Fundamental Analysis – Part Three

Keeping an Eye on Your Fundamental Health – Part Three – The NFT One

DYOR Crypto Fundamental Analysis Series 

Part One – A Post-Mortem of a Cryptocurrency, and Dissection of Red Flags

Part Two – “How Sherpa Got His Groove Back”

Part Three – The NFT One

Part Four – Scams, Hacks, and Hoodwinks!

Hello again, climbers of shitcoin mountain. Sherpa here with some more tips to keep your ass covered, and your gains safe. Today I’d like to discuss NFTs. With the recent boom & influx of celebrities, it can be hard to tell whether to buy beeple or Taco Bell or Soulja Boy or that weird kid from “The Facts of Life” when he inevitably releases an NFT.

I’m going to give you a few helpful tips for most any platform, and just NFT fundamentals in general. Whether you’re on ETH mainnet at OpenSea or Rarible, using WAX at Atomic Hub, or on any number of other blockchains or L2 platforms – there are some easy rules to follow to keep yourself from holding a penis jpeg for the next year or two.

ONLY BUY WHAT YOU DON’T MIND HOLDING

This may seem like common sense, but FOMO is the enemy of common sense. Ask yourself before you buy: do I really like this? Am I going to have buyer’s remorse for spending $1,200 on an 8-bit flying cat? Is this for a good cause, or am I just throwing money at jpegs?

Leonard Nimoy’s Family recently launched an NFT series… of never-before released candid pictures of Leonard enjoying life & his family. A portion of sales went to benefit COPD research & treatment. Even if these cards never go up in value, as a Star Trek fan & someone who gets joy out of charitable donations – I will still be happy. Can you say the same of an 8-bit punk? That is up to you.

RESPECT THE CHECKED

Most platforms will have a checkmark of some sort for verified artists/collections. They all have varying degrees of due diligence involved before an artist is verified, with most depending to some extent on sales volume.

Related: Amateur’s Guide to Aping NFTs

While you may occasionally find the next big artist or game by looking outside verified accounts, more often than not you’re going to be doing the marketing in order to sell that NFT because eyes won’t naturally be on it.

IDENTIFY USE, IF ANY EXISTS

As with any cryptographic asset, you should be asking yourself if this NFT has any use. In my example above, the Leonard Nimoy NFTs were sold in ‘packs’, limited to 1,000 of each type. These packs have a small chance for entire cards, and an incredibly small chance for a ‘gold’ version of a card. The majority contain ‘shards’ which can be combined to produce different versions of a number of cards.

Related: ENS Domains: What’s In A Name?

The value, there, is in the deflationary nature of the asset. With a limited number of packs, you know that some are being ‘burned’/opened to find shards & cards. Then the shards are being ‘burned’/combined, to create other cards.

The chances of some cards being minted is incredibly low, which drives people to buy the shards for those cards in an attempt to mint them through ‘burning’/combining. A lot of collectibles have this mechanism, so you’ll also want to check recent sales to see if the market is even active.

Another favorite of mine is NFT 20, a platform that lets NFT holders ‘pool’ or sell their NFTs for auto-minted token versions that are tradeable on Uniswap, or can be used to fund a Uniswap liquidity pool. Like Sushiswap, NFT20 has their own native token ($MUSE) which can be farmed by adding liquidity to certain pairs.

The beautiful thing is, this creates a market for quick swaps of NFTs, but also arbitrage vs prices on OpenSea/Rarible. In addition, it gives NFTs a set ‘liquidity’ that isn’t easily quantifiable otherwise, as well as a ‘floor price’, and incentives for providing liquidity to farm pairs.

Related: Making Millions on NFTs

A lot of NFT projects will have some sort of DeFi element attached, and it is up to you to decide if it adds value to your holdings or not. But be smart, perform your due diligence BEFORE purchasing any crypto asset, and tune in again next week for more tips for protecting your fundamental health.