3 Checks: Before Investing in NFTs


NFTs have been getting more and more popular since they hit the mainstream media thanks to the unimaginable popularity of Crypto Punks and Bored Ape Yacht Club (BAYC) collections.

Crypto Punks was a free mint and BAYC had a mint price of 0.08 ETH. People who had the good sense to hold on to these NFTs made life changing gains in a matter of months. This also led to explosion in new NFT collections and huge inflow of liquidity from investors looking to bag the next BAYC. There was so much hysteria that even outright copy paste projects with no planned roadmaps will be sold out in a matter of minutes. Any shill by a popular Twitter influencer would lead to a 10X pump in a matter of days.

With people blindly throwing their money at just about any project it attracted the scammers to take advantage of the situation. Soon the situation turned so bad that for every 1 genuine project there would be 2-3 outright scams. Also new projects were struggling to sustain as it was difficult to differentiate yourself when a new derivative project seemed to be propping up by the hour. Many projects fizzled out as founders could not think of a way to keep the project going and make it interesting for new investors.

Currently the scene is so grim that if you randomly picked 25 projects you will be lucky if even 1 of them is able to hold the 1 ETH floor and survive long term.

Due to these factors I have become really selective about the new NFT projects I invest in. While there are many factors which are important I will focus on the top 3 which are rules I never break in any circumstance as this has proved costly to me in many occasions.

 

1.       Always Invest in Projects with Doxed Teams

This is a rule I wish I had used since the first NFT project I invested in. When the founders have doxed themselves (doxing means making your identity public) it significantly reduces the risk of the project being abandoned. If the team is public then they cant outright rug pull as they know they will be hunted down and with regulations catching up they will sooner or later pay a heavy price for scamming.

Going public also puts more pressure on the team to perform well as now their name is at stake and they want to prove to the world how capable they are. This further reduces the risk of founders losing interest midway and abandoning the project.

If you invest in a project which is not doxed you never know when you will get rugged. NFTs generate a huge amount of capital which is enough to corrupt even people who normally stay on the right side. If they have a secret identity they are tempted further as they know they have a good chance of getting away with it.

Fully or partially doxed teams is the main reason I am long term bullish on Voxle Ville, Property’s and Boonji

 

2.       What Utility is Planned in Near Future

Utility is the next criteria that I look for in a project. This view has been reaffirmed during the current bearish trend in the market where this becomes even more relevant. 

If you look at most of the projects which are constantly gaining values and holding their floors even in the worst bear markets you would notice that the majority offer valuable utilities to the holders to stake their NFTs.

This gives an incentive to investors to not flip the NFTs and hold them long term as they are happy earning the native tokens passively through staking.

A perfect example is Sappy Seals which I think will be one of the leading NFT projects in the near future as their utility program is one of the most consistent I have seen so far.

 

3.       Stay Away from Expensive Mints

The third rule I have developed is to stay away from expensive mints as the majority have turned out to be pumped by marketing hype which soon fizzles out and crashes. If you spend more than 0.2 ETH for a mint your risk to reward ratio is very low. It is always better to find projects which have a solid team behind it and the mint is less than 0.1 ETH.

This was clear in the case of Mekaverse which was launched at a mint price of 0.2 ETH and the hype pushed the floor to 8 ETH and now it is sitting at 0.2 ETH. The worst hit were people who chased the pre-reveal pump and bought in at 6 to 8 ETH levels.

 

I would like to close with a disclaimer that always DYOR and never investor than you are willing to lose. Never put all your eggs in diversify across multiple projects.

I have been really cautious about which projects to invest but despite my best efforts I do end up with the rotten eggs once in a while.

This was evident when I invested in Loopy Donuts which had a doxed artist, soon launched utility token and even a companion mint of cups was launched. I was extremely shocked when this project rugged. Apparently the doxed artist had no idea who the founders were and was working on a single payment basis for the art she created. The project was taken over by the community and slowly rebuilding but it shows that even the safest looking projects can be rugged.

Stay vigilant and all the best to find the next 100X project.

 

Cheers,

SamBTC

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