- Mason Versluis says there are now too many generative NFT collections floating around.
- The next trend in NFTs won’t be about art but rather about access and community, he says.
- Investors can increase their chances of picking winning projects by doing the right research.
Non-fungible tokens (NFTs) gained widespread popularity last year and resulted in sales hitting a whopping $25 billion, according to Reuters.
Pixelated images that could have easily been downloaded for free were selling for millions of dollars simply because they were created as unique crypto assets. For example, one NFT from the CryptoPunk collection known as “Covid Alien” sold for $11.75 million.
The widespread popularity of NFTs aligned with the overall peaks seen in the crypto market. Last year featured two short and steep bull runs for crypto in April and November.
But 2022 hasn’t been as generous to digital assets. The total number of NFT sales on Ethereum’s blockchain in March was down by almost 80% from August’s 2021 peak, according to Statista.
Mason Versluis, a crypto investor and influencer who has amassed more than 1.1 million followers on TikTok, has been investing in crypto since 2017. Last year, while the sector was still red hot, he decided to play his hand at trading NFTs.
“I bought into that whole trend and I came out net positive,” Versluis said. “I did make a ton of money off of it, but I also lost, or I also invested in some NFTs that I can’t sell now. There’s just nobody to sell them to.”
He referred to NFTs as illiquid and compared them to real estate in the sense that somebody has to agree to buy your property.
“I can go and dump all my crypto on the market right now. And there will always be somebody to give me US dollars for that crypto,” Versluis said. “But with NFTs, I can’t just go on the market right now and liquidate my NFTs. It doesn’t work like that.”
Recently, the Bored Ape Yacht Club (BAYC) announced the release of Apecoin and it brought a bit of attention back to NFTs, Versluis noted. Anyone holding their NFT gets an airdrop of 10,094 tokens. Additionally, Yuga Labs, the startup behind BAYC, acquired the intellectual property of CryptoPunks, another leading NFT collection based on generative art.
But Versluis thinks that generative art, a term used to describe images created by an autonomous system using pre-created parts, is played out in the NFT world. It’s a popular way for NFT artists to mint their creations by the hundreds. NFTs like the popular BoredApes all use the same base image in every item, but simply add or remove accessories, colors, and more to create original works.
“I think most of the stuff we’re seeing in NFTs right now is kind of just played out. Like, it’s literally a dime a dozen of 10,000 generative animal collections,” Versluis said.
The next big trend in NFTs
Versluis still believes NFTs make a great investment because they can be flipped for high returns in a short period of time. Additionally, NFT investors are extremely early compared to the crypto market and this gives it a lot of leeway to grow.
He is betting that the next big trend will be membership passes.
But he isn’t referring to memberships for golf courses or nightclubs. Versluis says the specific term being used right now is “alpha pass,” and it usually gives its owner access to a Discord channel where users share exclusive news, or maybe even “secret” information, about NFTs, Versluis said.
“Sometimes they’ll tell you which collections they’re minting,” Versluis said. “It’s usually influencers that are doing this because they have a community already who want to know the insider scoop of what they’re doing. So they’ll maybe send out certain collections you should watch or upcoming drops.”
Some Discords will use tools like Nansen, which tracks the on-chain activity of prominent wallet addresses — or what the website refers to as “smart money.” It’s like seeing what wealthy people are spending their money on, he said, “which could indicate that there’s a secret or something that they know that you don’t know.”
Tracking where prominent crypto investors spend their money is like being able to see what Warren Buffett is buying in real-time and adding that same stock to your portfolio on the spot — except it’s for NFTs, and you don’t really know who the whale is. Versluis uses a section on Nansen called “NFT Paradise,” available in the paid version, which shows which NFTs smart wallets are buying.
He also hosts a Discord channel called Gold Squad and uses Nansen. The channel sends out notifications to his community when a whale purchases an NFT or certain crypto.
