5 Apr 22 – Cautious Optimism

Be mindful that the worst may not be over

I hate to be the doomsday screamer, or the naysayer.

Really, I do. Who likes to be the bringer of bad news, especially when the situation around COVID, around war, all seems to be taking a turn for the better.

Spring is blooming. Borders are reopening. The war seems to be at a standstill. And the markets are responding positively. So what is the cause for concern?

Bullish NFTs?

Since the drop of the APE coin, so much money has flown into the market, directly or indirectly. The direct way could be due to new interest in NFTs from people who have yet to have any exposure. The indirect means is from crypto money buying up APE, while APE holders who receive ETH for their airdropped tokens cycle the ETH into other NFT projects.

The net result is a resurgence in floor prices, especially of "blue-chip" NFTs, while some of the newer and smaller collection have seen renewed interest. Here are some of the latest successful milestones:

  1. BAYC goes back to above 100ETH floor

  2. Azuki crosses 20ETH, and even hit 30ETH at one point, while the two airdropped tokens per Azuki hit 6ETH floor. That's a free airdrop that people are buying up.

  3. Revival of the Anime meta, triggered by a soaring floor price of Kiwami and Akuma Origins. Just when everyone thought that the trend has died with the likes of Asuna, Tsuta, Muri, Soulz, and KGF, the momentum has picked up yet again.

  4. Many new projects with enough supporters have performed relatively well post-mint.

So why am I bearish? Because of the broader picture with crypto. Don't get me wrong, we're retesting a key resistance level of $46k BTC, and a breakout can be incredibly bullish. But until this hurdle is crossed, I will have that tinge of caution.

With MicroStrategy continuing to add to their over $3B in BTC position, while Terra (LUNA) is in the midst of converting their $10B of UST positions into BTC, we can expect to at least hold this current sideway consolidation.... Unless something really unexpected happens, which triggers a risk-off move and cascading equities and crypto prices.

Positioning Yourself

Everyone will have a different position, a different risk tolerance. While we can have some expectations of how the markets will perform, we should not expect it to always go our way. That is also why I believe it is about positioning, which means that you size opposing positions to capture either way the market moves.

For example, if you think that crypto is going to be bullish, you can hold a bigger position in that, and have a smaller position on an asset that is totally opposite e.g. treasuries. That way, in the case that you're wrong, at the very least your small position in treasuries can help to reduce your losses, and if you're right, you can afford to lose that small position. It's also called a hedge.

NFTs is a little trickier because they are denoted in crypto. Using ETH as an example, if prices of ETH goes up, people may sell their NFTs to ride the uptrend and NFT floor prices may drop. If ETH goes down too much, along with the rest of crypto, people may fear a risk-off move and seek to sell off their illiquid NFTs, and NFT floor prices will once again drop. So a sideways crypto market is actually not bad for NFTs to gain ground.

Insights From The Resurgence

One thing is obvious from this apparent bullish kickstart of the NFT market – money is mostly flowing into blue-chips. This means that either buyers and investors are getting smarter, and/or they are not prepared to make extremely risky/degen moves.

No longer can a project built on pure hype mint out easily. Sure, they can still draw some greedy players, and can possibly be good returns, but most of the time, holders will be stuck with a worthless NFT, and they learn from it. With a new wave of holders, the same thing can happen again, and that's also when we'll see more of these "dumb money chasing hype" happens again.

If you've been through it, remember to reduce your risk and/or take profits. Having said that, this really hits home for me.

When you get to a point where you can see trends, get savvy enough to make purchases, flip it, rinse and repeat, it almost feels too easy. It is methodological, and it is almost instinctive. But at what cost?

And honestly, any gains you have from flipping this will come at the expense of newcomers, at least those who are newer than you. And I suppose there's no better way to learn than from losing – every one of us has had losses and painful lessons.

If you ever find yourself on the losing end, don't give up. Get better and more familiar at this game. Learn how to mint from smart contracts, find reasons and make hypotheses of how you can do better the next time a similar situation occurs. It is the desire to improve and the relentless spirit that will help you find the success, because if you're even reading this, you're probably ahead of most people already.

So yes, I'm cautiously optimistic and my guts tell me that April will be an incredible month. But I'll stay nimble and try my best to react to any sudden changes.