10 Dec 2023
Stay away from the NFTsOur Head of Research tells you why he thinks you should stay away from NFTs, no matter how bullish the market becomes
History rhymes but does not repeat. Faced with a brewing bull run, anticipatory traders will be wise to acknowledge the above saying. The dynamic of a bull cycle has always been that Bitcoin outperforms first, followed by something else outperforming once the bull run is 'established'. The narrative that decides which coins or tokens outperform after Bitcoin has established the bull market has varied between cycles. No matter the prevailing narrative, the underlying is largely similar between cycles, though: It turns out to be worthless in the end. That's not to say you can't profitably trade the narratives. But it requires impeccable timing, or the most secure way, acquire tokens at 0 marginal cost (be a project member or investor). The outperformance rotation from the last bull market went like this: Bitcoin first (as always), then altcoins in waves (Ether -> memecoins -> Ethereum killers / DeFi), before the last spurt that marked the coming downturn, NFT mania. After Bitcoin tears up, largely worthless altcoins will outperform again. Whether it's new or old ones is not certain. It will probably be a mix. What feels more certain is that NFTs will not do the same as last time. My prediction is as follows: If momentum continues to build in the crypto market, NFT wash-trading will ramp up. This will feed a short-lived and slight momentum of people anticipating the same as last time. But then it will stop before gathering any serious momentum. The allure of NFTs is gone. The relevant people to fuel a run now know NFTs, in the form of ugly pictures or worthless in-game characters to a horrible game, are still s**t even if they're inscribed on a blockchain. Readers should not read this as saying that the concept of NFTs is worthless – there are several potential use cases. But for most thinkable valuable use cases, the NFT will have its value from the get-go – meaning there are few 1000x NFT trades lying around. Enough things in crypto that I feel should be worthless have traded at lofty valuations for years, so read this as an opinion. However, the things that trade at these strange 'premiums' (to me) have more complex and unclear value capture mechanisms – meaning everything is more up in the air which helps keep illusions intact. NFTs, in terms of pictures and in-game characters, are understandable for normal people too. And I predict the relevant public has learnt from their misfortunes last time. Hence, stay away from the NFTs.