Thread
🧵🧶🧵WHY UNDERSTANDING NFT CYCLES ARE CRITICAL & how I think about them based on my experience…
What I will cover:
• what are NFT cycles?
• what are some trends I’ve noticed in NFT cycles?
• how I plan to play it
🔽👇🏽👇🏽👇🏽⏬
What I will cover:
• what are NFT cycles?
• what are some trends I’ve noticed in NFT cycles?
• how I plan to play it
🔽👇🏽👇🏽👇🏽⏬
1. Cycles help you determine how to rotate in and out of assets.
Your strategy in bull markets should be different than in bear markets
And most importantly, you should be able to tell which market you’re in!
Your strategy in bull markets should be different than in bear markets
And most importantly, you should be able to tell which market you’re in!
2. What is an NFT bull market?
In short, bull market is when everything is literally going up.
I.e. Any noob can throw a dirt on any NFT, and it may 3-4x.
It’s exuberance caused by “adoption waves” 🌊
In short, bull market is when everything is literally going up.
I.e. Any noob can throw a dirt on any NFT, and it may 3-4x.
It’s exuberance caused by “adoption waves” 🌊
3. What is an NFT bear market?
This is when even the best of projects are hardly moving (no matter how well they execute)
However, floor on some of the “empty calories” projects are absolutely getting crushed!
Liquidity is very hard to come by
This is when even the best of projects are hardly moving (no matter how well they execute)
However, floor on some of the “empty calories” projects are absolutely getting crushed!
Liquidity is very hard to come by
4. I’m going to cover next some of the key PATTERNS 🔑 I’ve noticed.
I will be labelling them: P1, P2, P3, etc. So let’s dig right into it 👇🏽🍿
I will be labelling them: P1, P2, P3, etc. So let’s dig right into it 👇🏽🍿
5. P1: NFT CYCLES ARE SHORT AF
Crypto cycle “peaks” were ‘13, ‘17, ‘20
I’d argue that NFT cycle peaks were:
➡️ some month on 2017 (proof of concept)
➡️ Mar 2021
➡️ Aug 2021
➡️ Jan 2022
Notice how these cycles are 5 months apart compared to roughly 3-5 years apart
Crypto cycle “peaks” were ‘13, ‘17, ‘20
I’d argue that NFT cycle peaks were:
➡️ some month on 2017 (proof of concept)
➡️ Mar 2021
➡️ Aug 2021
➡️ Jan 2022
Notice how these cycles are 5 months apart compared to roughly 3-5 years apart
6. P2. NFT CYCLES ARE DRIVEN BY ADOPTION EVENTS —
Examples:
➡️ Proof of concept of NFTs & advent of 10k projects like crypto punks
➡️ Beeple $69M sale causing media frenzy
➡️ Celeb adoption
➡️ Twitter verification
Notice how these are not related to broader “business cycles”
Examples:
➡️ Proof of concept of NFTs & advent of 10k projects like crypto punks
➡️ Beeple $69M sale causing media frenzy
➡️ Celeb adoption
➡️ Twitter verification
Notice how these are not related to broader “business cycles”
7. P3. EACH CYCLE BECOMES MORE COMPETITIVE
Amateur stuff from the past cycles cannot be repeated in the next cycle
In Aug 21, ANY 10k project was 🚀
In Jan 21, ANY 10k with utility-potential was 🚀
Now, NFTs with ACTUAL utility is 🚀
Next, NFTs with GREAT utility will 🚀
etc.
Amateur stuff from the past cycles cannot be repeated in the next cycle
In Aug 21, ANY 10k project was 🚀
In Jan 21, ANY 10k with utility-potential was 🚀
Now, NFTs with ACTUAL utility is 🚀
Next, NFTs with GREAT utility will 🚀
etc.
8. P4. FLOW OF FUNDS
Just as projects evolve & get better (I.e. weak projects drop off & stronger projects live), so do investors
Less savvy ones lose their 💰 to smarter ones, who then allocate their funds to higher quality projects, therefore killing crappy/mediocre projects
Just as projects evolve & get better (I.e. weak projects drop off & stronger projects live), so do investors
Less savvy ones lose their 💰 to smarter ones, who then allocate their funds to higher quality projects, therefore killing crappy/mediocre projects
9. P5. LAWS OF EVOLUTION APPLY
Each cycle the competition gets stiffer. Leaders from the last cycle compete with new heavyweight entrants
The game levels-up. New leaders emerge & losers slowly go off into the sunset 🌅
This is survival of the fittest — this is evolution
Each cycle the competition gets stiffer. Leaders from the last cycle compete with new heavyweight entrants
The game levels-up. New leaders emerge & losers slowly go off into the sunset 🌅
This is survival of the fittest — this is evolution
10. P3. NFT CYCLES ARE IMPACTED BY ETH/DOLLAR FLUCTUATIONS
Rapid rise in ETH results in higher than proportional decline in NFT values (ETH denominated)
Why? People panic and move to ETH to then buy back NFTs cheaper in ETH terms.
Rapid rise in ETH results in higher than proportional decline in NFT values (ETH denominated)
Why? People panic and move to ETH to then buy back NFTs cheaper in ETH terms.
