Are You a Chives?
The key indicator for judgment is your trading costs. This article delves into the high and often overlooked trading costs, which, rather than market makers, are the true culprits harvesting retail investors. This article is based on a piece by Huang Shiliang, organized, translated, and written by Deep Tide TechFlow.
(Background: Institutional funds are frantically buying Bitcoin! Why are global retail investors “unresponsive”?)
(Supplementary Background: Seven crypto survival rules you must know to avoid being a chive in a bullish market.)
Chives are Cut by Trading Costs, Not by Market Makers.
Chives is a term that brings a lot of joy in the cryptocurrency circle, as it seems almost all friends self-identify as chives. Setting aside the joking aspect, we should indeed strive to avoid being a chive, or we might truly get harvested.
Self-awareness is crucial. How do we determine if we are chives? This could be a good question. I believe there’s one indicator that can answer this: your trading costs.
The higher the trading costs of the trading tools, products, and strategies you use, the more likely you are to be a chive.
When we invest, nominal returns often come from a percentage of market movements, while trading costs, including transaction fees, slippage, funding rates, gas fees, etc., are definite expenditures that we often overlook. These certain costs can frequently exceed potential nominal returns. Costs must be paid, while returns are filled with uncertainties.
Any trading behavior that does not take these certain expenditures into account is chive behavior.
Warren Buffett once mentioned a hypothetical case at a shareholders’ meeting about a wealthy family that could see their wealth grow just by existing. However, once they hire an analyst, broker, or fund manager to manage their wealth, these individuals would diversify the investments, constantly trading, and the family’s assets would gradually turn into transaction fees flowing away. The result is that others get rich while they lose money.
Old Buffett might have been referring to Bill Gates, who hired a financial team and ended up losing most of his Microsoft stocks.
There are numerous similar studies in academia, such as analyzing tens of thousands of retail accounts on the Shanghai Stock Exchange that lost money during a bull market, which actually turned their principal into transaction fees and stamp duties paid to the exchange and the government.
To avoid being a chive, always ask before any trading operation: What is the total cost of this operation? And then ask: Is there a lower-cost operational strategy?
There are various trading products and strategies in the crypto circle.
I believe the highest trading cost comes from the entry and exit of funds. You know, this can be extremely costly, not only due to high transaction fees but also because it carries significant risks, such as getting your card frozen or even arrested.
Tether announced a profit of $13 billion in 2024; I guess more than half of it comes from chives contributing to the entry and exit commissions (the other half comes from the interest earned on dollar collateral like government bonds by chives). Therefore, do not mess around with entry and exit.
Common trading products include spot, perpetual contracts, and options. Trading methods include on-chain DEX and CEX. Various explicit transaction fees are easy to understand; spot trades generally incur fees of 0.1% to 0.2%, while contracts incur fees of 0.01%, but these are just matching fees.
Another significant portion of trading costs is hidden. For example, the funding rate for perpetual contracts can depend on luck, and the time cost of options can be terrifying.
For major cryptocurrencies, the funding rates for perpetual contracts generally hover around an annualized 10%, while altcoins can exceed 30%. However, this can sometimes be profitable; what’s certain is that the long-term holding cost of contracts is very, very high, especially for altcoins.
If you are not a professional funding rate arbitrageur but are trying to replace spot trading with contract trading, you are definitely a chive.
Options are similar; the trading and holding costs of options are significantly higher than perpetual contracts. However, I am not an expert; I have held small amounts of ETH calls and puts a few times, only to find that I lost everything in the end.
The crypto space also has some flashy strategies; common ones in exchanges include grid trading, dual currency wealth management, and copy trading.
Almost all CEX strategies have exorbitant trading costs.
I once thought grid bots were a good product; I used them multiple times. In reality, they are just tools for CEXs to extract transaction fees from users.
I have not seriously explored dual currency wealth management, but I have always felt that its costs must be extremely high; otherwise, it would be impossible to offer annualized returns of 100%. The market makers are definitely making a guaranteed profit. I asked ChatGPT, and its essence is a form of options; I estimate that directly buying options would be cheaper. I am too lazy to research it further.
CEXs also offer numerous leverage trading models, and any leverage-related transaction incurs even higher costs. Because the interest expenses are terrifying, it is a friend of time; holding leveraged positions means you are not a friend of time.
I am most impressed by those who use huge leverage to trade real estate, taking pride in owing money to banks, believing that the more they owe, the more honorable they become. Truly impressive.
Binance reported revenue of $16 billion in 2024. Remember the massive drop at the beginning of 2025? Everyone said it was due to Binance cashing in profits.
Binance and Tether together accumulated nearly $30 billion in annual revenue in 2024. This is the trading cost incurred by chives. We do not know how much we earned, but they definitely made nearly $30 billion.
The costs of on-chain trading products and strategies are even more complex.
The most common spot swap trading in DEX incurs various strange costs.
Gas fees and transaction fees can be considered explicit.
Gas fees are inevitable and are not fixed; various fluctuations are a necessary cost in on-chain activities.
The transaction fees for swaps also vary depending on the liquidity pool routing; for example, Uniswap has a 0.3% fee and a 0.01% fee. After Uniswap V4 opened the custom fee pool, some pools even appeared with a 99% fee, which is baffling.
Besides explicit gas fees and transaction fees, the bigger costs in DEX trading are hidden.
The largest hidden cost is the MEV sandwich attack. If your slippage setting is too high, you are doomed to pay a high slippage tax.
Normal slippage can be quite terrifying when trading in small liquidity pools, especially for those small coins, where a 10% slippage cost is common.
The slippage cost for sniping IDOs can be outrageous, and paying 50% is not uncommon.
In the past two years, the trading costs of pump.fun have been extraordinarily high. To create a pool, everyone has to put in money. Trading incurs transaction taxes, especially since these meme coins are typically fast in and out; trading once every few minutes with a 0.5% transaction fee can quickly deplete the principal. Meme coin traders are definitely high-friction traders.
Now, almost all swaps have cross-chain swaps, which adds complexity in cross-chain fees, requiring payment of two miner fees and a bridge toll.
I once relied on Layerzero to exploit price differences between unichain and ETH L1, only to find out later that Layerzero made the most profit.
Grabbing airdrops is no longer a hot topic; this strategy incurs enormous trading costs. Airdrop grabbing is a typical example of “one general’s success is built on the corpses of thousands.” It is a classic strategy where project parties sell coins by collecting users’ trading costs.
I feel that on-chain plays are even more likely to treat users as transaction fee mining machines. The hidden costs on-chain tend to be higher than those in CEXs.
Uniswap’s total frontend revenue in 2024 was nearly $100 million, while the cumulative trading fees contributed by swap users on Uniswap amounted to $1.27 billion in 2024.
Pump.fun is even more impressive, with cumulative platform revenue (which is what pump.fun officially collects) of $313 million in 2024, while users contributed a total of $738 million in costs (it seems half goes to pump.fun officially, and half goes to LP).
As you can see, the transaction fee harvesting machine in DeFi is not a small number. We do not know how much we earned, but DEX platforms + LP tokens are definitely making a lot.
Please ensure to clearly record your trading costs in specific investment operations. I asked ChatGPT to list an estimation table; the data comes entirely from AI searches and estimates and is for reference only.
Compare it with the products or strategies you are currently using and see how much tax you have paid.
In fact, chives are cut by trading costs, not by market makers.
