NFTeasers #7 | NFTland is getting out of control...here's how I evaluate NFT projects
Scoreboard | RTFKT Space Pods | How to evaluate NFT projects
Welcome to NFTeasers from the Sunday:Drip Society crew. Each week, we explore the wild world of NFTs, from high conviction buys to hypothetical scenarios/predictions for your favorite projects. Occasionally, we feature upcoming drops and share why we’re bullish/bearish.
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What I world we live in, amirite?!
Not financial advice, but if you’re looking for a market with volatility, NFTs are a trader’s dream.
What first attracted me to NFTs was the potential long-term value of owning scarce digital assets. I have pretty high conviction that owning rare digital property (e.g., land, assets, memberships, etc.) will become the equivalent of owning physical property in the real world.
That feeling has only strengthened over the past few months as thousands of new players jumped into NFTs with the same core set of beliefs.
What I did not anticipate, was the pure madness that is going on within the space right now.
At the beginning of the “mainstream” NFT wave in the late spring and summer of 2021, successful projects required some combination of reasonable art, stated and novel utility/roadmap, unique concept, strong team and rapid proof of execution. If a project didn’t have at least 3/5 of those things, it was often overlooked and didn’t take off.
This was healthy because it provided a baseline benchmark for new projects to hit before launch. That rubric helped serve as a filter layer which kept the low quality projects from gaining steam in the first place.
And why is that important?
I’m not against anyone being able to start their own project. In fact, I love it!
In a legacy world of gatekeepers and middlemen, I’m over the moon about anyone being able to come up with a concept, execute and launch.
The problem is that without a natural filter, tens of thousands of new entrants to the space are getting schemed, scammed and bamboozled into believing overnight derivatives of Doodles are the new Bored Ape Yacht Club because they don’t know any better.
I can now confidently say that we have entered a new phase of NFTland.
Anything and everything is minting, and the crazy thing is that most of it is doing… well?
Project creators are making millions within hours of the initial mints on crappy concepts with low quality art and no promise of future utility. Because of the anon nature of the space, no one has any idea who anyone is. Men are pretending to be women, founders are pretending to be both devs and community managers, etc. Instagram models are uploading pictures of themselves as membership passes that are going for 5ETH.
The point is, this type of environment makes it super hard for someone interested in the big vision of NFTs to know where to start and not get scammed.
So the name of the game for this week and most weeks for the next few months is curation.
Find people you trust that can curate the best opportunities for you and ignore the rest of the noise. 90% of what you read online is people pumping their own bags. Remember that.
On today’s episode, we’ll break down:
Scoreboard - Analysis of our past performance
DripVault Trade - RTFKT Space Pods
Recommendation - How to evaluate good NFT projects
Here’s a few high conviction bets that we’ve written about on prior episodes on Riot Racers, Galactic Apes, RTFKT CloneX, Shiny Feathers, Gambling Apes and FlyFish Club. The aggregate return is up big. I’d stay away from Galactic Apes…that project is a shit show right now.
DripVault Picks (in ETH):
Floor Gen 1 + Cold Blood Creepz Whitelist - Current total gain of 2.31 (+$7200). We think Floor is a potential 1 in 1000 in the space and could become the “Coinbase of NFTs”. CBC as a P2E game has also picked up a lot of steam
Poolsuite Executive Member Pass - Current gain of 1.39 (+$4,300). We’re bullish on Poolsuite’s ability to build a rabid core community that monetizes well and builds an authentic brand ecosystem
BYO Pills + Vape + Apostle (bonus) + Land - Current gain of 3.07 (+$9,500). Lots of hype around the rollout of their game and token release. Would buy more on a pullback
Adam Bomb Squad - Currently breakeven here. Price action has consistently moved up over the last few months
LinksDAO Leisure Pass - Current gain of .42 (+$1300). Would pick another one up on a pullback
Adidas Originals (Phase 1 Pass) - Current gain of .9 (+$2800). This feels like one you do not want to bet against. Still no major news has come out since mint
Total portfolio “paper” gains: 8.09ETH (+$25K)
Total DripVault value: 9.5ETH ($29.5K)
We love where the DripVault is at and the projects we have exposure to for the community.
A few weeks ago we talked about RTFKT Space Pods and why we were so bullish. To read our analysis, click here and scroll down to the bottom.
The short explanation is this…we predicted RTFKT and Nike have something big cooking and Space Pods are a crucial component to the upcoming ecosystem.
Turns out…we may be right.
Is this tweet super vague? Yes.
Could this tweet apply to more than just Space Pods? Yes.
Are we extremely long RTFKT because Nike is one of the most powerful brands in the world? Yes.
So we bought another Space Pod for DripVault. We paid .45ETH because we feel like they are super underpriced and will pop on any significant announcement from the RTFKT or Nike teams.
I don’t have a lot of novel analysis since the previous post because there hasn’t been much new information released.
However, I thought this would be a good time to share a key lesson we’ve learned over the last 9 months in NFTland.
The lesson is that everything moves in cycles and you want to move up the quality stack whenever you get the opportunity.
The best stock market investors say that it’s always good to have dry powder so you can press up your positions when the market pulls back.
It’s the same strategy in crypto and NFTs except the pullbacks happen 5x as often and are 3x as volatile.
When you can, you want to pick up blue-chip assets when they have been neglected.
