A Brief Introduction to NFT Investment Logic
1.NFT: Non-fungible token.（BTC, ETH known as fungible token）
2. NFT Features: It has a unique and distinct identity, two NFTs are not interchangeable (each NFT has a unique ID)
3. Two Types of Protocols:
1）ERC721:The earliest originated from cryptocats, the core four defined elements are (ID, name, symbol, URI) and are irreplaceable and unique. The disadvantage is that transferring one token at one time is difficult to handle the interaction needs in a complex Dapp。
2）ERC1155: Enjin’s proposed NFT protocol for game scenarios.
The difference is:
- Batch trading, single smart contract, batch packaging
- Both non-fungible and fungible functions
- Substitutable assets can be converted into non-substitutable assets
- More adaptable to complex and interoperability in application scenarios such as games
NFT Logical Chain
At present, the logic chain of NFT ecology has gradually converged to DeFi ecology, which is based on the use of fungible tokens as a medium (lending, auction, trading, etc.), the same logic in NFT ecology, then replaced with non-fungible tokens as a medium, the logic is similar, including the chain of upstream, midstream and downstream is also similar.
NFT Market Data
- Data: 2021.11.15
- Top Sales NFT Project Overview
- NFT Sales
- NFT Primary and Secondary Sales
- Opensea Platform Data on Dune Analytics
According to the trend given by NonFungible data, the current development trend of NFT has not yet stagnated, whether it is the overall market or the primary and secondary markets, the overall sales and trading volume are in the process of continuous rise, ETH chain is still the main force of the NFT market, but with the development of other public chains, NFT is also a part of the development of public chains, so Solana, Near, Fantom are one after another NFT applications and projects, assets are beginning to show their head.
Opensea data from Dune Analytics shows that the NFT market exploded and grew exponentially from July to September of this year. Opensea’s monthly trading volume has again increased more than 3 times compared to the already growing figures from the beginning of this year. Compared to last year’s NFT market size, this summer is undoubtedly the NFT Summer, while Opensea’s fee income has also grown tremendously.
Partial NFT Classification of Popular Concepts
- Avatar JPG: avatar class NFT is currently a relatively mainstream NFT project showcase, the main features are summarized as follows:
- NFT is mostly based on the heads of people, animals, etc., distinguished by the rarity with features of other parts, such as ornaments, backgrounds, etc.
- The total amount is mostly 10000, 8888, 6666, etc.
- The initial release method is mainly based on discord whitelist mint casting and direct mint casting on the official website.
- Mint casting prices are mostly within 0.1E.
- Avatar NFT can be divided into two main types: blue-chip and air:
-/ Air NFT is a new project, most of which may not have much market buzz, or the floor price is maintained near the mint price which is the initial casting price, which is about the same as last year’s wave of Uniswap’s air coin, after proper packaging and basic operations, including some NFT tools, such as RarityTool, for some marketing and other actions.
-/ Blue-chip refers to projects that have passed the various initial periods (hibernation period, initial bubble bursting period, etc.) and are currently experiencing continued growth in project community and gradual growth in floor price and transaction volume. NFT is continuously empowered.
- Reference for Investment in Avatar NFT Projects：
-/ Team: The avatar category relies heavily on the star power of the team. If the team has built a successful blue-chip NFT, the whitelist for its second NFT project release will be bursting at the seams and the floor price will be pushed up very fast.
-/Projects Development: the planning of NFT, application scenarios, etc. Including Roadmap launch, holding NFT can be airdropped, NFT staking farm, etc. A good blue-chip NFT also has a token, airdropped with clear APY gains.
-/ Community: When the project is online for a period of time, you can track a few good NFT project communities, active and inactive community performance is completely different, as long as the project side is willing to do things, then it is sure to pull up the price when it is short of money.
-/ Project Popularity: Look at the frequency of mentions on Twitter or on domestic social platforms, of course, there will be some NFT spend money to buy heat and KOL retweets and so on, which is no way to avoid, but we can find the telltale signs of NFT which giving money to promote. Then, NFT will also face the problem of GAS war, so they need to weigh whether they are willing to spend this or wait until the initial bubble pain period burst, and then in the floor price near the second level of a plunge to stock up.
- Current NFT can be Roughly Divided into Four Stages:
-/ Release Mint stage. NFT projects in this stage can be judged based on market interest, frequency of discussion, community enthusiasm and accessibility of whitelist.
-/ The first prosperity bubble period. This stage, NFT project usually will continue to launch the project update features in Discord, Twitter and other social platforms, or for user activation activities, etc., with the initial project side a series of goals, the release phase will accumulate popularity, and gradually promote the volume and floor price growth, floor price will gradually push up to several times or tens of times of the mint price.
