How to tell if you're a retail investor?
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How to tell if you're a retail investor?
It is trading costs, not market makers, that cut the韭菜 (retail investors).
Navigating Web3 tides with focused insightsAuthor: Huang Shiliang
"Rug pull victim" is a hilariously common term in the crypto world—almost everyone jokingly calls themselves one. But beyond the joke, we really should avoid being a rug pull victim, or else we'll actually get rekt.
Self-awareness is key. How can you tell if you're a rug pull victim? That's probably a good question. I think there's one metric that answers it: your trading costs.
The higher the trading costs of your tools, products, and strategies, the more likely you are a rug pull victim.
In investing, nominal gains often come from just a few percentage points of market movement. Yet trading costs—including trading fees, slippage, funding rates, gas fees—are certain expenses that we frequently ignore. These fixed costs often exceed potential nominal returns because costs are guaranteed to be paid, while profits are uncertain.
Any trade that doesn't account for these certain costs is a rug pull victim move.
Warren Buffett once described a hypothetical case at a shareholder meeting: a wealthy family whose fortune grows naturally if they do nothing. But once they hire an analyst, broker, or fund manager, these people start diversifying and constantly trading, turning the family's assets into fees that slowly drain away. The result? Others get rich while the family loses money.
Buffett might have been talking about Bill Gates. Gates hired a financial team that ended up selling off most of his Microsoft stock.
Academic research shows similar patterns. Studies analyzing why tens of thousands of retail accounts on the Shanghai Stock Exchange lost money during bull markets found that their principal was essentially turned into trading fees and stamp duties paid to the exchange and the government.
To avoid being a rug pull victim, always ask before any trade: what's the total cost of this operation? Then ask again: is there a lower-cost strategy?
The crypto space offers all kinds of exotic trading products and strategies.
I believe the number one trading cost is depositing and withdrawing funds. You know what I mean—it's insanely expensive, not just in fees but also in risk. Cards get frozen, people get arrested.
Tether reported $13 billion in profit in 2024. I'd guess over half came from rug pull victims' deposit/withdrawal fees (the other half from interest earned on USD collateral provided by rug pull victims). So don't recklessly mess with deposits and withdrawals.
Common trading products include spot, perpetual contracts, and options. Trading venues include on-chain DEXs and CEXs. Explicit fees are easy to understand: spot trades usually charge 0.1%–0.2%, perps charge basis points, but these are just matching fees.
Another major portion of trading costs is hidden. Perpetual contracts have funding rates based on luck; options have time decay that's almost terrifying.
Funding rates for major coin perps average around 10% annualized, altcoins go above 30%. Sometimes you can profit from funding rates, but it's uncertain. What is certain is that holding perps long-term is extremely costly, especially for altcoins.
If you're not a professional funding rate arb trader, but instead use perps to replace spot trading, you're definitely a rug pull victim.
Same with options—their trading and holding costs are much higher than perps. I'm not an expert, but I've held small amounts of ETH calls and puts several times, and always ended up losing it all.
Crypto also has fancy strategies like grid trading, dual-currency products, and copy trading, commonly offered by exchanges.
Virtually all these CEX "clever" strategies carry extremely high trading costs.
I once thought grid bots were great. I used them multiple times. In reality, they're just tools CEXs use to lure users into paying fees.
I never seriously tried dual-currency products, but I always suspected their costs must be sky-high—otherwise how could they offer 100%+ annualized returns? The house always wins. I asked ChatGPT; it said these are essentially options. I suspect buying real options would be cheaper. Too lazy to dig deeper.
CEXs also offer many leveraged trading modes. Any leverage increases trading costs further. Interest payments are terrifying. Time is your enemy when holding leveraged positions.
I'm especially amazed by people who trade real estate with massive leverage, proudly boasting about their bank debts—the more they owe, the prouder they feel. Hats off to them.
Binance reported $16 billion in revenue for 2024. Remember the big crash at the beginning of 2025? Many said it was caused by Binance taking its profits.
Binance + Tether together generated nearly $30 billion in annual revenue in 2024—that's exactly the rug pull victims' trading costs. We don't know how much we made, but they made nearly $30 billion.
On-chain trading products and strategies have even more complex costs.
Even basic DEX spot swaps involve various strange costs.
Gas fees and trading fees are explicit.
Gas fees are unavoidable—they fluctuate wildly, the inevitable price of on-chain activity.
Swap trading fees vary depending on the pool routing. Uniswap charges 0.3% or 0.01%. After Uniswap v4 allowed custom pool fees, some pools even charge 99%—utter nonsense.
Beyond explicit gas and trading fees, DEXs have larger hidden costs.
The biggest hidden cost is MEV sandwich attacks. If your slippage tolerance is too high, you're doomed to pay a high slippage tax.
Normal slippage in small liquidity pools can be terrifying. For minor tokens, paying 10% slippage is common.
IDO sniping strategies incur absurd slippage costs—paying 50% is routine.
Pump.fun's trading costs over the past two years have been outrageously high. Everyone pays to create pools, there are transaction taxes, and since meme coins are typically in-and-out fast—trading every few minutes—a 0.5% fee wipes out capital after just a few trades. Meme coin traders are definitely exponential friction traders.
Now almost all swaps support cross-chain swaps, adding complex cross-chain fees—paying two miners' fees plus bridge tolls.
I once arbitrated price differences between Unichain and ETH L1 using LayerZero. After calculating, I realized LayerZero made the most money.
Airdrop farming is no longer hot, but it remains a high-cost strategy. It's a classic "one hero succeeds, ten thousand die" model. It's essentially a way for projects to sell tokens by charging users trading fees.
I feel on-chain games make it even easier to turn users into fee-generating machines—the hidden costs on-chain are higher than on CEXs.
Uniswap's front-end collected nearly $100 million in fees in 2024, while swap users contributed a total of $1.27 billion in trading fees on Uniswap that year.
Pump.fun is even more aggressive: platform revenue (what Pump.fun officially took) totaled $313 million in 2024, while users collectively paid $738 million in costs (looks like half went to Pump.fun, half to LPs).
See? The fee extraction machines in DeFi are no small numbers. We don't know how much we earned, but DEX platforms + LP tokens made a ton.
Please clearly track your trading costs in every investment decision. I had ChatGPT compile a table for estimation—data entirely from AI search and estimates, for reference only.
Compare against the products or strategies you're currently using and see how much tax you're paying.
Actually, rug pull victims are cut down by trading costs, not by manipulators.
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