The Last Degen: Surviving a New Dynasty
Crypto degens face a new opponent as the institutions land upon the shores of DeFi.
Japan’s natural isolation as an island helped cultivate a class of highly skilled warriors. In their time and environment, they became proficient in the tools of their trade. Rising from servant status to the ruling class of the island nation, their mark in Japan’s history runs deep and their legend rages on today across the world. Samurai are the legendary warriors of ancient Japan.
During Japan’s period of isolation, the Samurai rose to their height of skill and power. Though they enjoyed a period of power and stability, eventually the larger world reached the Island of the Samurai. New tools, ideas, and connections were introduced, and while the spirit of the Samurai may have endured, their way of life underwent drastic changes.
This led to new power struggles and the acceptance that the romantic period of the warrior was closing.
Crypto and DeFi are now in the midst of their own transition from isolation to expansion... and much like the Samurai of ancient Japan, the Degen culture of days past is experiencing a shift.
Similar to the early Samurai, crypto participants had humble beginnings. Cryptocurrencies were swapped on primitive exchanges or peer-to-peer on forums and chat rooms. The first era of decentralized finance was born with the launch of Ethereum, with rudimentary tools like EtherDelta.
But with the winds of a dynastic shift behind them, developers iterated on these designs to create modern DeFi. This quickly spread across the land, and the space began to rapidly expand. New opportunities and strategies for lending, borrowing, yield farming, and trading began to emerge, and the strategies involved became more complex as users and developers fought to keep their edge sharp.
Crypto participants that engaged heavily in trading and farming activities became known as “Degens.”
The Degens truly rose to power as they honed their skills and mastered the art of on-chain analysis and rotating through farms in order to stay ahead of their enemies. Activity up to this point was largely driven by individuals.
By 2020 and 2021 they were experts in the space. Chasing alpha and engaging in governance wars for power over protocols was a constant pursuit by the major players. Q3 2021 marked a high for the Degens.
They were early, they were experienced, and winning was customary.
Protocols strategically expanded across chains in effort to establish territory, and successful Degens spent hours monitoring Crypto Twitter, Etherscan, Discord, CoinGecko, Telegram, and any other sources of intel to retain their edge.
For more insight into the Liquidity Wars, read The Liquidity Wars: Arrival of the Tokemechs and The Liquidity Wars: Impact.
However, the landscape began to change as institutions and TradFi strategies established a foothold in crypto. As the market climbed, many noticed the prevalence of leveraged positions in crypto…a new and volatile frontier.
Many also noticed that, unlike previous years, crypto’s correlation to traditional markets was growing stronger and stronger. These foreigners brought forth the era of gunpowder upon the natives. The natural isolation of the island that was crypto was ending. Centralized exchanges fought back in order to regain their dominance and bring in more users, and hedge funds began to emerge from the shadows.
The skills that Degens had acquired early on were impressive and advantageous, but there were chinks in their armor. Degen skills had been sharpened to a fine edge, but this blade became brittle.
Quick decisive entries and broad exposure were trademarks of Degen life. However, with crypto continuing to be influenced by traditional markets and macroeconomics, the inclination toward speed began to play against the Degens.
In the isolation period, crypto moved so swiftly that success hinged on being able to do enough due diligence to avoid a rug or scam while also being among the first entrants.
As inflation grew due to the pandemic's economic impact, the war in Ukraine, and the government's attempts to control chaos through fiscal policy, many Degens weren’t prepared for the shift in tempo.
They moved with speed, only to find themselves in empty battlefields. They entered and exited positions too early and too quickly. While the thesis and strategy might have been sound, the timing was off, and timing is everything.
The volatile conditions created many bull traps – false indicators of a good entry with promising upward potential. Many Degens took catastrophic levered positions that would eventually leave them exposed like a mounted Samurai against a Gatling gun.
The End of the Age of the Degen?
Though the film The Last Samurai may leave you with the impression that the Samurai were all killed off in one dramatic final stand, the truth is much different.
There were plenty of Samurai who clung to the ways of the past and quickly became part of it, but the majority adapted. Proficiency with a sword or spear was no longer enough. Individual prowess on the battlefield had given way to more organized group tactics like those of the West.
The early gains of power and their experience throughout the turbulent periods in which they thrived followed them as they took influential positions in the new government, military, and businesses that entered Japan.
Martial arts lessons with the bow, sword, armor, and spear gave way to guns, suits, railroads, and foreign trade. While the rise of the merchant class in Japan did displace many prominent warriors, there were plenty that remained, and their influence in the following years is evident.
Degens now face a similar transition. There will be some that are unable to adapt, but many will have opportunities to become leaders in this space as widespread adoption grows. Degens will need to consider the larger world as a participant in what was once a much more intimate landscape.
One chapter ends, and the next one begins.
☢️❄️ Stay Frosty ❄️☢️