-/ The first phase of the bubble bursting period. At this stage, the project side will slightly slow down the pace of project news, or favorable rhythm, NFT’s secondary market transactions will also tend to shrink, difficult to deal, low transaction volume, floor price greater fall will be the main characteristics of this stage. Many projects are basically in a “zeroed out” state by this stage.（ My personal definition of NFT to zero: the volume of serious shrinkage, Floor Price fell below the Mint Price, a long time difficult to deal, etc.）
-/ Phase 2 Watershed. A clear distinction will be made here, between air NFT and blue-chip NFT. After the Floor Price of blue-chip NFT retreats, the price will stagnate for a period of time as project parties continue to announce project plans, NFT empowerment and a series of other operations, and then the volume of transactions amplifies + Floor Price improves, “price increases and volume increases”. Air NFT, on the other hand, continued to maintain the characteristics of the previous phase, with volumes continuing to shrink and floor prices going further down until no one remembers them.
- NFT Main Empowerment
-/ DAO Governance
-/ Club access “tickets”
-/ Stake of mining project tokens
-/ Airdrop tokens & new NFTs (including other project airdrops NFTs)
-/ Metaverse identity symbol
/ Identity symbols of traditional social networks
Popular NFT Concepts
MetaVerse concept of NFT, mainly for metaverse world assets (land, buildings, avatar images, etc.).
For example, the metaverse concept NFT now common in the market is the LAND of Sandbox, LAND of Decentraland, avatars and so on.
The concept of metaverse is not the latest concept, roughly defined as “you from a parallel time and space, or the real world reflected in a parallel universe”, reproducing the activities and sensations of real people to the greatest extent in a virtual universe, allowing people to transcend the physical and human limits of reality, and borrowing the power of hardware and technology to do more while being able to bring the immersive experience of the universe.
At present, the only projects that fit the concept of metaverse are the head ones, such as Decentraland, in which people can use virtual characters to walk around the world he created, talk, interact, build virtual personal worlds and lands, etc. However, the actual “immersive experience” has not yet been achieved. The real immersive experience, is like the Sword Art Online, with the help of hardware devices, will be connected to all their organs of perception to the new virtual universe, which is the real immersive, now the so-called immersive, Not as good as playing a high-quality 3A game with the same immersive feeling that, it can only be considered 3D → 2D dimensional projection, the concept is still in the hype stage.
NFT trading platform business logic, and the current Binance, FTX and other CEX platform is not essentially different: the platform takes a commission.
The main source of revenue for the NFT trading platform is the huge fee (royalty) income that comes with the increase in user volume, and the composition of the buying and selling fees for an NFT is rough:
- 3–10% royalty for NFT authors
- NFT platform takes 2.5%
- Miner GAS
So for private investors, cheap NFT investment profits are basically siphoned off by GAS + NFT platform + author.
NFT trading platform should be the most certain prospects, NFT’s strong appearance out of the circle attributes will gradually increase the NFT’s awareness and desire to buy, then as a simple pumping logic of the trading platform, the surge in user volume also means an exponential increase in fees, to achieve a good positive feedback loop.
Code NFT is popular in July-August, represented by Loot, which uses a few paragraphs of randomly generated code to directly show the most essential things in the crypto world, abandoning most NFT forms (artwork, design, etc.), and the code NFT is purer than the avatar class or NFT with design style, more crypto-punk sense, and has not lost its real application value.
The main features of the code NFT are:
- Fair Issue
- Community Driven
- Simplification of expressions
- More room for follow-up imagination
- A large number of derivatives/projects will follow
Code NFT can subsequently derive many branches, including RPG games (Rarity), nurturing games, text-based games, and also many corresponding auxiliary tools, visualization tools, etc.
NFT Investment Logic
At present, the personal judgment of the stage of the NFT market, is the second stage after the rise of DeFi in 2020, analogous to the hot projects, probably after the pain period of September-November, BSC ecology, SushiSwap and other DeFi projects again recovery stage (early to mid-term).
- Individual NFT Asset Investments:
1）Participating in the minting of early NFT projects as well as Discord whitelist minting and then selling at a high premium on the secondary market.
2）Buy-and-hold at the end of the secondary market breakout period, which requires a subjective combination of all dimensions.
3）Become a Crypto Artist
Individual NFT investment requires a very large amount of information acquisition and a lot of time and energy, join the corresponding community, group efforts, and then stay up late at night to get NFT whitelist, as NFT development, the project side of the whitelist requirements are increasingly high, or chat level, or social platform tasks, etc.. You can also pursue passive income from blue-chip NFT, including token airdrops, new NFT airdrops, and of course, you need to establish the judgment dimension of blue-chip projects in your own mind.
About Moon Capital
Moon Capital is a cutting-edge investment firm focused on blockchain and cryptocurrency. Moon Capital portfolio includes, Woo Network , Litentry, Subsocial Network, Bifrost, DeepDAO and some other high-quality projects.