DYOR — Spotting potentially successful NFT projects II
Previously, in learning how to spot potentially successful NFT projects, I’ve covered team and hype. Without further ado, let’s jump into the last 3 success factors.
There’s a famous saying where time in market is more valuable than timing the market. I believe to a certain extent depending on the kind of NFT trader you decide to be.
Timing the market
For NFT traders who just want to make a quick flip, or sometimes known as degenerate traders, timing the market is extremely important. What is the general sentiment regarding the NFT market? It’s not hard to tell whether it’s a bullish or bearish season when you take a deep breath in Twitter and look at the mint rate and mint prices across all NFT projects. Do take note that this consideration is to be surveyed across most projects in the space, it is not supposed to be taken in silo.
I’ve seen mint prices that goes as low as 0.05e and public minting sold out in less than 5 minutes. The market is reasonably bullish and the mint rate will be a good indicator of the market sentiments.
I’ve also seen prices that peaks as high as 3e public minting auction for the entire collection and it gets sold out in hours. Reasonably fast considering the price, but the market is dangerously bullish and how projects navigate from mint onwards will affect the market. Unmet expectations will begin to jade people out of the market, and enough disappointment might set the market to be reasonably bearish.
Of course, these values I used are relative to the current eth prices of the time of writing and it definitely scales to it’s price. Just know that this is taking a reference point of eth and extrapolating it into two wild extremes.
On the flip side, I’ve seen projects regardless of price struggle to mint out. There could be many reasons like market rotation, lack of liquidity, new crypto laws, but the struggle to mint out across many projects usually signals a bear market.
In short, if you are a short-term NFT trader, timing the market is very important. And especially so if you are a short-term NFT trader on projects with less prospects in other areas — hype, team, art, utility — because missing the short window of time to make your flip would make your NFT absolutely worthless and difficult to find a second window.
Time in market
There is another kind of NFT trader that trades more like an investor. General market sentiments do not faze them. In fact, a bearish market excites them because they can buy in all the more into projects which they believe will enjoy a good pump in time to come. Bullish market signals the time to sell.
These traders care less about mint price, mint rate, floor price, hype, art but they care a lot about the utility that comes with the NFT. The realization of the NFT utility will bring out it’s window to sell. This depends largely on the uniqueness and usefulness of the utility and also the competence of the team.
Art is a funny one — it found it’s home in NFTs yet it grows to be increasingly unimportant as NFTs get more complex. Here’s my personal take on the art of the NFT — it has to be good.
Art is the first impression people are going to have on the project, whether it comes from the sneak peek or the project profile picture. From the art itself, the market would begin to consider how much hype it is able to generate. While art will not be able to sustain the prices of NFTs for a long time, a bad art will fail to build impression, subsequently hype, and will lead to a failed mint phase. That is why art is important for the success of the initial mint out phase.
What art is good art?
At this point, it is also worth noting that NFT projects generally have uninspired artists. Therefore, you see a lot more projects conforming into design patterns that worked rather than trying out something new. I mean, why fix something that is working, right? The word of caution is to be sensitive to the kind of art that has been releasing within the space. Similar art styles will definitely worth less over time as market gets over-saturated with the ‘same kind of art’.
Not all new art will work. Some projects will aspire to enter with new kind of art styles never seen before. It goes both ways, is the market ready for this kind of art? Is it only good to a small select group of individuals? If it is, then it probably will not help in the initial mint out phase.
Whoever dares to dream a new art style and has the art palatable to the market will enjoy the first fruits — usually earns by a huge margin.
Art in NFTs serve as a foundation for the utilities to carry on the good work. If not, most art NFT projects will go on a decline.
I’ve saved the best for the last. Also because this factor suits my NFT trading style the most. In simple terms, utilities give NFTs a future.
Utilities is what will break NFTs out of the gamblers culture where you just mint, hope for a rare during reveal, and pray it succeeds based on pure art and hype. The truth is all NFTs do not have a future if they do not have any utilities. Why do traditional business succeed? It is only because they can continue to generate value for it’s consumers and users. The moment the NFT is useless, it will become obsolete.
Utilities usually comes first in the form of roadmaps. Not all roadmaps are created equal. Essentially, the roadmap is simply a new year resolution with hopes and dreams of a project. For many projects, they remain as imagination until they slowly disappear into thin air. How do we know if the utilities are good or has the potential to be good?
You need a little bit of general knowledge for this. When projects promise a AAA game to be developed in less than a year with a few developers who mainly writes contract and has no game development background, do you really think it could happen? When projects have a plan that looks like it could stretch to multiple side projects but is barely at the start, do you think it creates false expectations?
Do not get me wrong, projects can sure fulfill their roadmap. Take it with a pinch of salt, study harder in terms of their progress, the timeline they give themselves, and how much they communicate about said roadmap.
Proven track record
While the roadmap has to be taken with a pinch of salt, what you really need to consider is the proven track record of development and the team’s commitment to continuously deliver.
NFT projects which you want to hold for a long time until the realization of utilities have to be backed by a strong development team, strong communications manager, and also have timely and useful development updates for it’s utilities. I cannot emphasize enough on producing something useful for beta, it’s like what we called in development minimum viable product (MVP). You don’t need to cover every feature and edge case, but you need to have something that is minimally usable. Too many projects do not understand this when it comes to their utilities.
The infrequency of updates that will affect the prices of the NFTs. While legitimate NFT projects need not be concerned with the prices at secondary sales, the real success of a NFT utility is not just the completion, but also the adoption.
This concludes the whole section of spotting a potentially successful NFT project. I would like to take the opportunity to reiterate that the kind of NFT trader you are will define what a successful NFT project means to you. Here’s a little chart to summarize.
The size difference is relative to the importance between the two.
Once again, this is not really financial advice, a learning journal for me, and hopefully some insights for the rest of you readers.