… The opposite is somewhat true.
When ETH goes down in value rapidly, NFTs don’t seem to offset immediately.
In fact, it often goes down with it, though not proportionally
Why? Because NFTs are actually pegged more to the dollar than ppl realize
When ETH goes down in value rapidly, NFTs don’t seem to offset immediately.
In fact, it often goes down with it, though not proportionally
Why? Because NFTs are actually pegged more to the dollar than ppl realize
… Overtime, the price stabilizes, but not quite to the previous $$ levels unless of course there is an “Adoption Event”
… A goldilocks situation for NFTs is actually when ETH is stable
People tend to get bored, & try to find other ways of generating “alpha” — they’re Degens after all 😂
In this case, they don’t have their money going back & forth b/w ETH & $$. Instead, it moves b/w ETH & NFTs
People tend to get bored, & try to find other ways of generating “alpha” — they’re Degens after all 😂
In this case, they don’t have their money going back & forth b/w ETH & $$. Instead, it moves b/w ETH & NFTs
11. CASE STUDY
Punks were on a league of their own, then BAYC challenged them with utility!
Certain tier 2 projects like VeeFriends, Cool Cats, Toadz, DogePound, etc. we’re hanging in there & were considered “bluechips”
Punks were on a league of their own, then BAYC challenged them with utility!
Certain tier 2 projects like VeeFriends, Cool Cats, Toadz, DogePound, etc. we’re hanging in there & were considered “bluechips”
… Next cycle: Doodles & Azuki started totally kicking the “bluechip’s” asses — by varying degrees
Then came Moonbirds… slowly starting to kick Doodles/Azukis’ asses…
Then came Moonbirds… slowly starting to kick Doodles/Azukis’ asses…
12. One project that stayed constant though was BAYC 🐐
It continued to be the market leader by dropping “lower tier” collections to compete at the various price points and steal market share
They will do the same with Kodas coming up 🔮
It continued to be the market leader by dropping “lower tier” collections to compete at the various price points and steal market share
They will do the same with Kodas coming up 🔮
13. LESSON
If you’re trying the same crap that was successful 2 cycles ago, you are going to get absolutely slaughtered
Also as investors, if you bet blindly on the leader(s) i.e. Kennel Club Dog or “Ape Coin” or whatever, you would’ve nearly 10x’d
If you’re trying the same crap that was successful 2 cycles ago, you are going to get absolutely slaughtered
Also as investors, if you bet blindly on the leader(s) i.e. Kennel Club Dog or “Ape Coin” or whatever, you would’ve nearly 10x’d
14. 🔑 TAKEAWAYS
When u realize there is a potential Tesla in the game & u got the FUNDS to play it safe: BET ON THE TESLA ECOSYSTEM
If u need to take more risks because u’re starting with lower capital, then bet on some “smaller players” but be damn sure it’s a bull market
When u realize there is a potential Tesla in the game & u got the FUNDS to play it safe: BET ON THE TESLA ECOSYSTEM
If u need to take more risks because u’re starting with lower capital, then bet on some “smaller players” but be damn sure it’s a bull market
15. Remember: it’s much better to be able to turn 10ETH to 30ETH than 1 ETH to 10ETH, even tho the first is a 3x & the latter is a 10x
The former bet is MUCH BETTER RISK ADJUSTED
Imagine flipping a coin for a 3x vs playing the lottery for a 10x. The first is MUCH MORE LIKELY
The former bet is MUCH BETTER RISK ADJUSTED
Imagine flipping a coin for a 3x vs playing the lottery for a 10x. The first is MUCH MORE LIKELY
16. SO HOW AM I GOING TO PLAY THIS?
Because I have a sufficient amount of capital to throw down on bluechips, I’m going to ONLY bet on those
I will also opportunistically go in to “higher mint price, higher potential” projects. Think moonbirds at 2.5 or Azuki at 3 when dropped
Because I have a sufficient amount of capital to throw down on bluechips, I’m going to ONLY bet on those
I will also opportunistically go in to “higher mint price, higher potential” projects. Think moonbirds at 2.5 or Azuki at 3 when dropped
17. WHAT SHOULD YOU TAKE AWAY FROM THIS?
🔑 Stay the fuck away from any team that you don’t believe can be tier 1 in the space, period
Unless it’s altruistic & you have non-financial motives, then feel free to do whatever… but in this 🧵 I’m not factoring in philanthropy
🔑 Stay the fuck away from any team that you don’t believe can be tier 1 in the space, period
Unless it’s altruistic & you have non-financial motives, then feel free to do whatever… but in this 🧵 I’m not factoring in philanthropy
… (cont’d)
1️⃣ Cut your losers, and double down on your winner(s) 🔑
2️⃣ Rinse and repeat until one of your winners are undefeatable
3️⃣ Of course, take SOME “profits” along the way (from flips & selling off losers)
1️⃣ Cut your losers, and double down on your winner(s) 🔑
2️⃣ Rinse and repeat until one of your winners are undefeatable
3️⃣ Of course, take SOME “profits” along the way (from flips & selling off losers)
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Raoul Pal @RaoulPal
·
Apr 26, 2022
Great thread on how to invest in NFTs