projects without doing their due diligence. They know putting money into something like a new memecoin is a gamble and they treat it like one. They would usually only put a very small part of their crypto portfolio, like 5-10%, in a high-risk play and engage in it just for fun. They do not bet their entire savings because for casual degens, making high-risk bets is just a way of entertainment with a bonus if their bets play out in their favour. 

Hardcore degens on the other hand, are on the other end of the spectrum. Their motto is to have fun even if it means they remain poor. These individuals go all in when it comes to high-risk bets e.g. investing in a token that launched a few hours ago, opening leveraged trades on unaudited protocols and such. Hardcore degens would either get wiped out, retire early or experience both things, sometimes simultaneously.

Main Areas Where Degens Operate

Here are some of the areas where degens usually operate. 

 DeFi (Decentralized Finance)

The degen culture basically originated from decentralized finance. Degens dive into DeFi protocols for insanely high APYs, which are sometimes 500% and even 5000%, on yield farms and liquidity pools, both unaudited. The incentive is simple enough. You deposit tokens, get massive returns and then exit the protocol before it crumbles or is exploited. The downside is, that these protocols are usually scams and are very poorly built so if it doesn’t go right, the individual can lose every single penny in minutes.

Memecoins

Degens know that many memecoins do not have any real-life utility, so they bet in a way where they focus on profiting from the social hype of the coin and time their bet accordingly. They would generally buy in early, ride the hype wave and then aim to sell before the memecoin crashes. In most cases, people end up with making nothing and lose everything, but in some occasional cases individuals have made life-changing gains. This is what keeps degens hooked and they keep coming back, aiming to make similar gains again.

NFTs (Non-fungible Tokens)

When the NFTs took the market by storm, degens did a phenomenal job of minting an unknown project for a fraction of ETH and flipped them within hours on secondary markets like OpenSea, resulting in 10x gains. There were no roadmaps, no evaluation of the art quality and it was mainly gut instinct and speed. However, since 2021, the NFT market has cooled down so degens are not as active as before. Nonetheless, you can still witness degen behavior springing up for hyped projects where traders immediately want to mint first and question anything later.

Risks of Degen Trading 

Degen trading is exhilarating, however, the downside can be brutal. So, it’s important for every trader, degen or not, to understand what’s at risk before they sign up for it. 

Rug Pulls and Honeypot Scams

Rug pull is a common type of scam that happens when the developers of a project create a lot of hype, get the attention and liquidity and then suddenly pull out and disappear, leaving people with coins that are worth nothing. 

Another type of scam to know about is honeypot scam. This is where the token is coded in a way that you can buy it, but can never sell it. Many people who fall for this scam, do not realize their loss until it’s too late. By that time the developer has already disappear with their money. These scams are not rare cases but have happened quite frequently even on well-known chains like Solana and BNB etc.

Emotions Over Rationale

Sure, there are numerous ways a degen can get scammed, but one of the risks that comes from within is their own emotional degen behavior and non-practical decision-making. Degens FOMO and buy tops, they panic and sell bottoms, when they win big they become overconfident and make more oversized bets, causing them to lose weeks of gains in a single trade. You cannot efficiently manage your portfolio based on emotions, which is why risk management and discipline is crucial.

Dangers of Unaudited Protocols

The legitimacy and strength of a project’s code is a major factor to keep in mind. A project can be legitimate but if the code is weak and vulnerable, it opens a window of opportunity for hackers to invade and exploit the project. DeFi protocols run on smart contracts and billions of dollars has been drained from them through flash loan attacks, logic errors in codes and more. Degens who bet on unaudited protocols are basically racing against the odds that no hacker finds the bug before they exit.

Important Reads: Common Crypto Scams to Avoid

Is There Any Upside of Being a Degen?

The degen culture is chaotic but it does have some genuine value, not just for the individual traders but for the overall crypto space too. 

Degens Find 100x Tokens 

Degens come in and buy tokens early before there is any due diligence, listings or mainstream attentions and those tokens sometimes go on to give massive gains. The early investors of tokens like SOL, SHIB and PEPE were majorly degens who took a chance when no one else did and hence, they became the examples of the “100x success stories”. These stories do exist but are not the norm.

Early Liquidity to New Protocols

Degens provide early liquidity to new protocols, which is much needed for them to get started. Therefore, from a market structure perspective, degens play a functional role in the crypto space. Many projects that were legitimate and had great potential would not have gotten the same attention from investors without the liquidity depth and initial trading volume they got from the degens. 

Degen-ing in a Responsible Way

The term ‘degen’ began as a term of contempt, however, it doesn’t necessarily mean you have to be financially irresponsible and reckless. There is a sustainable version of the degen behaviour as well, where you can follow a simple rule: only risk what you can afford to lose without wrecking your financial life. Do not chase losses, set strict limits and do not let a degen bet affect your emergency funds, savings etc.  

Conclusion

Degen in crypto isn’t just a term, it is a mindset, a culture and a core part of the crypto space. In crypto, bold moves are often rewarded but recklessness can cost you everything. Therefore, before you dive into degen trading, make sure you understand what it means, its risks, the rules and how you can make the most of it without losing everything you own.