The Flip Mentality That’s Slowly Suffocating Web3.
Let’s cast our eyes back to Q4 2021…
We can all agree that this was a seriously good a time to have bought your first jpeg.
A modern day gold rush was unfolding, only this time round the shovel was surplus to requirement — prospectors needed only an internet connection and a catchy Discord username.
But fast forward only a few months and it feels as though we have started treading water — wallowing in a thick, liquid form version of FUD. Projects that had genuine hype are failing to mint out and we’re seeing blue-chip-potentials achieve floor price levels we thought impossible.
So, what’s changed?
Well, of course there are bigger world issues at play. Let’s not forget, Web 2 markets ain’t that rosey either.
In addition, the account adoption rates have stagnated — maybe those Coinbase credit card warriors have lost interest? Or is it just a liquidity issue?
Pools that were once Mariana Trench deep oceans seem to have evaporated into thin air — in part down to the countless number of trash mints that insist on exuberant donations to the gas gods thanks to their “optimised contracts” — lol.
Personally though, I just can’t subscribe to the generalist theory that “market conditions” are solely to blame. Look at the Moonbirds launch or the fact that Azuki and Doodles have both recently hit all time highs (f*ck I promise I’ll get through one of these articles without mentioning Zuki or Doods.).
Twitter sleuths will crawl through the data and make claims about liquidity re-allocations or bear sentiment. However, the fact of the matter is, the whales are always going to be hungry — keen to feed their insatiable appetite to spend their Monopoly money.
Even still, the actions of the 0.1%, (whales) are not the cause for countless smaller projects getting their floor prices bashed to all-time-low levels. Now I’d be wrong to point the finger at one indicator in particular; it’s always going to be a range of factors that will pave the way for favourable or, unfavourable market conditions.
That being said, sitting on the fence is no fun — so let’s point a finger.
Patience.
Or to be more specific, the lack of it.
People’s Patience Has Gone Missing.
So, why is it that the NFT/Web3 world has fostered such horrendous attention spans?
It’s not an exhaustive list, but I’ve compiled some of the key factors that I feel play a major role in having destroyed people’s patience.
1/ The Newbie Factor — A “Green” Mentality
Many of those who have entered into the NFT space are often very green in terms of their investment experience. They’ve aped into a 3 ETH dutch auction but haven’t got a penny of exposure in a traditional stock market.
There are KYC barriers involved to setup and trade stocks listed on the New York Stock Exchange or FTSE100. But with Web3/NFTs, it’s a quick deposit into Metamask and you are ready to “invest”.
Newbies hang out on Twitter and see another 100ETH ape sale followed by the unnecessary “which floor shall I sweep” tweet (cringe).
They want in.
But, in general, people are not willing to put the time into understanding what exactly they buying into. So FOMO dictates the decision making, leading to money being poured into low quality projects.
Mint day rolls around and that the excitement is quickly quashed.
“Wait, what, the floor price is X? F*ck that, I thought this would moon!”
Perceptions have been pre-conditioned into believing Web3 is this untouchable nirvana where everything goes up and money quite literally grows on tress.
The truth is that there are hundreds of projects that mint each day, and the successful ones are few and far between. Added to this, the broken whitelisting model means that it’s a closed club anyway, so if you are new to the space, you’re only given the chance to mint the unwanted projects.
So no one turns up — the floors bashed and you want out.
In addition, you didn’t actually build a relationships with the team and community, so there’s no anchor or attachment.
If you are lucky, you take your 15% gains, and you move onto the next. The project is left in a wake of flipper exodus, succumbing to an inevitable slow death.
The cycle then repeats.
2/ Investment Length & The Phycology of Holding
Now, I might not have Warren Buffet’s Midas touch, but I’d owned or traded stocks for ~8 years before I’d even heard the word NFT.
Therefore, upon entering the world of Web3, my pre-disposition to making “investment decisions” was baked in with the notion that things take time.
Unfortunately though NFT projects have not been afforded that same luxury.
People will spend months begging for WL yet flip it out the door the moment the floor shows weakness.
Holders want value now.
“Apes took less than a year to hit a 100ETH floor — so why can’t you?”
When you think about it, the best projects get holders on board and work together to grow a foundation.
Yes, you might be presented with opportunities that will make you reevaluate your decisions along the way, but ultimately there is an element of patience needed.
(And then Moonbirds came in and screwed that notion all up!)
Jokes aside, the issue is that “investment” decisions are made based on a desire to get immediate returns, often for marginal gains, because they’d bought in not to support a long term vision but to get out whilst the liquidity is there.
“They are going to do it anyway so I might as well beat them to it” … which is followed by an immediate rush to undercut each other.
People will consider a Long term hold as making it past reveal, a barbaric measure of patience.
A Sole actor with this flip mentality wouldn’t cause much issue, but when 30% of the owners want out in the first 24 hours you’ve got a problem. Not all projects have the team, vision and market support of a project like Moonbirds.
So the flipping begins, the FUD evolves and the project is crashed.
