Finding opportunities in the NFT space as a DeFi-only user (none of this is financial advice)
Over-Priced JPEGs

Over-Priced JPEGs

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Over-Priced JPEGs

Article contributed by Avran Wong

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Previously, I painted a rather bearish tone on DeFi and its flaws. Mercenary capital runs rampant and odds are rigged against retail investors. I still love DeFi but it sucks to have the odds stacked against you. My thought process from a purely opportunistic standpoint is that, in a PvP market like this, would you rather go against VCs with an infinite amount of money or people that buy pictures of monkeys?

If you’re long crypto in any form or capacity, it doesn’t take long for you to realize that there are really only 2 dominant sectors (broadly speaking) in the space: Defi and NFTs. As a predominantly DeFi user/researcher/investor or whatever you wanna call it, NFTs have always been something just outside my sights.

In this article, I will be highlighting my initial thoughts on how NFTs can potentially fit into my portfolio. This is not a “BUY NOW” shill or an “NFT SUCKS” post, but rather a collation of logical thoughts on NFTs as a DeFi only user. That said I’m definitely an NFT pleb so please do your own research.

I don’t understand

Digging around within my own circle of DeFi degens, the common consensus I get is that NFTs are a piece of technology that will probably become something, but it’s just so strange to us that we avoid it altogether. I mean why bother with JPEGs when you can evaluate tokenomics and observe capital flows. Defi is more quantitative and tangible, but pictures, art, and community are all so subjective and abstract.

“Seems cool but I just don’t get it”

As with any emerging technology, it is always the speculators and early adopters that have the most to gain (and lose). My mindset as a human has always been to continuously learn and be open-minded to new opportunities. That was my mindset getting into DeFi, it should be the same mindset for NFTs.

Listening to the markets

Tweet by 0x_pasta

At the time of writing, it’s pretty obvious that sentiment is bad and people are turning on each other. Retail has left the broader crypto markets in droves after being rekted by basically every token out there. As an investor (or speculator), I have to think about what will get retail excited in the future? Perhaps in 2022/2023, it will be easier to explain to a normie the appeal of NFTs than to explain complex tokenomics?

Given the recent activity (and fear) around Azuki, Otherside, Akutars, VeeFriends etc. It’s becoming increasingly clear to me that we shouldn’t fade NFTs. To me, it’s important to listen to markets for opportunities. Sure it might be a bubble, we can either indulge in our confirmation biases and pass it off, or we can be open-minded. What do these NFT holders see that I don’t? Or more importantly:

“How can I extract value from NFTs?”

NFT as Equity

Let’s face it, most people (including myself) don’t understand fine art, especially NFTs. As such, it’s really hard for me to value NFTs for the aesthetic appeal. To me, the art is what gets people to look, but fundamentally is just a way to trojan horse people into blockchain and the company they are building.

Fundamentally, minting an NFT is purely transactional. You give the creators X number of ETH, and in return, you get a token on the blockchain with an image tagged to it. Doesn’t that sound a lot like an IPO, ICO or whatever method of raising capital? If I were to ever purchase an NFT, I would be thinking of it as purchasing equity in a startup.

Screenshot of Akutars on Opensea

Taking Akutars as an example, with a floor price of around 1 ETH and 15,000 items, is a $30 million valuation for a media company overvalued or undervalued? How much of a premium are you willing to pay for the design of the character? I know this is oversimplifying, but perhaps viewing NFTs as equity in a start-up can be a good way to navigate this space as a complete pleb like me.

What I’m looking for

Again I have to stress that I do not own any NFTs currently and am in the early stages of research. Please please DYOR. For me, I will be looking into projects for the long term. Gone are the days of grinding for whitelists to make a quick flip after mint. My focus will be looking for proven and doxxed teams with a clear vision for their project. They must have a track record of being accountable for their actions and properly communicating their vision in the mid to long term.

Given the poor sentiment in the broader markets, I am advocating patience and will not be in a hurry to make any purchases. Since there is a non-negligible chance that we are headed to an extended bear market, it makes sense to me to bet on teams that will continue building regardless of the overall market conditions.

All in all, survival is still the key in this market. While previous conditions may have emphasised the importance of hype and marketing, now is the time when the dust settles and real builders start to pull ahead. NFTs are still largely unproven and highly speculative, but that doesn’t mean we should completely ignore them.

Hopefully, this article has been useful in shaping your mindset in the world of Crypto. If you like the content do consider following me on my journey and sharing this around 🙂

References (Opensea for data on secondary markets) (0x_pasta’s twitter) (Fewocious Project) (Akutars Project) (Moonbirds Project)

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