I’ve been in this space for 2-3 years and I love watching money move. Figuring out marketplaces is my thing.
I’m not writing this post to ‘call out’ any body or any projects. More to bring to light strategies people use and bring clarity to navigating NFT project hype.
I’ll cover NBA Topshot, Decentraland, CryptoPunks, the Art space, Axie Infinity, etc.
Also, I’m not judging coz..who tf am I. I’ll leave that part to you.
Are the below tactics wrong or right? You decide.
Social Media+ Crypto Whales
It’s important to start with acknowledging how much social media + crypto whales play a part in the NFT/Crypto industry.
Some regular people are sitting on 9-10 figs. $500,000,000 to Billions. Seriously, there are some BIG whales here.
Couple this with a big YouTube or Social Media account and you have people that can really influence a market. In fact, they can single handedly CREATE industries.
Now, there’s nothing wrong with that, it’s what Venture firms do, it’s what early Bitcoiners have done in the last 2-3 months, it’s what Angel/Strategic investors do. They invest, they accelerate.
The issue lies in how this influences newbies investment decisions getting caught up in all the hyp.
What happens when the above accounts have a HUGE reach and their audience are newbies? Pump & Dumps, people get rekt, bad intentions bring wash traders, big sales numbers that don’t sustain, etc. It become the sad nature of a low attention span but enthusiastic market.
Let’s explore the EFFECTS of the above. Again, not judging.
Twitter Hype Cycles
This is true for crypto, NFTs, stock, pretty much everything. I’m not going to say it’s good or bad but this is how it plays out,
So when I get asked, “what is a good project to invest in”, the answer really is which Phase are you investing at?
Phase 1: You take a risk. You could be early and it could blow up. Or it could go nowhere.
Phase 2-6: You’re probably buying at a hyped period
Phase 7: If it’s a positive scenario and the project has had interest 6-12 months+ down the line, it’s probably here to stay. A good long term hold. This is where I enter. Usually games or virtual projects or really good collectibles survive. Mostly those that continue to give utility.
Love this project. Let’s explore what happened.
Early Beta Investors get first dips at packs.
People go in hard, feel this is going to be big and buy a ton of packs. Good on them, the project blew up. But what does this mean for new investors that want to participate? Is it still a good investment?
Breaking down the NBA Topshot Marketplace
People get accepted to Beta test, Packs get sold out as early investors thought,
- This is going to be massive, NBA scale potential is enormous
- We can grab early editions, rare cards
Dapper Labs hit the ground running and their low friction buying, fiat onramps, zero wallet management and non crypto people interest brought a lot of new money to the project.
Suddenly people that spend $10,000 are sitting on $250,000+ estimated portfolios. ‘ESTIMATED’. Key word How these estimates are made gets interesting.
intangible.marketplace starts doing estimates of accounts. (A third party website – not created or endorsed directly by Dapper)
Suddenly people are showing pics of 7-8 figure account estimates. Holy crap! But if you look at the estimator tool above it estimates based on ‘market low’ meaning the cheapest listing. LISTING. Not cheapest SALE. This can be gamed and we’ll explore this later.
Credit to the creator of the website, who mentions this.
Why does ‘cheapest listing’ instead of ‘recent sale’ matter?
Because it’s speculative and can be gamed.
Like cosmic moments which have low supply and go for a lot of $ in NBA Top Shot.
Eg, Legendary Ja Morant has recent sales history of the below,
Highest sale not including the #1 is $8.5k USD.
The current cheapest on the market is $50k
So what does the estimate tool pick up? $50k. See how that’s an issue?
Let’s look at Lebron James Cosmic,
Highest sale is $50k, also single digit serial #. Yet the cheapest on the market is $206k. So the estimator picks up $206k.
Imagine I own both $206k AND $250k. Then I can market make/game this. I can list the cheapest at $1M and the estimtor will tell me my portfolio is $1M. Lol. Even though no sales happened even close to this $.
This is why I think large accounts that are sitting on lots of cosmics or holos or rare/low supply moments have massively inflated estimates.
Yes, the most recent sale is 15th Jan and there’s been 2 weeks+ since this date but any estimate that involves prices of NON SOLD items is speculative. Fact.
If I bought that $8.5k cosmic and the next cheapest on the market is $50k, then the estimator picks up that my portfolio of 1 cosmic is worth $50k.
The above on a Pump and Dump level
Ok, say some have figured out this loophole. Then suddenly it makes sense to buy ALL the cheap moments for limited editions because the estimator will immediately give you a much larger estimate to what you paid for.
