Be very careful with extremely high APY DeFi

hello everyone!

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i've been a part of this community for quite some time now and as we grow bigger and bigger I see people falling into the same mistakes EVERY TIME.

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so if you are reading this I assume you already know what DeFi is and how it works, you probably heard of MakerDAO, Aave and Cake.

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and you probably heard of this "new token" that is the "next big thing" and that yields you 100000% APY and you assume, HOLY COW! I found gold!

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you do all the necessary safety checks and it all checks out, they have a reputable team, they are doxxed, they are audited, so you decide: I'm going to go all in in this!

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and you put a fair amount of cash in their house token, say 1k dollars, in 1 day you realize you have earned 100 dollars! this is it, the cash is literally in your account, you just earned 10% in 24h, so you do the logical thing and you invest way more

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the next day you see that the value of the token has dropped a little and you think "oh the market is sideways its nothing to worry about, it'll come back" and the next day it drops even more.

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when you see its been 10 days, you have earned 300 dollars and your original 1000 are now 400 dollars. so you literally lost money.

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"how did this happen?" you pounder to yourself, but the answer is quite simple and its called the "inflation problem".

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remember those guys in the news talking about this inflation thing that you never really understood? yeah well, inflation happens when the supply of something rises more then the demand for such thing making its value go down.

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in DeFi, when you are staking the house token and earning the same token, you are literally making new tokens that were not in circulation before, if the token has a high demand that is not an issue as people are willing to pay for that, but the thing is that with time the demand decreases and the sell power increases, causing inflation and losing value.

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so DON'T get all excited to see some crazy numbers, they might not be a scam but they may lose value very quickly.