The NFT space has been exploding recently with over four billion dollars in sales in December 2021, and over seven billion dollars in January 2022 alone. In addition to that, in periods where the crypto coin market is starting to pull back, we’ve actually been noticing that the floor price on some NFTs can be stable if not stronger.
Some of the best blue-chip projects right now are holding their value in their USD equivalent, while the underlying coin might be down close to 40 or 50%. With this explosion of money entering the space, and the fact that NFTs are like digital collectibles or trading cards, it’s something that personally appealed to me because even before NFTs, I loved flipping things for profit.
I’ve been playing in this space for the past few months, and I’ve been having success with my own flips, and today I want to share with you my framework for evaluating projects that I think are going to be winners in the space. These steps are going to be a complete guide on how I look at a project, and that’s where I’m going to try to invest my money before it hopefully blows up.
Risks
If you are able to identify a winner early on, you really stand to benefit a lot from the asymmetric upside where your gains could be 2x, 5x, or even up to 10x, or 50x, if you get really lucky. With that being said, investing in NFTs is probably one of the riskiest things that you can do, but I would rank NFT flipping and investing as just one step above sports gambling.
If you’re completely new to this space, it’s going to be much harder to make money, you have the risk of the NFT collection losing value and interest, but also the underlying risk of the cryptocurrency that it’s tied to going down in value. For example, if you bought an NFT using Ethereum for $4,000, and Ethereum plummets in price, that’s generally not good for your investment.
Lastly, it’s really hard to get liquidity with NFTs, it’s not like you can just sell your NFT whenever you want, you need to find a buyer for your NFT which might take some time depending on the price and market for that particular collection. And speaking of collections, we’re going to be talking about collections in this article rather than one-of-one art, because investing in one-of-one digital art is going to be much more subjective and much more difficult to resell.
NFT Chains
When it comes to different chains that you can buy NFTs from, there are Ethereum, Solana, Luna, and Cardano, and there are also alternative blockchains like Near. You can apply the same framework that I’m going to share with you today for any of these blockchains.
By the way, if you are looking for a place to buy your cryptocurrencies such as Solana, Ethereum, or Bitcoin, I personally use coinbase, and if you use my link and you’ll get a free $10 worth of bitcoin just for signing up. Let’s get on with the article.
Where do You Find Upcoming NFT Projects
There’s a huge variety of online tools out there to find upcoming NFT projects, but the one that you can use on Solana is the Magic Eden Launchpad. It’s the leading marketplace for entities on Solana, and they actually have what’s called a launchpad in which you can go and see all the new collections that are about to drop on their website.
By clicking on the launchpad button on the left side of the screen, you can see the feature launches that are approaching soon, as well as some of the live launches that they have. If you scroll down further, you’ll see there is a live launch, as well as a whole roster of upcoming launches that you can see.
It is a lot of work to go through all the projects and vet them, but it also presents a lot of opportunities.
Another website you can use is called Rarity.tools. If we actually just go to Rarity.tools, you’ll see in the top section of the homepage that there’s a section called upcoming. If you click on it, you’ll see all of the upcoming NFT drops, their prices, and their dates. If you scroll down to today’s sales section, that’s where you’ll be able to see all the upcoming NFT projects, their prices, and exactly what time they drop.
NFT Communities
Those are some basic website tools that you can use, I would recommend if you are going to be investing in the NFT space, that you should network and meet as many other like-minded investors that you can.
Oftentimes, buying NFTs through certain communities will unlock “alpha chats” in their discord where people like to share information about upcoming NFTs as well as get real-time feedback from other investors in the space about the pros and cons of potential new NFT projects.
After I found a couple of good NFT communities, my success rate in identifying winning NFTs has gone up tremendously. Although I still do check Rarity.tools and Magic Eden’s Launchpad, I’m usually getting insight into new projects by keeping tabs on different conversations in my discord communities.
My Framework
1. The Team
The first step of my framework is always going to be checking out the team, I’m always looking at the team first. This is because teams build projects and while art is important, the meta in today’s NFT space is that the project or collection needs to have a little more going for it than just the art. It’s always best in my opinion to have a team that is completely “DOXXED”, which means their identities are revealed.
This is not the norm in the crypto space as many people prefer to operate anonymously. However, if a team’s identity is revealed or DOXXED, the chances of you getting rugged and having the team run away with all the NFT revenue is lowered considerably because these people have their reputations on the line, as well as their public information is probably out there.
