Author: Nancy, PANews
Two years ago, celebrities and giants entered the market, high-priced transactions occurred frequently, and NFT became all the rage. With the continued rise in popularity and the vigorous development of the diversified ecosystem, the overall scale of NFT also ushered in a period of rapid growth. However, as NFT ushered in its first deep bear market, projects closed down one after another, blue-chip NFT suffered a Waterloo, the trust crisis intensified, and players rushed to flee...
In this brutal and cold winter, what survival rules do NFT project owners have? Is NFT still worth investing in? When will the market turn? With these questions, PANews interviewed several NFT practitioners and diamond hands to hear their views on the way out of the bear market and future development.
The NFT market has shrunk significantly, but is it time to buy at the bottom?
NFT is facing a significant shrinkage in the ecological scale, as well as a continuous loss of popularity and funds. Even the blue-chip NFTs with the highest market recognition have not escaped the dilemma of continued plunge. Data from the 10 famous NFT indices Blue-Chip-10 tracked by the data analysis platform Nansen show that as of August 29, the index has fallen by about 50% since the beginning of the year, and has fallen by about 74.8% from its high point.
Not only that, as the market has reached a freezing point, trading enthusiasm has also cooled significantly. NFTGO data shows that in the past year, although the number of holders has increased by 56.4%, the number of NFT traders has fallen by more than 32.7%, and the number of buyers has fallen by about 48.4%. At the same time, compared with the high point, the number of traders has fallen by more than 86.2%, and the number of buyers has fallen by 84.4%.
"There is no sign of a rebound in the market in the short term, and more and more startups will not be able to hold on. In addition, the challenges of NFT are still in the early stages, including the difficulty of Web3 business, difficulty in getting investment, and the poor economic situation of Web2." Sleepy, founder of Weirdo Ghost Gang, said bluntly in an interview with PANews.
Faced with the huge discounts on NFT assets, some people choose to sell off their stocks regardless of cost, while others take advantage of the opportunity to buy at the bottom. Unlike paper hands that buy and sell quickly in the short term, groups like diamond hands can often provide strong confidence in the NFT market. They are regarded as the most strategic NFT investors. After being optimistic about and firmly holding a certain NFT in the long term, they can withstand risks in fluctuations and ultimately obtain higher returns.
Crypto KOL JZ (@jzinvest_xyz on Twitter) gave his own bottom-fishing strategy. For example, in project judgment, you can check the capital reserves, analyze and judge from the aspects of primary market public sales, secondary market models and other empowerment; for example, you can judge whether the price can be supported by factors such as project issuance of coins, introduction of innovative gameplay, and entry of whales. In terms of the timing of bottom-fishing, in addition to considering the potential increase, you can also observe the entry strategy of whales. Judging from some data, these whales usually choose a time range rather than an accurate price. Of course, this price range also needs to be coordinated with market sentiment to judge the "timing". For example, the SEC's latest enforcement action believes that NFT may be an unregistered security, which also puts NFT at regulatory risk. However, blue-chip projects are relatively expensive for ordinary retail investors and are not suitable for the strategy of bottom-fishing in price ranges.
"Volatility in the NFT market is normal. The best time to buy is when the blood is flowing, which is now. But considering the volatility of the NFT market, you still need to be vigilant to avoid high-risk over-speculative NFTs and focus on the long-term value of the investment. Only buy projects you trust and communities you like, and find projects with a history of delivery performance from your past observations. As an investor, you should also adjust your cognition according to market dynamics, be wary of path dependence and excessive reliance on blue-chip historical performance, and focus on future paths and goals. At the same time, risk management is also very important." Crypto KOL Annie (Twitter @Annie所长) pointed out.
At the same time, Annie also pointed out in the interview that if NFT wants to gain blue-chip status, it must have the potential for continued appreciation. Sales must be considerable, and the market will prove its high demand. After the current market reshuffle, blue-chip NFTs also have some new test criteria, such as: Does it have a long-term sustainable collection value? This value may be specifically reflected in dimensions such as historical trading activities, cultural attributes, collector demand, artistic rarity, and strong fundamentals.
How do project owners save themselves during the reshuffle crisis?
The bear market not only brings about a sharp drop in prices, but also a collapse of confidence. As the prices of a number of old blue chips are sluggish, the sloppy "business" of top projects such as Doodles, Azuki and DeGods is severely damaging the trust of the community and even questioning the narrative and value of PFP. Compared with the loss of funds, the general lack of confidence is fatal to the development of the market.
Market performance of different types of NFTs from 2022 to date Source: Nansen
In addition to the inaction of the project parties, affected by factors such as the overall sluggish environment and poor business models, NFT has started a "closure wave" in recent months. Projects including Recur, Cardinal, Rentable and Tessera have failed to withstand the test of the bear market after raising hundreds of millions of dollars in financing and have chosen to close one after another.
Faced with the test of the bear market, the NFT project MaoDao has set its sights on the community. KK, the founder of its acquirer Hash Global, told PANews that MaoDao is positioned as the spiritual home of the global Web3 Chinese. The term spiritual home sounds a bit "soft" and a bit "empty", and it needs practical things to support it. For this reason, MaoDao hopes to support a mutual assistance, co-construction, healthy and happy community by providing good content and good entertainment activities (online and offline). At the same time, compared with other projects that introduce common mechanisms such as Staking to achieve low turnover rates, MaoDao plans to achieve this through identity recognition, high-quality content output and economic self-circulation, so that holders value the value of the community and hold it. KK revealed that the MaoDao community will interview cat owners from time to time to talk about entrepreneurship, life, preferences and ideals, so that the MaoDao community will become a real "home" for global Web3 Chinese. In addition, MaoDao will also launch fan club products based on Web3 technology in China to support the development of the community.