Let’s take the below ‘common tyus jones assist’ moment as an example,
Cheapest is $16.
But for a long time it was $1.
So a single buyer can come in and buy them up from $1, $2, $3, $5, $10, etc. Let’s do some math and pretend he bought 100 of the cheapest of this moment.
20 x $1
10 x $2
15 x $3
25 x $5
10 x $10
5 x $12
10 x $15
5 x $16
So buyer spent $475. Let’s pretend the next cheapest on the market is $20. What does the estimator tool now estimate his portfolio to be? $2,000.
Say he continues going and buys 100% of supply. All 3,999 of them. (Pretty much impossible but let’s be hypothetical). Now, he’s the market maker. He can list the cheapest at whatever he wants, which, is fine BUT the estimator tool will estimate it based on HIM and not the market.
So he lists the cheapest at $1M each. Is his portfolio estimated at $3999M? $4Billion? lol no. See how this can be gamed at a certain level?
- Buy the floor, reducing supply and getting the estimator tool to beef up your portfolio worth
- Share this on Twitter
- Bring interest so they come in and you sell the moments you have slowly releasing them back into the marketplace one by one, (not too many at once so people feel like they’re buying the ‘last one at that price’.
- Re-invest to pump another floor
- Keep going till it’s unsustainable and it’s too expensive
- Market slows down and consolidates UNLESS some big news happens
Now, I’m not saying the above is wrong. I mean, it’s perfectly OK to buy up whatever you want and sell at whatever price you want. It’s a free market. In fact, due to the insane interest and marketing of NBA top shot, the new traffic has been able to sustain even these massively appreciated values.
But, I’m putting these tactics out there so newbies know what’s up.
Smart investors/traders exit and enter based on what they think is the bottom/top. If you held your NBA Top shot portfolio through a 20x and are upset because it’s dipping a bit because early investors are dumping, well that’s the nature of the market. Hype always dies eventually but if the project is good, prices will pick up again.
Big Sales Volume
At the peak of NBA Top Shot, the 24hr sales volume was ~$6M. Now, it’s $1.4M. Still pretty large but during it’s peak, people were buying up cheap moments, reselling, then reinvesting back into the ecosystem.
A big accelerator to this was that it takes 4-8 weeks for withdrawals AND you need KYC so people didn’t want to withdraw. That’s why many just rebought with their profits creating a very high circulating volume for a short period of time.
Now, ETH and crypto is mooning again, (or on the verge of mooning), so it seems volume has slowed down as people want to withdraw their money and throw it in crypto markets.
Decentraland ‘Nessie the Whale’
If you’re a Decentraland OG, you may remember Nessie. A name we, the community gave an anon whale who came in and threw down $1-$2M on Land during September 2018 like a boss.
There were $100-$300k sales days which now, doesn’t seem like much but back then it was HUGE.
Nessie came in and bought every land parcel from 7k MANA all the way up to 15k MANA.
A great example of how one whale can come in and double the price of NFTs in a project single handedly. Generally, NFT liquidity is quite low so it’s easy to pump/dump and give the illusion that ‘prices have doubled or trippled’ when in reality it’s just one guy who’s spent $100k to $1M.
Although the community was excited about the above, it was also concerning that one guy had so much land. So he could effectively dump it all back on the market whenever he wanted.
Which is what happened later in 2019, Nessie just dumped his single parcels taking the price all the way back down to around 8k MANA a parcel.
Decentraland also released the rest of their land in the second auction, (around 9,000+ land), which brought a lot more land supply, again, squashing the cheapest parcel price to around 8-9k MANA.
Currently there’s a seller who has 13 lands at 8,999 MANA. Basically a ‘sell wall’, which, when eaten will start to appreciate the rest of the land as there’s not that many under 10k MANA.
This is why it’s risky to have a handful of whales own too much of one project. They can heavily influence the market at any time. They can keep prices of NFTs down, they can pump them up, they can BIG buys and bring fomo. Basically, unless there’s a good spread of many whales and community investors, the project will be at the mercy of a handful.
cryptoslam gives a great column of all time buyers/owners.
The more users there is, the more promoters, supporters, influencers, devs, creators, there is. Basically a strong community that can help grow and sustain the project.
So if there’s a project with some big sales and HUGE sales volume but like 5 people behind it, meh, to me, it doesn’t matter at that stage.
Like CryptoPunks lately,
13 people make half a mill in volume. Not very exciting to me to be honest.