Case Study
Let’s take a look at a case study real quick. If you navigate to the dazed duck’s website, it’s a Solana NFT project of 10,000different dazed ducks. One of the biggest reasons I invested in this on mint day was that in researching the website, I actually saw something really interesting. If you scroll down a little bit, you’ll find an about section and you can click on the meet the team behind the dozed ducks Metagalactic club.
What I found was super interesting, they actually had made a YouTube video revealing the team, and if you actually watch this you get a sense of who they are. They’re actually real people, and it actually gives you a little bit more faith in the project because you can see their faces, and know kind of what their mission is.
Now, I know that this is kind of a low bar, but many teams don’t even put their own photos on the website much less a YouTube video. I viewed this as a sign of high integrity which is what you want in this space. Ultimately, you want to be investing in the people that are behind these projects, because it’s truly the people that are going to drive the NFT collection forward. You’re essentially becoming an investor in small companies, and the NFT is just simply a representation or part ownership of that.
2. The Art
Art is super subjective when it comes to NFTs, but you want to find a project that you think will do well based on how widely appealing the art is. The more appealing the art is to a wide audience, the better chance the NFT collection has in becoming a long-term winner.
A lot of NFT collections right now are what we call generative collections. It’s usually one based model of a character that has a variety of traits that are generated with an algorithm to give it a unique flair. It definitely helps in a generative collection if there are a lot of varieties to the art so that people can find an NFT that they personally resonate with.
The Artist
When it comes to art, the artist is also definitely important. If the artist has a reputation in the art world, it could definitely bolster that NFT collection’s value. For example, the doodle’s NFT project that launched on Ethereum, the artist that made them is named Scott Martin, and BurntToast is his alias. If we actually take a look at his portfolio, we can see that he had done beautiful illustrations before sometimes even for big companies like Google, Skillshare, and also Adobe, and Huawei, so he had a reputation in the space.
When you paired that with a good team and a decent road map, it’s no wonder when an NFT does well. The doodle’s floor price raised from the starting average price of around 1 to 1.5 Ethereum in November 2021, all the way to a floor price of around 11.85 Ethereum right now. This by the way is almost a 10x return in Ethereum terms in just a couple of months. In terms of dollar values, did the calculations based on the price of Ethereum in November 2021 versus now and you’re looking at a 4x return on your money.
When it comes to the art, you definitely want it to have some mainstream appeal, plus if it has some appeal where people can get emotionally invested in the art, that’s always a positive thing.
The next thing to look for
3 & 4. The Road Map And Unique Differentiators of The Project
A roadmap is a project’s intentions for further development down the line, especially after they mint out. Good projects typically have aspirations to do way more than just be a profile picture collection, and they’ll usually have unique differentiators of their project that set it apart from others.
Usually, this type of innovation will spur an increase in the floor price of the project. There’s typically a premium on unique features, if you’re able to identify if a feature is unique by spending a lot of time in the space, that’s usually going to be a bullish sign for the project.
Air Drops
I’ll give you guys another example. For those that bought boryoku dragon right here on the second day after mint, one of the coolest things at the time was that they actually had what’s called a “boku token” that they were going to airdrop to their holders every single day. This token concept was completely novel and new at the time with Solana NFTs, and ultimately became a differentiator that made the rest of the community follow suit.
These days you’re going to see a lot of Solana projects launching with a token being airdropped to you just for owning the NFT, and as such it’s not really a new or novel feature anymore. So I’d probably just gloss over that if I were trying to value a new project. However, if you were someone looking at the boryoku dragons on day two or three after their launch, you could have said to yourself “huh! this project is doing something I’ve never seen done on Solana, and this could be big”
As projects on Ethereum have already done this sort of thing before such as the cyber kongs, this actually might be a bullish signal for Solana. In fact, that’s what many people that invested early on into the boryoku dragons concluded, and those people with those early convictions definitely ended up with the asymmetric upside rewards that you see today. Especially now that we see the boryoku dragon’s floor price at 225 SOL when it in fact minted for one SOL and you could have bought it the day after for 20 SOL.
5. Community
The fifth thing that I like to do is check their community out. I like to check the community aspect, how their Twitter and their discord look, Does their Twitter seem botted or has real engagement. We can also go into their discord server and lurk in there for a while, and see if the engagement is real, if people are stoked about building the community or if they’re just there to flip for profits.
The longer-term-minded the community is the bigger the likelihood that you can get in on a project early and get that upside return. You do want to be careful though, sometimes you might get so invested in a community that it could change your life, and it might be hard to sell because that means you’ll no longer be a part of that community when you do sell your NFT.
Okay guys, I hope that this article was helpful in helping you identify future winners of NFTs. Let me know how things go in the comments. Peace and Happy Hustling!