Weirdo Ghost Gang, a domestic NFT project, chose to start with the business model. It received a seed round of financing of US$1.8 million at the beginning of this year. Sleepy told PANews that the bear market had little impact on them because, in addition to the financing received at the beginning of the year, they have always focused on the Web2 business model, including IP and trendy brand industries, so the bear market did not seriously interfere with the business progress. However, under the bear market environment, they further reduced the proportion of development in the Web3 field.
"NFT projects must be prepared for a protracted war, survive first, and stop thinking about the entrepreneurial path of burning financing to build scale and raise valuations, but do business first. Little Ghost's NFT business has been postponed. We hope to fire the bullets during the bull market to obtain the greatest benefits. We also take advantage of the bear market to constantly reflect and summarize and make adjustments to the gameplay and mechanism based on our latest understanding and the development of the overall ecology of ManesLAB." Sleepy further pointed out in the interview.
Sakuragi, founder of the multi-chain NFT trading platform AlienSwap, admitted that the bear market has brought more positive effects than negative effects to the platform. Building a platform that is fearless of bull and bear markets and can continuously generate protocol income will be the basis for a platform to survive in the long run. "To achieve counter-cyclical growth, there are two main points: (1) Do not be eliminated, wait for the cycle to pick up, and become a 'survivor' of counter-cyclical sustained growth. The bear market is cruel, and it is important to reduce costs, increase efficiency, increase revenue, and save money to survive the new round of bull market; (2) Solidly build infrastructure and user experience, and continue to explore more NFT counter-cyclical growth. Therefore, in terms of infrastructure construction, AlienSwap has released a gas-free trading system, a creator platform, NFT Mint and LaunchPad products, opening up a complete closed loop of multi-chain NFT creation-issuance-trading."
Annie gave the project owners very practical suggestions from the user's perspective. If these NFT projects want to recover the loss of community consensus and maintain competitiveness, they need to start from five aspects: (1) Community communication: The project owners should be transparent with the community and promptly inform community members of the latest situation, development plans and goals of the project. Actively respond to community questions and concerns and establish good communication relationships; (2) Reward mechanism: Design a reward mechanism to encourage community members to continue to participate and contribute. This can include airdrops, token rewards, 1-1 NFTs, etc.; (3) Community activities: Organize various community activities, such as online Space, AMA, competitions, etc., to enhance community interaction and participation; (4) Partnership: Seek partnerships with other projects, Web2 brands or creators to expand the project's influence and audience; (5) Expand use: Explore more uses of the project's NFT, such as applications in the virtual world, in-game items, real-world peripherals, IP derivatives, etc., to make it have more practical value.
In addition, although the prospects of PFP NFT are questioned, Annie believes that the consensus of such projects will not change because it is related to core social needs. "Everyone uses PFP, it has become our habit, and PFP as an avatar is also the easiest to become an emotional bond."
The bear market will continue, and the next cycle needs diversified narratives
While many NFT data have shrunk severely, investors are facing huge losses. According to NFTGO data, as of August 29, the number of investors who have suffered losses in the past 30 days has reached 455,000, which is 11.5 times that of those who have made profits, which is enough to show the cruelty of the market. It can be said that NFT is currently struggling in a deep bear environment. Many interviewees also admitted in the interview that the bear market will not end easily, and incremental users and funds, as well as diversified narratives are needed to start the next cycle, and investors will pay more attention to the long-term value of the project.
"According to historical experience, liquidity will eventually flow into the NFT sector after economic recovery, but I don't think economic recovery itself will happen within a year, so it will be difficult for NFT to recover at least within this year. In fact, Starbucks and McDonald's have recently issued their own NFTs, and many users have participated, but these new users have not led to a recovery in the overall NFT price. To some extent, this is contrary to everyone's expectations. Obviously, McDonald's NFT holders do not mean that they will be interested in Web3 or even participate in NFT investment transactions. However, these attempts have a positive effect on the adoption of NFT and blockchain technology, and can be regarded as the first step in user education. Only by clearing the demonized impression of NFT, Web3, and blockchain can people be willing to join Web3 in the more distant future." Sleepy said.
In this regard, Sakuragi also gave the same view, "The prosperity of any market is driven by incremental users and incremental funds, and the NFT ecosystem is the same." But he also said that in the early stages, NFT is the outer edge of cryptocurrency, but not entirely, because the NFT ecosystem will carry much larger incremental users than the TOKEN ecosystem. Although the current market is very bearish, there are still many persistent NFT builders in the industry. Infrastructure construction and gameplay innovation are building pipelines, and a new round of NFT bull market will still come. The NFT exploration of RWA and real-world big IP will become the driving force of the new round of NFT bull market.
In Annie's view, the next cycle requires new and diverse narratives, such as games, music, and education. Different types of NFT projects may become the focus at different times, triggering a waveform narrative. New technologies and standards will also drive changes in the NFT market, rediscover value on the asset side, and provide better interoperability, scalability, and security, thereby triggering new trends. The key to the next round of narrative outbreaks may lie in the community's secondary creation capabilities. Project parties urgently need to demonstrate their outstanding ability to build a multicultural universe and shape a unique community ideology through products, sales, culture, and other levels, thereby laying a solid foundation for the brand. As the market matures, investors and project parties may look at NFT projects more rationally, focusing on quality, practical use, and long-term value, which may bring about the NFT2.0 era derived from RWA, equity, and IP.
"Only when market participants, both suppliers and demanders, truly understand the value of NFTs can the NFT market recover and reach the next high," KK pointed out in the interview.