But I get it, they’re higher value assets so there doesn’t need to be that many buyers to have high sales volume as each punk is like $5k+. Same with Decentraland regarding land.
BUT, I’m saying this doesn’t indicate community and project growth to me.
When I see big sales numbers and volume I ask myself, how many new people bought? Is it the same community? Has the community grown? If yes, it’s stronger, if not, it’s the same.
Will Cryptopunks, with around 1,000 owners, be relevant when this space has 50 Million people into NFTs from big name games like possibly fornite, blizzard, etc? And are all using different blockchains?
If there’s a lot of owners then you’ll see a lot more support from a range of people around you like what happened with Hashmasks and what’s happening with NBA top shot.
Cryptopunks are NOT the first overall NFTs. They are the first on Ethereum.
The first NFT’s were actually RarePepe’s predated only by Spells of Genesis Cards.
Spells of genesis were previously on XCP but have now moved to Ethereum.
Cryptopunks has done well to stay relevant though.
The CryptoPunks – Rarible Saga
When the platform Rarible came along, they had a revolutionary model.
Incentivise buyers and sellers on the platform buy giving them RARI token for their activity. It took off! And as RARI went to $5-$10, it was insanely profitable to just move your trading activity to Rarible.
In the midst of all this people realized something with CryptoPunks. (It might get a bit confusing here if you’re not familiar with Ethereum Tech).
Basically – Cryptopunks are SO OG that they were pre-ERC721 standard. This is the token standard that most NFTs on Ethereum are today. The reason why we can use opensea, Decentraland, Superrare NFT tokens across platforms is because they accept these standards.
Cryptopunks have their own Token they started with which inspired the ERC721.
So you could previous ONLY buy them from the Larva Labs website. (Creators of Cryptopunks).
But people realized that you can buy them from Larva Labs, convert them to ERC721 using the wrapped punks website, and sell them back on Rarible for the same price or a minimal profit because the RARI kick back was enough to make a lot of money.
That’s why we started to see a ton of ‘wrapped punks’ volume out of nowhere. (Notice total volume).
But if you look at 7 day volume, it’s back to almost minimal today.
If you look at individual punk sales, you’ll see some sales/sellers buying/selling them at around the same price or +/- 0.1 ETH. The profit on the punks didn’t matter, the buy/sell event did. = $RARI.
The circled period above was pure RARI farming.
But the added benefit of ‘buying up the floor’ on Larvalabs Punks website would have been, signalling across the NFT space that ‘OMG Punks are blowing up!’
So people who were already using Rarible buy Cryptopunks because they see them going up like crazy. They also get some RARI so it’s a win-win.
Pump + Dump cycle is complete.
Since then, punks have continued to grow in terms of number of investors, publicity, etc. more wallet owners, supporters have entered and strengthened the project. I think it will do well for a while. For ever? I don’t know.
Again, the purpose isn’t to call out, it’s to SHOW what goes on.
The NFT Art Industry
The NFT Art industry is a whole other beast.
I tweeted the other day that I’d like to invest or support artists that are here to stay. Basically because I think those that continue to work on their art, minting technique, new tech etc and give value to their investors will do well.
Like Josie Bellini who has been in the industry for 2-3 years, networked, even runs a podcast of 40+ episodes interviewing artists.
Continues to grow her brand between her art work minting.
Or Loopify who runs a blog, keeps the community interested and tries to build a community around the space.
I don’t own any of the artists above work, but again, I feel those that have showed they’ve been here for a while and grow their brand/network along with releasing art will bring value to their art beyond any hype. Over time.
Those that come in, ride the wave by selling some art and then split, will probably have their art reduce in value UNLESS it’s an iconic moment.
Nifty Gateway does like 10+ drops a week. bringing some huge names to the industry. The way I’m navigating the hype is collecting pieces from Artists and projects I personally like. I like comic heroes, I used to watch Dota 2 esports tournaments so I bought an OG ring. It feels cool to have one of their first piece.
Once there’s 10s of thousands of Artists/projects on Nifty Gateway, for my investments I ask, which were iconic.
There’s plenty of iconic moments but one, just to illustrate this, is Beeples Physical + Digital open edition which did $3.5M+.
Something on this scale that reached a lot of people means that it can’t be ignored when writing the history books of the NFT space. It was also the first time open editions and physical were attached to an Art Drop on Nifty Gateway.
So I feel, Beeple’s early pieces, (Politics is BS), and the physcial + digital drop will go up steadily in value. And it has been.
But there’s also plenty of artists, small or big who released their first pieces of art somewhere. If I feel they’re here to stay, I’ll buy their early pieces.
