If you’re a living breathing human being, have a Twitter, and are even remotely curious about NFTs, you’re probably overwhelmed. Things are moving at such a pace that it’s a full-time job to just not fall behind. So yeah, you’re not alone.
Given that I have 54 tabs open right and 53 of them are DeFi, NFT-related, you could say I’ve been down the rabbit hole. I’d like to share with you some of my findings. First, I want to highlight NFTs that I think are positive investments. These will also befor fellow builders out there looking to learn from the space. Please do your own research and all that jazz. I do lose money too, so it’s unwise to trust me blindly. Second, I want to empower you to analyze projects on your own, by sharing with you my analysis process.
After this article, I hope to publish an NFT Project Review a few times a week.
What I look for in NFT Projects:
- First and foremost, let’s not beat around the bush. We want to make money. We want to buy projects that will increase in value from the time we bought them. I don’t want you to think I’m some out-of-touch idealist who thinks that people are buying NFTs without this being their primary motivator. That’s ok.
- Support projects that are committed to creating a better Metaverse. The Metaverse is the social layer for Web 3.0. I’m going to talk a lot about this. We want to create a better social layer than the current — 12-YEAR-OLD GIRLS KILLING THEMSELVES AT ALARMING RATES — Web 2.0. This is actually our chance to create a better social network. Please bring that into your heart. Let’s do this with consciousness and awareness. Let’s support transparent, value-driven projects.
There are certain criteria I look for in a project. I have learned the hard way how to properly analyze them. I’m calmer now. More patient. I’m not quick on the trigger, but when I pull the trigger…I pull the trigger. That’s how you want to be.
First, The Risks
Buying these is not like stock trading and it’s not even like crypto investing. NFTs aren’t fractional which means they have far less liquidity. This means that price moves are dramatic and harsh. Your NFTs will likely fluctuate 25%-100% daily. Keep your cool. Keeping your cool is a lot easier if you don’t have your mortgage on the line…
My NFT Strategy:
I want to identify projects with strong communities, good ethics, and encouraging fundamentals that I believe will significantly increase in price. I am buying a little bit of many projects. Many of the projects will fail and go to zero. Some of them will do 10–100x. I want to try to catch several of those.
When things do go down I just generally accept the loss and hold. I’m not into selling at a loss, especially with something as unpredictable as NFTs.
When I do not make money…I consolidate into ETH, BTC, or other blue-chip NFTs.
Some of my rules for buying NFTs:
I always buy at least three NFTs of the same generation. You don’t want to be caught in the soul-wrenching process of deciding if right now is the time to sell that rapidly increasing (or decreasing) NFT.
- The first is sold to cover your investment — that means I want to sell it when it’s at about a 3–5x.
- I sell the second one at or around a 10x.
- The final one is just the sprinkles on top. I hold that one and I hope I get rich.
Remember, you’re trading back into ETH or BTC. Those are assets you want to hold. Be patient. Even if you’re just slowly increasing how much ETH you have, that’s a good place to be.
Do I mint NFTs?
I don’t worry too much about the mints. If I come across them I come across them. But it’s simply not possible to look at everything, and there’s so much garbage. So I’ll browse, but I’m comfortable with the fact that we’re so early, any solid buy today is a good buy, even if it’s not at mint date.
For example, after a few unsuccessful mints, I did mint @desperateapewives which seems to have been a good decision.
How do I analyze an NFT Project?
You should absolutely read this insightful thread. I’ve incorporated many of her points into my own analysis process.
Much of my metrics will be compared to the standard set by Bored Ape Yacht Club. They’re the strongest community-based NFT project today.
I judge an NFT on a few main categories:
I want to make sure that the fundamentals behind the project check out.
Distribution: This means analyzing the current holders of the NFTs to see whether the NFTs are well distributed. Too many held by too few people means that when those people sell, the price will crash.
How many original holders: While this number can be dummied, a good amount of individual holders means (1) that more people are involved and (2) people are unlikely to dump if they only have 1 or 2 NFTs left, especially if the NFT is providing utility, a valuable community, and potent social capital.
In many cases, the teams are anonymous which makes analyzing them hard. In that case, I am looking at their community engagement, their professionalism, and their vocalized vision. I always reach out to the team, both to ask questions and to just get a sense of their commitment.
I am looking for dedicated, positive, motivated communities. I want to see community members identifying with their NFTs. That means fan-art, printing their NFTs, adding to the lore, attending and organizing meetups, and just generally being involved with the project. The bottom line is that it should be clear that there’s some value associated with being a part of their community.
This is really important. The art should be visually appealing, interesting, dynamic, and eye-catching. However, it is very important to focus on the art of their “floor” NFTs, the basic ones that most people are buying. They also need to be dynamic and diverse. If they all pretty much look the same, the whole project will suffer.
The NFT should serve some type of utility. Airdrops are nice, but what value will those airdrops provide? Airdrops to worthless NFTs will also be worthless.
The future is DAOs Decentralized Autonomous Organizations) built with NFTs as the keycards. These keycards unlock profit-making operations, a network of talent, a network of funding, and just generally positive human beings. The greatest utility an NFT can bring is social capital.
I’m not calling this a roadmap because what most projects call a roadmap is basically a vague outline of their future operations. But that’s what we’re buying into – a vision. A vision of what this organization will be, what it will stand for, how it will use its money. I want to know that the team is in it for the long term, and committed to that vision on more than just a purely monetary level.
A Little Unsolicited Advice
I love unsolicited advice so I imagine you do too. I think that the most powerful investment mindset you can have is to truly internalize that how much money you have now is how much you’re supposed to have and that how much you will make is also set. This allows you to approach each investment decision without baggage and clinging to past decisions, or fear about the future — the two enemies of clarity.
This isn’t fatalistic, because you can change the amount you make. But not by working harder, but rather by working with more wisdom. The more you’re truly able to embody this mindset, the more you’ll truly be calm and clear, and the more what you want will occur.
That’s really it. Follow me for my analysis and thoughts. Drop me a comment. Let me know if there’s a project that I should look at, but give me something constructive to go, don’t just shill me.
This process I’m sure will ebb and flow as I get better and better.
I intentionally did not paywall this article. If it was valuable to you and you want to support this work, tips are greatly appreciated.
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