Typically, NFT traders will rotate out of things that haven’t made any meaningful announcements into things that are hotter and moving quickly. This causes prices for the original asset to slowly trend down. It will almost always pop again on news about further development or additional utility, but it’s often too late because you’ve missed the buying window. It’s fairly obvious, but you want to buy in during the lull of the news cycle.
This type of cyclic action is common amongst all projects, but happens less frequently on the “blue-chip” projects like Bored Apes, Clone X, Doodles, etc. When it does, you must take advantage.
When we combine that cyclical price action opportunity with an underlying bullish sentiment, it’s a green means go.
For Space Pods, we were already hyper bullish on the project itself, even at all-time high prices. This lull is a perfect opportunity to add.
As I mentioned in the opening monologue, NFTland is scary right now.
Navigating landmines of scams and rug pulls is almost impossible when you’re new to the space.
When I first started exploring NFTs, I was fortunate to have Shiny as my curation layer.
Today, Sunday:Drip serves as the alpha curation layer for many of our members. While our primary mission is not to provide alpha for NFT projects, we realize the importance of helping our members navigate the space safely and being at the cutting edge of what’s happening at the intersection of culture, lifestyle and web3.
Regardless of if you join Shiny, Sunday:Drip or countless other web3 communities, I strongly encourage you to find a system for curation.
Don’t venture out into this space alone because you will get taken advantage of.
Today, I plan to share my process for evaluating an NFT project and determining if it’s potentially worth buying into. I haven’t gotten all of my bets right, but I do have about a 75% hit rate and have never been scammed/rugged. So DYOR, but experiment with this system.
We also covered a bit of this framework during a past episode of our podcast, Cryptoland.
Concept resonance - The first thing I evaluate before anything else is if the concept of the project resonates with me personally. I have to want to be in the discord and spend brain real estate on it. If this is a no, I’ll pass, even if there’s a chance to make money flipping. Your sanity should trump your bank account. I’d encourage you to define what this means for you and set some guidelines. For me, anything that maps to culture, fashion, music, sports or exclusivity interests me. Fine art, fan clubs, influencer memberships tend to not.
Curation validation - If a project passes through the first filter of resonance, I’ll then look for validation from at least one of a number of curation layers. This may sound silly, but in NFTs, you don’t want to be the only one that likes something. If you are, you’re not buying for appreciation but for the love of the art/idea. For me personally, I have enough of those types of bets already, so I’m looking for something that could have legs and grow overtime. If nobody else likes it, it probably won’t. Also, I’m human and often overlook things. My curation layers (Shiny, Sunday:Drip, Anti, etc.) all help me triangulate good ideas I may have missed.
Long-term potential - If a project resonates with me and is validated by curation layers I trust, I spend time thinking what the best case scenario could be. For Riot Racers, maybe it’s creating the F1 racing equivalent to Zed Run (billion dollar company). For Bored Ape, maybe it’s creating the next Disney. If I don’t see long-term potential in the idea, I pass. Again, this doesn’t mean you can’t short-term flip a news pump, but I’m not trying to be a trader because it’s exhausting to watch for those news cycles 24/7.
Team make-up - This is tough if the team isn’t doxxed (if they’re still anonymous). Some of the best teams are made up of anon developers that are super talented but probably don’t look great on paper or haven’t succeeded in the traditional world. If they were doxxed, people might not give them a chance. It’s much easier to bet on a doxxed team because you can evaluate their track record and if they’ve delivered on similar goals in the past. For example, I’m semi-doxxed. I go by a pseudonym and have limited ties to my government name online but those who have listened to all of our podcasts and read everything I’ve ever written could find me pretty easily. I’m okay with that. My previous accomplishments stand for themselves and I’m proud of the work and relationships I’ve built as “Kallaway” in the web3 world. It’s not always that easy. Doxxed teams almost never rug because their reputation outweighs a short-term cash payout. I like betting on teams that feel like they have to succeed. You have to be super careful with an anon team because they rarely have that bar for accountability. Either way, I typically try to look for if the team has hired into the skill positions to accomplish what they’re promising. If they’re building a game, they’re going to need game developers. If they don’t have them, it’s likely a pass.
Marketing/distribution - A team can build the coolest project in the world but if they are unable to spread the word about it, there’s a good chance it will never take off. This one is harder to gauge up front because Twitter/Discord follower counts are often botted/fake and teams tend to phase their marketing around announcements and product development which might take weeks/months. I try my best to gauge if the potential is here but don’t hold this against teams if it isn’t immediately obvious because this is something that can be improved overtime.
WITMMFTE - Lastly, before aping in, I ask myself, “Will it triple my money faster than ETH?” I think ETH is going to $10K sometime in 2022 (about 3x from here). By buying into an NFT project, I am taking on more risk, so I would expect a higher return than the base appreciation in ETH. If I am not fully confident that this has the potential to triple my money before the end of 2022, I am better off just holding ETH. This has served as a helpful mental model to keep me from chasing dumpster mints.
This framework can be helpful to newcomers who haven’t yet built a playbook for evaluating projects.
On the next episode of Cryptoland, Roman and I broke down our recommended process for how NFT beginners should find alpha. The above is how you evaluate a project once you get the alpha, but finding alpha is a job in itself, especially if you don’t have a curation layer.
Look for that episode to drop next Monday (1.24). You can subscribe here to get it delivered directly when it comes out.
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Legal Disclaimer: No information shared in NFTeasers is financial advice. All content is for entertainment and informational purposes only. Wavy Labs, LLC is not a registered investment, legal, or tax advisor or a broker/dealer.