The Illusion of Scarcity: Why NFTs Are Neither a Good Investment nor a Good Business

CoinVoiceJan 11, 2024
The Illusion of Scarcity: Why NFTs Are Neither a Good Investment nor a Good Business

Key Takeaways:

  • The real business model of NFT is not to buy and sell scarcity and collectible value, but to use misleading information to attract a very small number of final buyers—that is, to win trust with high-priced NFTs and sell other NFTs at falsely assessed prices.
  • In the past, the "agreed price" of individual people was always confused as the "consensus price" of the market, but individual transaction prices are by no means "market consensus prices". In fact, the real buyers of NFT are limited, and the market depth of NFT determines that its pricing mechanism cannot be the "consensus pricing" generally considered.
  • There are almost no thresholds and costs for issuing NFTs, which is destined to make the so-called "scarcity" of NFTs an illusion. NFTs that resemble "scarcity" are mass-produced, making them not only not scarce, but even too widespread.
  • The market has actually priced in the false scarcity and substantial proliferation of NFTs. The hidden consensus of the market is that it does not recognize the pricing of NFTs, so that NFTs only have prices but no buyers.
  • Most investors and issuance teams cannot make money from NFT. Investors are unlikely to buy lottery NFTs that have skyrocketed in price, but they have a high probability of becoming the "last buyer" (maybe even the only real buyer) of a mispriced NFT; most issuance teams only mechanically inherit The product form of NFT has not been seen through, and only by relying on strong financial resources and courage can we have a chance of creating a blue chip like BAYC.
  • The seemingly fair NFT trading market and data platform are part of the deception. They use absurd statistics to mislead investors and issuers to miscalculate and price.
  • No longer welding ideas to collections and scarcity narratives, correcting the misunderstanding of the NFT market, and stopping the wrong allocation of resources are the prerequisites for the NFT track to be revitalized.
  • This article is about NFT, but it is not just NFT. There are still many illusions in the market that need to be exposed. This article is just to shed some light.

There is a secret maxim in the venture capital world: when everyone flocks to an investment sector, it is no longer a high-return track.

Profit-seeking behavior will create an equilibrium - any obvious profit margins will be quickly robbed, so that the real hiding place of excess profits may not be visited by anyone, or it may only be found once in a thousand years. (That’s why I love trading opportunities that people don’t understand)

Although this is not an irrefutable dogma, it often works in the investment and business fields, so much so that I am always confused by the booming NFT market two years ago:

Since selling NFT is a business model that is so simple that almost everyone can make huge profits at no cost, where does the huge profit come from?

Now that the profit path of NFT has been understood by everyone overnight, and NFT has inspired almost everyone’s imagination to describe the future business landscape, how can it still be called a potential track?

It is almost impossible for crowding and growth, low barriers to entry and high returns to coexist. If they appear at the same time, one of them must be false.

Failure to explore this relationship will inevitably lead to irrational profit-seeking and various disastrous decisions.

This article will try to explain why most of the reality about NFT/NFT-like assets is not what people see.

Two years have passed, and the market’s understanding of NFT has not improved much. There are still a large number of teams investing huge costs into a track based on wrong assumptions. Even though the market was so bleak before, there are still teams working tirelessly to launch new NFTs, and they still hope that the NFTs they issue can squeeze into the blue-chip sector. As of the time I started writing this article, there are still 30 projects waiting to be minted on CryptoSlam, not to mention the endless new NFTs emerging on the BTC chain riding on the Bitcoin ecological narrative.

NFT on BTC chain

The pursuit of profit can inspire people's endless creativity, but more often than not, it makes people follow the trend and get lost in manipulation and misdirection. The free market allows people to make free choices, but also allows people to freely create illusions and be deceived by illusions.

The important thing about deciphering illusions is that we will begin to learn to protect ourselves, and the market will stop investing resources in the wrong direction.

The market size of NFTs

NFT track research reports have always been fond of mentioning the total market value of NFT and describing it as a huge market, especially when it was an astronomical figure of up to 3 trillion US dollars two years ago (November 2021); at the same time , the research report also talked about the incremental users it created for WEB3.0. As of the time of writing, the NFT market still has nearly 5 million independent users, and the cumulative number of buyers exceeds 12.6 million.

Perhaps due to the tendency of human beings to fixate on their beliefs, people are willing to find supporting information for the NFT market with full potential and gold, rather than trying to prove that prosperity is not established.