Top 6 tips for making smart NFT investments
Versluis told Insider that he snagged a Degenerate Ape Academy NFT in August 2021, at the peak of NFT sales volume. It was a popular collection of 10,000 cartoon apes on Solana’s blockchain that sold out in eight minutes, according to the project’s Twitter page.
The cheapest NFT from that collection is currently listed for 87 SOL, which is equivalent to about $9,800 based on SOL’s last trading price of about $113.
Popular NFT projects can sell out within minutes. Knowing what to look for and where to find information is key to getting in early.
First, Versluis emphasized that you have to believe in the founder of the project. If they’ve built other successful businesses or projects, that’s going to be a good indication of future success.
Second, Versluis says you should look at the team as well, and get to know who the founders selected to run the project with them. One big question to ask is: are there any known scammers on that team?
The Department Of Justice recently charged two NFT creators, Ethan Vinh Nguyen and Andre Marcus Quiddaoen Llacuna with wire fraud and conspiracy to commit money laundering. The two released a collection called “Frosties” but disappeared within an hour of the release. The collection of 8,888 pieces made over $1 million in sales.
They made long-term promises to buyers, including rewards for holding one of their NFTs. Instead, investors were left with an image of ice cream-like characters with no utility or even website.
Twitter and Google will be your go-to sources for this investigation. On Twitter, Versluis says you should do a general search on a member’s name and read through comments under their tweets, and even mentions of their names. You’ll be able to gauge what the overall sense in the community is regarding the founders.
Also, they have to be doxxed, which means they have either submitted information that confirms their identity to a verification platform, or have publicly shared their photo and name.
“I would prefer every single person to have their life behind it,” Versluis said. “They should have their reputation fully on the line for any project they’re building.”
Third, look at the community. “Basically you look for the principles of like the vibe of a cult. That’s all I look for is, does this feel like a cult?” Versluis said.
If people are constantly interacting on the Discord channel, or if their image on their social media profiles somehow represents the community, like with an NFT as their profile picture, this signals a strong and active community.
“From an investor perspective it translates to a good, liquid market,” Versluis said. “NFTs only work because the community is willing to buy and sell them.”
Fourth, be early. NFT collections can do multiple drops, but the first release, also known as genesis NFTs, are often the highest-valued, Versluis said.
Without access to Nansen, would-be NFT investors can use other ways of gauging an early release. Versluis also uses a tool called NFT Scoring, which is a live list of the latest trending projects. Under the tab called “drops” it will list upcoming collections.
He also recommends checking out NFT Calendar and rarity.tools, which provide similar data.
Fifth, look for innovation in a collection. This means the team is doing something that nobody has seen in the NFT space, or giving access to something in a Discord that nobody has access to yet, he noted.
“If they’re not innovating, I don’t even want anything to do with it,” Versluis said.
Sixth, don’t jump on every project that’s hyped up.
“Every single NFT project feels like it’s the one, like that is a definite feeling that even someone like me with at least some experience in the market feels,” Versluis said.
A lot of collections will have great websites, beautiful artwork, and a solid roadmap. If you don’t control yourself, you may end up spending way too much on NFTs. “This is a super-risky market — expect to lose some money in it,” Versluis said.
And if you don’t have expendable income, or an NFT is out of your price range, you shouldn’t be buying, Versluis added.
It’s also important to remember that not everyone is starting off on an even playing field when investing in NFTs. These digital assets are bought and sold in the blockchain’s native crypto. Ethereum and Solana are two of the leading blockchains for this marketplace.
For example, Versluis made large gains in crypto during the bull run between April and May of 2021. This means he’s buying into NFTs using his crypto gains.
“A lot of the people who are rich in NFTs bought their ethereum way back at like $100 or $50,” Versluis said.
As of Friday, ether was trading at around $3,103, according to CoinMarketCap. This means you should be clear on your risk tolerance and capacity, and consider the price range you’re entering the market at.
Source : Read More