3/ Project Volume > Project Demand
This moves us nicely onto the next point. No one can deny that there’s an incessant over saturation of projects in web3.
You can’t go a day without coming across dozens of new projects. If I had 0.1 ETH for each time I saw a “You are early” tweet, I’d have at least enough for a couple of Punks. And I’d guess I am only seeing a fraction of these uninventive teasers.
Don’t get me wrong, it’s great to see market adoption. But this is still such a new space and the talent pool is relatively small — very few Web3 specialists exist.
So, rather than many qualified people working together on a handful of projects you get the talent pool and teams being heavily diluted across many.
This plethora of PFPs leads to a lower general quality of project and thus, less value creation per project. It saps liquidity out the market and scare investors who lose out.
So, why is this relevant?
Well, I bought my first NFT 6 months ago, and in that time, have minted 5 projects.
Yet I know people that average 5 mints a week!
When there is no immediate gain, they’d rather chance it on the next hype train than sit back and trust the team to execute. Because there is such an abundance of opportunities to choose from, holders will bounce from one project to the next.
4/ A Criminal Lack Of Regulation
For a business to get listed on the stock market, it has had to jump through countless hoops to prove its strength and long term prospects for investors.
With Web3, it’s anyone’s game.
There is little to no regulation and very few people have been held accountable for the gluttony of rug pulls.
Added to this, developers are in high demand which often sees them working across multiple projects in unison. These mercenaries move from one to another — usually undoxxed.
Too often, a project’s mint will go awry and the team will blame the developer for a faulty contract or for malicious intent. It then comes out that they were a contracted agent, with no attachement or affiliation — with whom they paid (badly). No wonder it went to sh*t!
It’s seen as surplus to requirements to have a developer as a core member of a team; a huge oversight. This has been the downfall of many a project.
Some progress has been made. The Frosties founders were arrested and charged by the DOJ for shutting down their Discord and taking ~$1.1m of ETH with them.
However, $1.1m is peanuts compared to the amount drained by other notable rug pulls (for the sake of keeping my nose clean, I’m not going to highlight projects that have not legally been charged 😉 ).
The lack of regulation paves a clear path for bad actors.
Scammers and hackers are rife within the NFT space, preying on people with their more and more elaborate schemes.
This lack of regulation feeds into the patience game.
People fall for flash mints or to-good-to-be-true offers in their pursuit for a ticket on the next rocket ship. Unfortunately, this often only serves to lead to wallets being drained and more liquidity falling out of the hands of willing investors.
Conclusion
Given how well the year kicked off, we’d be excused for thinking that the rest of 2022 would be as fruitful. There really was a great deal to be optimistic about - Web3 was the land of opportunity, where fortunes were to be made.
In fact, what’s developed is a totally unhealthy ecosystem that’s fast outgrowing it’s (very) newly laid foundations.
The space must do more to encourage better procedures around white listing, community building and security education. Because if we allow the current state of affairs to be morally accepted, we’re digging a deep grave for the future of the Web3. It will be one entrenched in promoting bad practices that only serve to damage the space and not help nurture it.
That being said, there is plenty of reason to be optimistic and we must remain steadfast in our pursuit of redefining what it means to be part of this exciting industry.
Jojo
New Projects To Keep An Eye Out For
As mentioned before, the purpose of these articles is not to turn it into a tips blog — but I do like to highlight projects I feel are doing things right (IMO).
1. Dad’s
Dad’s NFT is the brainchild, or should I say father, of Rami Niemi — an acclaimed artist who has a a wealth of web 2 projects under his belt.
If, like me, you take a deep dive into his portfolio of work, you’d find a plethora of household names as clients. GQ, Vanity Fair, New York Magazine — to name only a few.
Dads NFT was first brought to my attention thanks to Markus Magnusson (Motion Markus) — the artist behind Invisible Friends. Markus announced Rami’s entrance onto Twitter back in March.
His entrance into the Twitter sphere was not just to quench some digital thirst, Rami was here to launch something. And we didn’t have to wait long, Dad’s was announced and I was immediately on board.
The collection plays homage to the dads out there — who come in all shapes and styles and from a variety of backgrounds. The dynamic range of teasers gives us an insight into just how deep the collection could possibly go.
They already boast over 30k Twitter followers and have collaborated with a brilliant array of projects — including Ugly Sweaters, Kibatsu Mecha and Dippies.
I am a huge fan of the project and can’t wait to see it come to life.
Launch is expected sometime before US Father’s Day, and there is currently no Discord.
Special Mentions
Thank you Otterman for the bespoke meme for this article. :)
Thank you Ugly Sweaters! They’ve immortalised Manors Golf into a handsome bear for their upcoming spring collection.
I couldn’t be more proud!
This is not financial advice. For the purpose of this article I have intentionally not focused on global market conditions but just the forward outlook within the NFT space.
About The Author: Jojo Regan
I am passionate about writing and cover stories that range from interviews with start-up founders, artists or the NFT market as a whole. I have no fixed agenda, and will always make it known if I have a vested interest in any of the things I write about. All statements are my own opinions.
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