Therefore, whether it was two years ago or today, when the market value has shrunk by 99% and only remains at 6.7 billion, almost no one questions the calculation method of NFT market value.

NFT market data as of January 9, 2024

NFT market value = floor price (sometimes average price) * total supply; and the total market value of the NFT market is the simple sum of the market values ​​of all NFTs.

This formula is not reasonable when applied to general securities market valuations, and even more absurd when applied to the NFT market. It is as invalid as using national GDP to measure the living standards of each family.

Generally speaking, the lower the market capitalization of a stock, the more likely it is that value bubbles and valuation deviations will occur. The actual circulation of most NFT series is only 1%-2% of the total supply, and the circulation of non-blue chips is even lower. The most important thing is, as will be explained later, because the price of NFT does not come from a full financial game, the value reflection effect will be worse.

Ineffective high prices and low circulation rates that no one cares about constitute paper wealth. It is this mediocre "accounting method" that makes market participants overestimate the product value and market potential of NFT. The final result is that it is falsely Fooled by prosperity.

Ignoring the irrelevance of indicators and conclusions is one aspect. Some data that can obviously falsify the prosperity of the NFT market are rarely mentioned. For example, as of November 28, the cumulative historical transaction volume of NFT was US$86 billion—not even as high as Bitcoin. The total number of transactions of the coin on Binance in two months.

The stock market is filled with all kinds of scammers, with trading volume being the only exception.

The NFT market is far not as big as people think. When we reorganize all the data we can obtain, we will find that the only thing in this market that can be called "huge" is its bubble.

Measuring Liquidity: Real Buyers in the NFT Market

I have been thinking about what other indicators can effectively measure the size and liquidity of the NFT market in addition to cumulative transactions.

A scientist friend inspired me. He told me that he had casually crawled the transaction data of Cryptopunks, and after a simple sorting, he found that the vast majority of punks had never been traded.

This discovery unveiled the liquidity dilemma of the NFT market, and it led to a conjecture: Perhaps the reason for the lack of liquidity in the NFT market is that most NFTs do not have real buyers.

In order to verify my conjecture, I crawled blue-chip data other than Cryptopunks, and some interesting statistical results began to appear. Next, I will take BAYC as an example to explain one by one.

As of November 28, 2023, Etherscan has recorded a total of 36,990 BAYC transaction histories in 8 major NFT Marketplaces. It should be noted that they are not all of BAYC's transfer histories. The former is a subset of the latter.

As of the editing date, the number of transactions has increased from 36,990 to 37,183.

As shown in the figure, among the 36,990 transactions of 10,000 BAYC, 10% have not been traded once so far, 71% of BAYC have been traded less than 5 times in their lifetime, and less than 20 BAYC have changed hands more than 30 times in the market. Only 4 have more than 50 times, and no BAYC has more than 100 transactions.

The data underwent preliminary cross-checking.

I took out 100 extreme values ​​of more than 10 transactions and only 1 transaction, and compared their corresponding token ids with the sales data collected on Cryptoslam.

Cryptoslam also captured data from other unnamed markets in addition to the above 8 trading markets. When all transaction history of BAYC with a certain ID is limited to these 8 markets, the data on both sides are consistent; 100 transaction times are only The historical data of the 1-time sample token is also consistent on both sides.

But there are still some errors, such as BAYC#5497. The number of transactions I crawled from etherscan's NFT Trade records is 21, while the number of transactions collected by Cryptoslam is 54, of which 21 are blur and opensea transaction data, and the additional 33 occurred in other etherscan and Unlisted trading markets.

For example, BAYC#4970, the number of historical transactions recorded on Cryptoslam is 17, and the number captured on etherscan is 24.

In fact, the bias is concentrated in those BAYCs on the Cryptoslam activity list, and the coverage rate is almost 100%. If you pay a little attention, you will notice that the 24-hour, 7-day and 30-day activity lists are all the same BAYC, and even the rankings have not changed at all. They are all traded frequently on unnamed exchanges, so they are displayed on Cryptoslam. The number of historical transactions is generally higher than that recorded by etherscan.

No matter what caused this part of BAYC's turnover to surge, since we measure the turnover distribution of BYAC over a long period of time, this sudden and extreme outlier should be excluded.

Therefore, this has no impact on the conclusion - 99% of BAYC has no market (no possibility of changing hands) because they do not have buyers of a certain scale.

