The Daily Alpha 5/9- I'm back! After a 4 day vacation visiting family and totally logging off from all work and content creation I'm back and totally refreshed. It's beyond critical to make sure you take time to refresh, especially in this kind of environment. I'm talking the environment of a global pandemic, isolation, demanding jobs, political turmoil, and least importantly- a bear NFT market. Everything in life can always wait, you always have to do what's best for you and your mental health. I look forward to resuming this newsletter and starting new conversations with everyone on a daily basis. On that note, let's get into it:
Adding Utility to an NFT Project is a Massive Mistake – NFT GOD. — nftgod.gives By adding utility to your NFT project you are making it more likely than not your project is going to 0. Here are some lessons learned from Cool Cats and other projects...
Azuki Founder Exposed
Earlier today Azuki founder Zagabond released an article revealing he was behind the projects CryptoPhunks, Tendies, and CryptoZunks. All 3 are projects he abandoned at various points in their lifecycle, the most egregious being Tendies which he abandoned pre reveal. In a 30 day span that’s been full of massive headlines this one is perhaps the biggest. When news broke the Azuki floor price absolutely collapsed, sending it down to 11 ETH. Before today it was widely accepted that Azuki was a certified blue chip, maybe even the biggest blue chip only behind Apes. Now many will argue this is a death blow to that status and puts the whole future of this project in question.
I won’t defend Zagabond’s actions but I will say this, this type of thing happens all the time in tech and NFT’s. Serial entrepreneurs start companies and projects, take on investment, build a user base, then leave when they come up with a new idea they think will make them more money. Kevin Rose is infamous for this maneuver. In fact, Business Insider has written an entire article on Kevin Rose using this practice: https://www.businessinsider.com/digg-kevin-rose-untold-history-2012-7
Gary Vee is another serial entrepreneur that bounces from idea to idea hoping he lands on one that makes him a billion. Kevin Rose eventually settled on Proof and Gary Vee eventually settled on Veefriends. This is a classic play pulled many times before and will be pulled many times again. Serial entrepreneurs have one goal and one goal only and that’s to spend time only on things that make them maximum money, even if that means leaving others with the bag. I’m not saying this is right or wrong, I’m just saying if we are going to cancel one person over this, we might want to examine everyone we associate ourselves with. I’m also not defending all of Zagabond’s actions.
There are a lot of details here that stink badly. Stories about Zagabond pretending to be a woman in Discords in order to attract attention to projects and leaving projects before they’ve even revealed. Both are shady things and deserve scrutiny. All I’m saying is there is a fine line between rugging and leaving for greener pastures, as the latter is something that happens all the time.
The lesson learned is this: research the teams behind projects. If they are anon developers with no history then you have to assume large amounts of risk. In fact I’d argue Zagabond’s actions here are quite common for anon developers in web 3. Know the risk when you invest in these teams. I personally would be shocked if Zagabond rugs Azuki. It’s a cash cow and if he keeps building a company around it he’s guaranteed millions of dollars. Based on that logic I would be a buyer here. But unfortunately the market determines the price, and if the market determines this project is dead then it will die.
Stablecoin Terra is no longer stable
The third largest stable coin in all of crypto is no longer so stable. Terra, previously pegged at 1 US dollar is now down to 78 cents at time of writing. Obviously an incredibly concerning event for all holders. Terra is backed completely by Bitcoin, with Bitcoin dipping so much it’s clear that it has impacted the price of the stable coin. There’s a lot of technical wizardry behind the algorithm that keeps Terra stable but I’ll say this- Terra became famous because it paid over 20% APR when you staked the coin. This is an absolutely absurd rate. When something is too good to be true it usually isn’t. I came very close to investing in this protocol many times but ended up doing nothing. Always trust your gut and if something smells fishy in crypto or NFT’s it’s usually a good sign that something is wrong. I exit any and all projects that start to show red flags like this.
The Sky is Falling
NFT prices continue to absolutely free fall. Everyone has their own opinion on what to do here and where the tops and bottoms are. I’ll just say this on the topic: It is impossible to call tops or bottoms, absolutely impossible. In this kind of hyper bear environment you’ll see a lot of toxic positivity and toxic negativity in the space. You have to ignore this. You have to cut out all emotion and move with logic. My personal logic says this- we are in one of the most unpredictable macro economic environments in market history. I’m talking all asset markets. In 2018 during the last bear market the crypto space crashed simply because we ran too hot. The macro’s overall in the global economy were still strong. Unemployment was at record lows, GDP was high, interest rates were moderately low. At this current moment this is not the case. Inflation is at record levels, GDP is falling, rates are going up, there’s a war going on in Europe with potentially catastrophic consequences, and on top of all of that we are still in the middle of a global pandemic.
This is as unpredictable an environment as you can possibly get. Unpredictability is the enemy of all markets. This kind of unpredictability is absolutely destroying all moderately risky assets at the moment. NFT’s and crypto are just one of the many assets being stomped on. In this kind of unpredictable and risky environment there’s only one variable you’re going to be able to control, how long you can survive in a worst case scenario. If you are not prepared for all of your risky assets to go to 0, you’re putting yourself in danger. With this kind of of environment you absolutely need at least 6 months of emergency fund ready to go, preferably in the local currency of your country. This is critical. I was not at 6 months of cash so last week I sold some NFT’s and crypto and cashed out that ETH to my bank account. This is critical for literally all players in the market. What you do after that depends on how much risk you can afford. If you are younger and have a super long time horizon you can afford more risk. If you are older and plan on retiring soon you can afford very little risk. Make sure you are still saving money for retirement/housing/rent if these are factors to you. After all other priorities are accounted for, you can start taking on risk again in the NFT market and attempt to buy dips.
That’s my advice when people ask me when is the right time to buy. The right time to buy is when you’ve accounted for all risk depending on your age and financial situation.