NFT Gas Therapy.
If you scrolled through Crypto Twitter this week, I am sure you would have read about Moonbirds NFTs. The PFP collection of 10,000 pixelated owls became the new “blue-chip” collection going for a minimum of 19.5 ETH (worth ~$61,500).
The founders of Moonbirds, Kevin Rose, Ryan Carson, and Justin Mezzell, are previously successful entrepreneurs who borrowed from Bored Ape Yacht Club’s (BAYC) playbook and applied it to their NFT project PROOF Collective of 1,000 NFTs.
Holders of PROOF NFTs get exclusive access to the project’s Discord channel, VIP passes to conferences and other real-life events, and access to future NFT drops. Moonbirds NFT holders will enjoy similar benefits.
The question is whether you should spend over $60,000 to bet on the next potential BAYC? Or even $7,000 (2.5 ETH), the amount for which Moonbirds NFTs were minted, even if you had millions to spend.
The bitter truth about the NFT market is that collections like Moonbirds that attain floor prices above 10 ETH are like lottery tickets. Often hype around a given collection is unsustainable, and they eventually collapse below 10 ETH and into oblivion.
Fine, but you can buy these “lottery tickets” for relatively cheap, right? Sometimes. For example, Bored Ape Yacht Club mint was well under 1 ETH. However, the market has become more crowded, so you have a much lower chance of pulling out the winning ticket.
Promising collections get hyped up long before they start selling. Thousands of participants are fighting to get a spot, while bots make the job more challenging for the mob.
You may think buying hyped collections straight after listing on a marketplace like OpenSea is a viable strategy. And it can be, given that many initial investors will fix quick gains without realizing the project’s potential. However, buying expensive collections has a bad risk/return profile.
You could buy a Moonbird for 10 ETH and ride it to 20 ETH in a few days. Maybe if you would hold for longer, you’d get to see a 100 ETH floor. However, the probability of that happening is increasingly low, while the money you put on the line is significant.
You play the NFT game to increase your ETH stack; others do the same. Active NFT traders will likely move their Moonbirds profits on to newer projects rather than trying to ride it for further gains.
Average trading price and volume of Mekaverse NFTs. Source: OpenSea
Average trading price and volume of Brotchain NFTs: Source: OpenSea
The above graphs, which resemble a radioactive decay chart, indicate what happens when the initial hype dies. There’s hardly any trading volume for once-popular collections, leaving a bunch of bag-holders that invested 10 ETH (~$30,000) or more.
In other cases, a project’s team can also kill their project by making bad decisions—for example, CryptoPunks, whose floor went from $400,000 to $200,000 in under a year. Imagine losing $200,000 on a JPEG.
PUNK (fractionalized CryPUNK (fractionalized CryptoPunks floor) price. Source: CoinGecko.ptoPunks floor) price. Source: CoinGecko.
With numerous projects flooding the market, your best bet is to acquire NFTs early, preferably during mint, and flip when the hype around the project increases. This way, you play it the right way, like a lottery. Buy tickets for cheap and fix profits if you win.
This strategy, obviously, won’t get you hyped NFTs, but maybe some of the ones you pick for pennies get traction. A ride from 0.08 ETH to 1 ETH would already be substantial in such a case. Check how the Milady collection, which was selling for 0.08 ETH, did.
Whether NFTs are the future or just a fad, you’re more than welcome to speculate on their prices. However, I think you’re better off playing it like a lottery instead of making concentrated bets.