Among the remaining 1%, if we regard a change of hands as the emergence of a new independent buyer, then only less than 30% - 17 BAYCs have more than 30 buyers.

In other words, in the past 950 days, each of these 17 BAYCs had less than 30 people willing to buy; and only 1 out of 10,000 BAYCs received 60 historical buyers.

This kind of data distribution is also true for other blue-chip NFTs.

BAYC’s listing rate on Opensea is 2%

Some people may ask, since 90% of BAYC has been traded at least once, how can we conclude that NFT has no buyers?

In fact, just looking at the listing rates of various NFT series on Opensea can reveal clues. Almost all blue-chip NFTs with a circulation of 10,000 only have 1%-2% — that is, 100–200 units are listed for sale on the market.

If all NFTs with transaction records are actually sold, why is the listing rate so low?

According to the crawled data, a total of 1,729 BAYCs have only one lifetime transaction record. If these 1,729 BAYCs are all purchased by independent real buyers, how can BAYC have only 200 listed on the market? Sales and circulation means that bookmakers have the motivation to control the listing rate, but market participants aiming for profit have no reason to buy and then not sell, allowing funds to stagnate subjectively.

Now, I think everyone should be able to fully understand why the NFT market lacks liquidity.

Lower liquidity than imagined

We always talk about liquidity, now it’s time to give it a clear definition. I have observed that when people talk about the liquidity of NFT, most of the time they refer to the liquidity of NFT as an asset itself, but also to the existing funds in this market segment.

Asset liquidity is the speed and ease with which an asset can be sold for fair market value. Assets with good liquidity can be sold quickly at the current market price without significant discounts, and without paying high transaction fees.

The amount of funds in the market refers to the adequacy of funds in this market, which depends on the comparison between the amount of funds and the amount of assets. It is the liquidity on the liability side.

The lack of liquidity in the NFT market is both asset-side and liability-side.

First of all, because the NFT Marketplace makes the casting and issuance of NFT extremely simple, the supply of NFT assets has grown like a virus, and the sharp increase in tradable NFT has squeezed the liquidity of the entire market.

Secondly, the characteristics of non-fungible tokens make each NFT itself a market segment. Even if it is a PFP issued in a series, each NFT in the series is in its own single trading environment, which ultimately creates a negative impact on the market. Liquidity segmentation.

The nature of NFT itself leads to fragmentation of liquidity, and there is always a lack of mechanism in the NFT market to observe marginal changes in liquidity, which makes the liquidity problem worse. In the FT market, once the marginal amount of funds on the market changes, the price of FT will also change accordingly. The withdrawal and increase of liquidity in the FT market will inevitably be reflected in the price.

However, in the NFT market, the marginal amount of liquidity and the price are isolated from each other, and the withdrawal of funds on the market cannot be directly reflected in the price; and even if there is no incremental funds on the market, the existing funds can still be used to push up the price of NFT. Selling price, thereby promoting the expansion of the book market value of the entire NFT market.

When there is no mechanism to measure and lock existing funds in the NFT market, it will lead to a false prosperity - even though there is little liquidity left in the market, the NFT book price and total market value can still remain high.

For NFT investors, the lack of buying/trading counterparties and the myth of sudden wealth created by survivorship bias ultimately result in them being lured into the market at a high price. Not only did they fail to buy lottery-winning NFTs, but they became "The buyer of last resort".

Consensus Pricing Fallacy

So, can the price of NFT be believed?

According to past statements, the price of NFT can be believed because from extensive discussions, both market participants and observers agree that the pricing mechanism of NFT is "consensus pricing."

Consensus and scarcity are the explanations people find for why NFTs are expensive.

In my opinion, "consensus pricing" is the kind of elegant but vague expression that the crypto market has always loved, and the widespread recognition of such expressions is itself a typical irrationality of the crypto market.

Once you trace back to the logical starting point of the "consensus pricing" view, you can easily find that the true meaning of "consensus" here is actually visibility indicators and group sentiment characteristics, which respectively correspond to a hypothesis:

Assumption 1: If the issuer of NFT is well-known and has many fans, the consensus base will naturally be broad and solid, because celebrity fans will flock in enthusiastically to provide liquidity and turnover, thus making NFT have the potential to increase value.

Assumption 2: Different groups of people are looking for a sense of belonging and self-expression, and groups are willing to pay high prices for NFTs that meet their emotional needs.

