The crypto market has dozens of trading strategies: some are based on fundamental analysis, others on technical indicators, risk management, and long-term planning. But there is also a far more aggressive style where азарт, speed, and the willingness to risk almost everything for quick profit take center stage. This is known as degen trading.
What is degen trading
Degen trading is a style of trading in which a trader consciously takes on elevated risks, often making impulsive decisions, and aims to earn profits as quickly as possible.
The term “degen” comes from the English word “degenerate.” In the crypto community, it describes market participants who are willing to operate on an “all or nothing” basis: entering questionable tokens, buying assets at very early stages, and risking a significant portion of their capital.
Degen trading is especially common in the memecoin (joke cryptocurrency) market. Such assets can rise by hundreds or even thousands of percent within hours, but they can also collapse almost to zero just as quickly.
Why degen trading attracts traders
The main reason for the popularity of degen trading is the opportunity to generate enormous profits within a very short period of time.
New tokens on decentralized exchanges sometimes surge in price immediately after launch. For traders, this looks like an opportunity: enter before everyone else and exit before the hype ends.
For example, in May 2024, according to Binance Square, the wallet sundayfunday.sol turned $2,275 into $2.26 million within eight hours using the memecoin 1DOL. Stories like this make degen trading especially attractive to beginners.
However, it is important to understand that such cases are exceptions rather than the rule. Behind every loud success story are usually thousands of unsuccessful trades made by other traders.
Key characteristics of degen trading
Degen trading is characterized by:
- the desire to make money quickly;
- weak or almost nonexistent project verification;
- impulsive buying;
- reliance on hype and FOMO (fear of missing out);
- attempts to copy the trades of large players;
- the desire to “win back” losses after unsuccessful trades.
Many traders monitor the actions of “whales” — large cryptocurrency holders. If a large wallet buys a new token, degen traders may immediately copy the trade in hopes of catching the price increase.
Sometimes degen trading turns into an attempt to recover after losses. A trader increases the size of subsequent trades, hoping that one successful entry will cover previous losses. This approach resembles the Martingale method* used in gambling and can quickly lead to a complete loss of capital.
* The Martingale method is a betting or capital management strategy in which a trader increases the size of the next trade after each loss, most commonly by doubling it. The idea is that one successful trade will compensate for all previous losses and generate profit. The method became popular in gambling but is also used by some participants in degen trading. The main risk of the strategy is that during a prolonged losing streak, a trader can lose their entire capital very quickly.
Bots in degen trading
In degen trading, even seconds matter. That is why some traders use specialized bots that automatically purchase new tokens as liquidity becomes available.
Such tools are especially common on the Solana and Ethereum networks, where competition for early entry into memecoins is extremely high. However, automation does not reduce risk: a bot may buy not only a promising token but also an outright scam.
Risks of degen trading
Degen trading is more like gambling than classic investing. The potential profit can be enormous, but the risk of losing everything is equally high.
One of the main risks is the lack of proper analysis. In the pursuit of quick profits, a trader may fail to verify the project team, liquidity, tokenomics, and the ability to sell the asset after purchase.
Another dangerous factor is leverage*. Some crypto exchanges offer leverage of 50x–100x. With such trading, even a small price movement against the position can lead to liquidation of the deposit.
* Leverage is a tool that allows a trader to use borrowed funds from an exchange to open a position exceeding their own deposit. For example, 10x leverage allows you to open a $1,000 trade with only $100 of personal funds. In this case, profits can increase significantly, but risks also multiply many times over.
Scam and rug pull
A separate threat in degen trading is fraud.
One of the most well-known schemes is the rug pull. In this scam, project creators attract investor funds, generate hype around the token, and then withdraw liquidity or disappear with users’ capital.
According to Chainalysis, rug pull schemes generated more than $2.8 billion for scammers in 2021. This is especially relevant in the DeFi (decentralized finance) sector and among new tokens, where project verification is often minimal.
A notable example is Squid Coin. The token appeared in 2021 amid the popularity of the TV series “Squid Game” and rose by more than 40,000%. However, many investors soon discovered that they could not sell the asset. As a result, the project became one of the most famous examples of a cryptocurrency scam.
Conclusion
Degen trading is a style of crypto trading intended for those willing to take extreme risks for a chance at fast profits.
It can generate impressive returns, especially with memecoins and new tokens (digital assets), but it can also lead to a complete loss of capital. Therefore, degen trading should not be viewed as a stable investment strategy, but rather as a high-risk speculative activity where speed and excitement often outweigh analysis.