- The growth of the NFT market has presented many opportunities for market participants, but it has also attracted many garbage projects.
- Tracking the communities, social activity and roadmap of a project can often give a strong indication of its quality.
- Extreme advertising, high mint prices, and uninspiring derivative-based artwork should also set off alarm bells.
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There are many lucrative opportunities in the NFT avatar market, but there are also many unoriginal projects and cash grabs to watch out for.
Identifying the worst NFT avatar collections
Over the past year, the NFT space has seen explosive growth. Thousands of creators have found a way to make money from their work, celebrities have become the tech mainstream by claiming cool points on punks and apes, and staggering amounts of wealth have been created in the process. But despite all the positive developments we have seen, there is another dark side to the NFT market.
Since Bored Ape Yacht Club ignited the spark last April, countless avatar-based NFT copypastas have sprung up.—with varying degrees of success. Those who got into Cool Cats, Crypto Coven or CloneX early are now laughing, but there are plenty of projects that haven’t had as much of an impact.
NFT influencers will never tell you this, but the truth is, for every blue chip, there are 10 other avatar projects that fail once the rumor mill dies. And I dare say that many of those that seem to be doing well today will eventually go down to nothing. As more and more projects emerge and the overall supply of non-fungible tokenized assets increases, the proportion of high-quality projects will decrease. This means that if you want to make a profit in this space (which you probably will), it’s more important than ever to know how to identify junk; now that JPMorgan is here and the market is worth $41 billion, you won’t easily find a free giveaway for something like cryptopunks like the class of 2017 could with a little digging.
While there are no dead certificates to determine which projects will fly and which will fail, there are some red flags to watch out for. First, beware of super-hyped things with a huge following on social media. These projects tend to attract new entrants, and teams know this very well. They often disappoint on launch, either because the art is great or there’s a breakthrough followed by a bang shortly after the mint. Remember everyone was talking about how full the MekaVerse Discord server was before it launched? They were going for around 8 ETH before the reveal and then tanked as soon as everyone saw how bad the art was.
Adding to the point about social communities, I always avoid anything that runs whitelist giveaways to get retweets or social engagement. These projects use people for free promotion because they can’t grow organically. Think about why this is the case: Usually, it’s because there isn’t enough substance to get people excited without offering an incentive.
Likewise, you need to be careful about anything that NFT influencers start endorsing. Over the past year, countless scammers have come to cash in on the space, and many of them are hiding in plain sight. Most of these leeches will have a hard time showing you any pre-2021 chain activity, and they’re no smarter than you; at least if you go badass on a DeFi liquidity pool, you can be pretty sure the perpetrators are smart contract ninjas. the Coordinated Booty Accomplice It was particularly bad in September. Lest we forget, JPEGs of white text on a black background were trading for 20 ETH on top once the influencers had done their job. They’re worth a fraction of that now and Loot is widely considered a joke that never lived up to the bold promises. These days, the worst NFT influencers endorse projects without disclosing that they were paid for their promotion. They often get a piece of the deal on any project they pretend to be excited about, then go out on a limb with their audience and hope they zachxbt it does not notice it
There are other useful tips that are more difficult to define, but are just as important to follow. Try to find art that speaks to you, and if you can’t do that, at least find ones that seem to have made some effort. You only need to explore a set as Azuki for 10 seconds to see that the creative direction is better than most others following the same template (note that there are exceptions to this rule:transfersfor example, it looks like it could have been drawn by a 12 year old, but it has an instant meme capability).
In similar advice regarding art, understand that 99% of derivatives will not make it. You can try your luck with a slight variant of Bored Apes on Ethereum, Solana, or another Layer 1, but keep in mind that people will only remember the original stuff in a decade. There’s a reason we can all instantly recognize the work of Basquiat and Bowie, but no one’s ever heard of your big brother’s band who thought they’d do a cover of “Smells Like Teen Spirit” at the talent show at the school would turn them into the next Nirvana.
Be sure to dive into the communities if you have time, and take a full look at the project’s website. Try to identify a roadmap and team vision for the future (and remember that projects can often speak to a great game, but few measure up). If the team is legit and has real plans ahead, it might be worth emulating. If not, or if you have dreamy vibes, consider firing him.
Beware of high mint prices. If a collection has 10,000 editions and mintages at 0.1 ETH, that’s about $3 million in revenue, assuming they sell out quickly. And that doesn’t take into account secondary sales, which, if the project has legs, should be where the team makes most of its profits. TOAny project that isn’t content with a few million dollars at launch should set off alarm bells – don’t be surprised if they pick on you and disappear once you’ve given them your ETH or other NFT money of your choice.
like me warned last week, just about anything Coinbase NFT shills is something to watch out for. While the long-promised market has been associated with some obvious credible projects like Cool Cats, it has also formed ties to the MekaVerse, HAPE, and chubby penguinswho have failed in one way or another (God knows who is in charge of their healing, but they could do with reading this article).
If all of this sounds like too much work for you and you’re still not sure whether to part with your hard-earned crypto, see how things go once a project launches. Catching a buzz after the initial hype has died down can be extremely profitable. I doubt anyone who bought a Bored Ape for 10 ETH and still has it will regret it now.
One more thing: you can still make money off the junk if you get out fast enough, but it’s not as easy as it was during Summer NFT, and keep in mind that you’re likely to get rid of newcomers who don’t know any better. If you can live with that, no one will stop you. After all, this is the freest market you will find.
Disclosure: At the time of writing, the author of this feature owned ETH and several other cryptocurrencies.
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