This is not consensus pricing, this is visibility pricing and sentiment pricing.

The visibility assumption is easily falsified by plummeting prices and real on-chain data—that is, true market consensus.

Take Jay Bear as an example. It once seemed to be really "hot" in the market, but in fact, the sales ratio of Jay Bear is not as good as that of BAYC and Punk, which are expensive and difficult to match (sale ratio = number of issuances/total number of transactions, I Use it to roughly measure the average turnover rate of a series of NFTs).

mfer and azuki, which are known for their "emotional value", have a higher sales ratio (even higher than BAYC and Cryptopunks), and their "consensus" is more reliable. I guess this has to do with user positioning. Fans of celebrities are not NFT audiences. The number of fans of a certain celebrity in the NFT audience (still the kind who are willing to spend money) will not be more than those who like Japanese comics or shout long live the bastard. .

In other words, turning celebrity fans into NFT audiences and finding celebrity fans from NFT audiences is obviously more difficult than tapping the emotional needs of NFT audiences.

However, even if emotions can stimulate people's willingness to trade more than popularity, judging from the results, it is still not enough to form a so-called "consensus."

As mentioned above, each NFT actually corresponds to a single market segment. If 99% of NFTs only have one or two customers in their lifetime, and cannot even find transaction customers, then who will form their consensus? If an NFT has less than 30 historical customers, is the consensus of 30 people a consensus?

How can we find fair prices for tens of thousands of personalized markets?

In price theory, NFT confuses the "agreement price" of individual people with the "consensus price" of the market. In fact, the real buyers of NFT are limited. Among the NFTs that have been traded, 81% of NFT holders have less than 5 opponents. This also includes the dealer’s self-buying and selling. The price depth and frequency of changing hands of NFT determine that it cannot have a “consensus price”, and the pricing mechanism is by no means the “consensus pricing” generally considered, but a limited investment. The pricing of human speculation.

But that’s not entirely why NFT prices aren’t trustworthy.

The Emperor’s New Clothes: The Illusion of Scarcity in NFTs

Another factor used to price NFT is scarcity, but when we understand the proliferation of NFT on the asset side, the scarcity narrative of NFT is self-defeating.

The NFT business model was born around the scarcity narrative, and its essence is to sell scarcity at high prices—a mechanical adaptation of the luxury business model.

I can generally understand the origin of this logic. Some scattered market theories in classical economics dominate the way of thinking of NFT market participants.

Although people do not fully agree that the invisible hand is an ideal way to organize economic activities, they do apply it to the NFT market one-sidedly.

We simply know how supply and demand determine prices. Without considering elasticity, excess supply causes prices to fall, and supply shortages cause prices to rise.

The NFT issuer wants the result of "price increase", so it artificially creates a "shortage".

The concept of stealing is the first step, claiming that the uniqueness of non-fungible tokens is equal to scarcity; not only that, the issuer will divide the attribute levels among a bunch of NFTs to make "scarcity" become more "scarce".

However, the real market demand for NFT has obviously not been taken into account.

Price is influenced by supply but determined by demand. People's demand for NFT is nothing more than consumer demand and investment demand. Consumer demand pays attention to cost performance. NFT obviously cannot support the cost performance of high prices, so only investment demand remains. However, as NFTs that can be continuously produced, they can have very low consumer value, but they will never have the investment value of truly scarce (but never lacking market) antique collections.

In the real art market, the prices of paintings are also distributed in a 28% distribution. The works of a few famous artists are extremely valuable, while the works of most painters cannot be sold at high prices.

The strange thing about the market is that although the illusion of scarcity has been created, the market does not easily buy it on a large scale.

Data results show that 10,000 NFTs in each blue-chip series cannot be fully bought and sold (in fact, the market's willingness to trade the "most promising" 200 ones is also quite limited). There is currently no yardstick to measure the market's true demand for NFTs, but the excess supply of NFTs is an obvious fact. Although the supply of a series of NFTs is limited, the total supply of NFT assets in the entire market is in excess.

Number of newly issued NFTs in each month from October 2023 to January 2024

And this just shows that the myth of NFT’s sky-high price and trillions of market value attract more not “buyers”, but issuers who supply NFT.

But judging from the final result that most NFTs are unknown, most issuers obviously do not understand what makes NFTs successful.

Who blew the bubble

Due to limited real demand and liquidity, issuing, selling or investing in NFT is not a profitable thing, especially when the investment cost is high.