How Big is the Community?
For Non-Art NFT projects I ask, how big is the userbase/community.
If it’s a collector NFT, is it just 100 wallet holders? Well that’s a team 100 strong that will be responsible for keeping the narrative alive.
If it’s 5,000+ strong then wooo we have a good chance.
Basically, the more people that own the NFTs, the more people will be developing tools, promoting, sharing with friends etc.
That’s why I don’t ‘buy up all the Art supply’ from my favorite artist. Because I want more collectors on our team. So why would I do that? I’ve seen people employ that tactic and it’s self defeating. imo*
Beeples drop had a ton of people take notice and invest/buy which means there’s a lot of people that will help push the word of Beeple.
Same with Hasmasks. A lot of people bought and now it does more volume than cryptopunks. Will it sustain? I’m curious to see. It’s really up to the community to make it sustain. It doesn’t have the ‘first NFT on ETH blockchain’ thing that cryptopunks does.
BUT it did bring a lot of people participating as a collector community.
When the hype dies, (which it will), I’ll be curious to see how the market reacts.
So How Do We Invest/Participate?
I’ll tell you what I do.
I invest in phase 1 of the above image if I truly feel like the project is here to stay. Either it’s a big brand, IP, well funded project, super ambitious project lead, etc.
OR if I miss Phase 1, I’ll wait all the way till Phase 6 or 7, when early investors have dumped their bags and there’s not much downward sell pressure.
It’s ok to be 1 year late if it’s a 10 year project. You’re still 9 years early.
Perfect example is Axie Infinity. I didn’t buy any ‘mystic axies’ till 2 years down the line. When they were 3 ETH. Now, the cheapest one is 5 ETH. They reached 7-8 ETH a couple months ago.
Axie infinity has 16k+ daily players. And continues to grow. My theory is that the more players, the more the value of these limited axies will go up.
More demand + fixed supply = price go up. Right?
Then there’s Decentraland which I’m ONLY bullish because I can see that the developer and creator community keeps building cool things and they have a ton of community funding. (~ $3-$4M per year for the community to use).
If the above 2 weren’t true I would have sold a long time ago.
Even Cryptopunks seems like it’s lasted the test of time. If the whole Rarible – CryptoPunk saga didn’t exist then I would have seen more organic increase and would have bought. But it would seem I’m buying at a hyped phase right now.
When there is 1,000x the NFT users playing AAA games, etc, will they bother with nerdy stuff like the first NFTs on ETH? Especially when there’s other chains like FLOW, DOT, ADA, EOS, etc that are starting to have big projects launch on them.
Don’t know. I’m watching at this stage.
Avastars is also cool. They actually are starting to bring utility to the avatars by giving special discord roles/access to people that own x avatars. Again, utility for me is key for longevity. OR it has to be something iconic/special.
There’s crazy money in this industry. Where traditional physical collector industries take years to mature, (Like Pokemon), the millionaires and billionaires here can accelerate in a few months.
You will see the same pattern repeat at hyperspeed,
- Buy early NFTs from project A
- Hype big sales on Twitter
- Volume increases because buyers and sellers are trading
- Early investors get out
- New investors are left holding bags
- Early investors continue to hype till THEY get out completely or to keep project relevant
- Project flatlines as people move to next NFT project
- Project will survive if it can provide utility/growth over the coming 1-3 years and convince people to come back
Projects are made of people that hold and promote long term AND flippers. Flippers bring hype, get in, get out. Long term investors bring hype, grow project, stay and build.
People can be either one of the above or both. None are wrong. Even flippers are an integral part of the market.
I used to flip my lands in Decentraland all the time. Buy, sell, buy, sell. I went from owning 5 lands to 500+ this way. If I saw the opportunity and someone knocked on my discord door wanting to sell for a good price, why wouldn’t I take it?
If a buyer came and wanted to buy my land for a huge price, why wouldn’t I sell?
The question again, for YOU is at what stage/phase are you buying. If you’re buying at a hyped stage, try at least negotiating your way to a better bulk price. That way if the market tanks, you’re covered a little.
Most if not all project founders create with the intention to grow their communities and NFT project but the traders and investors in this crypto space are used to jumping on a train and getting off every month.
What you CAN do is be aware of what phase you’re investing in. If you miss the boat, dw, there’s always another project in the works.
It’s also important to note that everything above is connected to crypto movements. If ETH or BTC or Alt coins start to moon or dump, people usually mass enter or exit NFT projects.
So…yeh, more madness.
Invest well – be safe.