But how was it initially packaged into a trillion-dollar industry filled with excess profits?

In 2021, I once sorted out the history of NFT market development and talked a lot of nonsense about digital scarcity, cultural change, and cryptocultural expression. Now it seems that the most important gain from writing that article is to discover the reason why NFT has become a business opportunity. , began when various crypto art markets actively contributed to sensational high-priced auction events in 2020 (especially Nifty Gateway and Async Art), and culminated with Beeple, Pak, and Cryptopunks being promoted to Christie's and Sotheby's.

In other words, it is the encrypted art market and traditional auction houses that have progressively increased the popularity and pricing of the NFT market.

  • In 2020, in the second month after AsyncArt went online, it facilitated the auction of "First Supper" for $344,915. Since then, single transactions of hundreds of thousands of dollars have begun to appear frequently. Nifty Gateway conducted three curated auctions for Beeple from October to December 2020, with a total transaction price of 258 ETH (worth approximately $180,600 at the time).
  • In December 2020, Pak became the first crypto artist to earn over $1 million.
  • In March 2021, Beeple's "Everydays: The First 5,000 Days (2008–21)" sold for a sky-high price of US$69.34 million. In the same month, Sotheby's announced that it would hold an auction for Pak in April as the first step to officially enter the NFT field.
  • But the most important event is that in February 2021, CryptoPunks 6965 was sold for 800 ETH (equivalent to US$1.5 million), and then on March 11, CryptoPunk#7804was sold at a high price equivalent to US$7.5 million. So, the next month (April 8) Christie’s officially announced that it will auction Cryptopunks in Christie’s 21st Century Evening Sale.

The emergence of PFP and the rapid expansion of NFT asset scale began at this point in time.

  • On April 23, 2021, BAYC started minting at a price of 0.08 ETH
  • On May 3, 2021, Meebits started casting
  • July 1, 2021, Cool Cat
  • July 28, 2021, World of Women
  • September 9, 2021, CrypToadz
  • Doodles opens for casting on October 17, 2021
  • December 12, 2021, CloneX
  • January 12, 2022, Azuki
  • March 31, 2022 Beanz
  • April 16, 2022, Moonbirds

The above are the top ten blue chip pfp release times on the entire network.

The myths written by the crypto art market and traditional auction houses for Cryptopunks inspired a group of gold diggers with the sharpest sense of smell and the most capital gaming experience in this market—so BAYC was born.

"Men make history out of the conditions inherited from the past" - Marx

This is how bull markets always come - some elements of random events are deliberately amplified and turned into word-of-mouth narratives and replicable products.

As the ancestors and founders of PFP, Cryptopunks and BAYC have basically shaped the issuance framework of all subsequent NFTs - BAYC imitates Cryptopunks' product structure, while other NFTs imitate BAYC's (ostensibly) business model and promotion scenarios.

The magician’s trick — NFT price manipulation

The founding team of BAYC was a master genius in dimensionality reduction for the NFT market at that time.

While most people are still ignorant about NFT, BAYC's team has already planned how to use blindness and people's cognitive flaws to build BAYC into the next myth.

Going back to what we mentioned before, some and only bookmakers have the motivation to control the NFT sales rate - the control starts from the time of casting.

I crawled 5,000 BAYC mint data. In this sample, which is close to half of the total, I found that: 668 independent addresses participated in minting, of which 1 address minted 16% of BAYC (800), 46 % of BAYC (2311) are concentrated under 20 addresses.

Moreover, more than 87% of BAYC are minted in batches through a single address (the amount minted at one time is more than 4).

Some BAYC casting records

When BAYC was first released, the number of minters was far less than 1,400. We reasonably suspect that it completed the minting within the team in a rather low-key manner. In addition, the collection of seigniorage tax set the first psychological line for the price of BAYC. The combination of the two factors opened up its height. The first step in controlling the market.

The second step is to create price myths.

From a transaction level, the biggest difference between NFT and FT is that the price manipulation of NFT is simpler. NFT does not need to go through the process of price suppression and chip recycling; market makers can accurately avoid tokens that are not in their hands and only allow the machine part in their hands to become high-priced targets.

The nature and trading methods of NFT are destined to allow market makers to decide who to buy and who not to buy.

If we are participating in the FT or stock securities market, as long as we choose the right target, we will definitely be able to benefit from the growth (whether it is a capital game or growth caused by improved fundamentals), even if there is no influx of public investors in the end. Can get exit opportunities from the indiscriminate promotion of market makers.

But this is not the case with NFT. For ordinary investors, the only way to withdraw liquidity is through other public investors.

The brilliance of the BAYC team lies in creating "price".

As we said before, FT is an indifferent price. At the same time, the value of one FT is equal to the value of another FT. Moreover, the price of FT is the real "consensus price", which is priced by the real-time game between buyers and sellers. The price is supported by trading volume. In other words, only "transactions" can change the price.

But this is not the case with NFT. The price of the other 9999 NFT is determined by one sky-high price NFT as the price anchor.

This is why they must create a price myth, and it is precisely for this reason that there will be a large number of BAYC price gaps — the first time it is sold on the market, it will reach a transaction price of hundreds of ETH, or the first transaction price will be no more than 3 ETH, and the first transaction price will be no more than 3 ETH. The second transaction price suddenly increased by 139 times.

Why can a price gap never be a natural price increase?

Because those BAYCs with huge transactions are not listed for sale on the market, and there are almost never auction records, the transaction records are all direct transactions.

Thinking about it from another angle, how could BAYC, which had never experienced market pricing, become worth millions of dollars overnight?

NFT jumps to sky-high prices

The market makers and sellers may price it at a huge price, but buyers have no reason to buy at a high price regardless of their consumption motives or investment motives. The actual situation is also the same. The number of transactions of BAYC at sky-high prices is extremely limited - it's not that no one buys it, but that it is no longer listed on the market after one or two transactions at sky-high prices.

The buyer who "takes the offer" at a sky-high price is not the real buyer.

But are there real buyers among them?

It exists, but it is extremely rare. As mentioned above, the number of real buyers will not exceed the market listings.

The few real buyers are those who believe in the "scarcity narrative" and the value-added possibility of NFT. They are those who do not see the risk, only see the increase, and believe that they can win the lottery - that is, the real NFT issuer. Target population.

Those who enter the game make investments with the mentality of opening a lottery, but who is the "winning lottery ticket" is determined by the controlling party. Their entire purpose is to raise the price at a high price and then sell it at different prices to ensure that there are people taking the orders at each price level, that is, "just sell it."

The real business model of profitable NFT is to raise the price of NFT and find a few buyers who believe in the narrative.

The huge increase in individual BAYC prices, the increase in floor prices, and the control of the listing rate are the most important links.

The price of NFT has nothing to do with scarcity, consensus, or intrinsic value. The "scarcity narrative" packages a bunch of bad assets together and fakes them into gold, just like the subprime mortgage crisis in the past. —

This can be done because the "floor price increase" in the NFT trading market only requires the selling price to increase, rather than the actual value to increase or the last lowest transaction price to increase.

That's right, the floor price of NFT is not driven up by transaction - the floor price listed on the NFT trading market (at least Opensea) is the listing price, not the last lowest transaction price.

Still taking BAYC as an example, BAYC’s floor price on Opensea on December 1, 2023 was 28.8 ETH. This price is the current listing price of BAYC #8864. Opensea shows that its last transaction occurred 6 days ago, and the price was 29.4 ETH, but Cryptoslam showed that it was traded at $16.98 on an unnamed exchange 8 hours ago.

The lowest transaction price of BAY#8864at the same time is lower than the floor price displayed by Opensea

BAY#9196was traded on an unnamed exchange 2 hours ago at a price of 19.9ETH, and BAY#7410was traded 1 hour ago at a price of 28.1WETH. These prices all occurred within 24 hours, and they were both higher than 28.8ETH. The price is lower, but Opensea shows that BAYC’s floor price is 28.8 ETH.

The seemingly fair and open NFT issuance platform and trading market are part of the price magic.

And they are also the biggest winners of this deception.

Market value maintenance is a mistake

In addition, we can also prove the scarcity of real buyers of NFT through a phenomenon: BAYC price has not returned to the casting cost line so far.

When the market is in a long-term depression, the reasonable development of prices is to gradually return to the cost line.

The first visible cost line of BAYC is the minting price, and the second cost line is 90% of the initial transaction of BAYC (ranging from 2ETH to 1000ETH). Assuming that the casting and initial sales are all through real buyers, after a long period of market stagnation, there may always be significant differences in selling prices on the market, but the floor price will return to the cost line.

But as far as the current situation is concerned, BAYC's floor price on Opensea on December 1, 2023 is 28.8 ETH, which is still far from the minting price and the lowest price of the initial sale.

When something goes wrong, there must be a monster.

The possible reason is that there is no real buyer in the existing market whose cost line is 0.08ETH (or even lower than 20ETH), that is, no real buyer in the market bought BAYC during the minting and initial low-price sale, and this The side shows that the floor price is still controlled by the market makers.

Or, there are a very few low-price buyers who still hope to make big gains with their small purchases, but reluctance to sell does not mean they have no intention to sell. BAYC’s listing rate on Opensea is 2%, and the market-wide listing rate is 3.43%, which means that only There are more than 300 BAYCs circulating in the market. The price distribution is still manipulated by bookmakers, so the real number of BAYC buyers must be lower than the number of listings (343), and almost no buyers' cost line is at the mint price.

At this point, we finally understand what kind of carefully woven dragnet NFT buyers face.

But not everyone is as good at it as the auction house and the BAYC team.

NFT is a market where only platforms that collect tolls have an absolute advantage. For most participants, participating in this market is almost unprofitable, both for buyers and sellers. Issuing NFT is not a profitable business - The issuance of NFT is very simple, but finding a buyer for NFT requires financial resources and courage. It relies on investing huge amounts of resources in the right place. The success of BAYC and other blue chips lies in the fact that the team has strong financial resources and a deeper understanding of how the market operates. They have known how to use blinding methods to lure people into the game from the beginning. However, many people still do not understand the market, so they are still expecting the NFT market to develop in a certain way. way to recreate glory.


I have always wanted to write a real NFT market insight, so I came up with this article.

The cognitions mentioned in this article are not new. They should have vaguely existed in the minds of most people who have been deeply involved in the NFT market.

However, I think it is still necessary to systematically clarify the previous wrong assumptions about NFT in the market. We are currently unable to prove what NFT is, but we can prove what it is not - it is not inherently scarce or even too widespread; its pricing is based on manipulation rather than Consensus; NFT is a market with extremely limited liquidity and buyers. Most NFTs have almost no real buyers, and their huge market size comes from absurd formulas; the high returns of NFT business are by no means achievable with the low threshold you see.

Those seemingly professional NFT Marketplaces and data platforms, including top auction houses, are also part of the deception. They are willing to deepen people's misunderstanding of the market and disguise some wrong valuation factors as professional indicators. They have the least motivation. To debunk this magic trick.


It is also important to recognize the failure of the NFT market - it has not improved the overall economic welfare of the encryption industry as expected. What is worse is that it has led to the wrong allocation of resources, both for investors and especially for entrepreneurial teams.

The current NFT is neither a good investment nor a good business. We should not go further and further in the wrong direction. If the NFT market itself does not have liquidity, how can we release liquidity through NFTfi? If there is no real buyer for NFT, how can it be used for pawning and liquidation? If the price of NFT is a castle in the air, how can the market recognize loan and pledge based on market price?

Recognize the situation clearly, abandon your illusions, and prepare for struggle. Only then can the NFT sector have hope of reinvention. If it is impossible for NFT to be priced based on scarcity and consensus, then we should start boldly trying a new pricing mechanism; if we realize that a single NFT has no transaction depth, we will start to consider aggregating scarce and dispersed liquidity when developing NFTfi. , new indicators will be developed to screen NFTs with real buyers and liquidity for lending or pawning, instead of just using "blue chips" to determine life and death.


As an anti-anxiety fighter, I also hope to take this opportunity to convey the fact that reality is different from what we see. Sky-high prices and huge profits are often lies packaged to tempt you. If you want to seize an opportunity, it is best to First realize how the magician removes coins from our pockets.

When you fully understand how profits appear and disappear in a fanatical narrative, you may begin to let go of why "it is always someone else who makes money."

Myths do not exist, and magicians are not a simple profession. A perfect scam still relies on abundant capital.

At the same time, NFT price scams are not a special case. Deception is both common and inevitable. If we have some kind of weakness and there is some way for us to be deceived, there will be deceivers secretly waiting for the opportunity to deceive. This means we need to learn to guard against misleading stories and the spotlight that grabs our attention. It also means we will start taking steps to defend against the negative side of the market.

We don’t need an absolutely perfect industry, but we do need a relatively healthy ecology. I hope this is a good start.


This article is for informational purposes only. It is not offered or intended to be used as investment or other advice.

Lastest information

see all