Paper 2: Which NFT should I buy?

bcheque.substack.com/p/paper-2-which-nft-should-i-buy

NFA: A sensible way to enter the NFT market

As the “NFT market” continues to grow substantially, collectors and investors -

particularly new entrants - are exceptionally worried about buying the “wrong” NFTs.

The fear of being “left holding the bag” is reflective of an ecosystem which has become
hyper-financialised and the subject of wild speculation.

In this Paper, I explore the important factors to consider before buying any NFT. Next
week I will provide a case-study on how I’ve applied this thinking myself.

(A) Why do you want to buy an NFT?

At the outset you need to be honest with yourself about why you want to buy an NFT.

Do you love art? Do you love the tech? Are you trying to retire ASAP?

The thought process for spending your hard-earned money on digital assets should
operate no differently to when you buy IRL things: some things are out of necessity; some
things for pleasure; some things as a store of value; some things might be more
speculative and '“for profit”. At all times, however, what you buy is within your means.

What is important to consider is that IRL, with the benefit of experience and hindsight,
we have broadly distinguished between what is considered necessary, recreational,
speculative, and a store of value (with some overlap but clear distinctions).

With NFTs, however, the differences between ‘store of value’, ‘speculation’ and
‘recreation’ are far more difficult to discern. This is because no NFTs (or relatively few
NFTs) have been around long enough to provide certainty that they have staying power.

For this reason, it is important to recognise that almost all NFTs right now are quite
speculative - there is no guaranteed safe haven.

(B) What different types of NFTs are there?

NFTs are not homogenous. It’s useful to understand there are very different types of NFTs
before we consider how to evaluate them for purchase.

(i) Art

Some of the most well-known NFT art platforms are SuperRare (the most OG), Async Art,
KnownOrigin, MakersPlace, and Nifty Gateway.

There are also new(er) NFT platforms like Feral File, Institut, Blockparty and Aorist.

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 Defaced @Defacedstudio
'The Guest' Now available for bidding on @Blockparty 🌟🎨🤖💘
December 22nd 2021

27 Retweets152 Likes
The Guest, by Defaced: Launched on Blockparty

(ii) Exclusive Membership / Access Token

Holders of Gary Vaynerchuk’s first NFT offering will all be granted access to VeeCon, a
huge conference in May 2022, which can only be accessed by token holders.

(iii) In-game Items

Star Atlas, a next-gen gaming metaverse on Solana, sells all sorts of kit, equipment and
vehicles which users can own and use in-game.

(iv) Shared Ownership

The Pixel Vault Founder’s Dao Token represents proportional ownership of the Founder's
DAO Vault (approx. 600 ETH of value at the time of minting).

PUNKS Comic @punkscomic

The Founder's DAO has been established using a Gnosis Safe Multisignature Wallet at
FoundersDAO.eth. It contains 25M $PUNKS tokens, which represent the 16 CryptoPunks
fractionalized by @fractional_art earlier this week. You can view current DAO NFTs here:
opensea.io/0x580a96bc816c…

July 28th 2021

63 Retweets325 Likes
(v) Redeemable for Physical Items

The Adidas Originals partnership with Bored Ape Yacht Club, Punks Comic, and GMoney
will allow token holders to claim 4 different physical clothing items during the course of
2022.

adidas Originals @adidasoriginals

WEN? EARLY ACCESS MINTING STARTS NOW 👉
adidas.com/into_the_metav… First
look of the collaborative NFT with @gmoneyNFT @punkscomic and @BoredApeYC Good
luck and #TracksuitUp

December 17th 2021

1,925 Retweets8,804 Likes

The most desirable of any of these types of NFTs seem to come with status and the
potential of huge financial gain.

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(C) What are the factors that should determine the purchase of an NFT?

These factors should be considered holistically. On different occasions you will decide that
certain factors outweigh other factors.

These are just my thoughts, interwoven with the wisdom of Batsoupyum in the below
tweet and Loopify’s article (two very prominent collectors/investors in this space).

batsoupyum @batsoupyum
Here's my guide on how I value #NFTs. It is by no means comprehensive, so please add to
it in this thread! Let's start with a basic equation for how I think about it:

December 20th 2021

84 Retweets433 Likes
(i) Price / Supply

Only buy what you can afford.

Compare price of NFTs with comparable projects/works, previous sales, and take into
account supply.

(ii) Aesthetics

If you like the look of something, chances are someone else might think the same thing.
(What looks good is obviously highly subjective.)

This In Search of Aesthetics article by Artnome is an illuminating read on this.

(iii) Founders / Artist (and their Community)

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If you want to buy into a founder or an artist, you will want to get comfortable with those
leading the project.

Pay attention to how they plan, deliver, and communicate (when things are going well +
when things are going badly.) Research them on the internet. This is where we live!
Observe their habits. Do you believe in them?

You can get a great sense of who they and their fans are by joining the Discord (the online
chatroom where the founders, moderators, and community members hang out).

Spend some time there and figure out if you want to be a part of that particular crowd.

Separately, OG artists/teams are those who have been around in the NFT space before it
was popular or lucrative to be here. These people might command higher prices.

To consider who those people might be, dive into this informative thread by @2Yeahyeah.

YeahYeah / BEEPLE EVERYDAYS #5336 / Punk638 @2Yeahyeah

46/

October 24th 2021

3 Retweets46 Likes
Finally, this article by Artnome is foundational reading.

(iv) Trading history

Check the trading history on Opensea. You can see who is buying, when they are buying,
and how often.

A strong and steady volume is obviously much more encouraging than a project which is
struggling to make any sales on the secondary market.

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Secondary Sales: in the ‘Activity’ tab on Opensea you can monitor price history and
previous sales

(v) Distribution

It is often quite important WHO is buying a particular project. Certain people are
motivated by a long-term thesis, and some are motivated by trying to sell quickly for
profit.

Researching who your fellow holders are can be useful to forming your plans.

Here is a very brief, non-exhaustive list of people who were helpful to follow in my first
year here.

BCheque @BCheque1

👇
HOW TO BEGIN IN NFTs A number of people have been asking me how to begin in
NFTs. So much is going on all of the time. Where to start? Here is my NOT definitive
guide of who to follow to develop your understanding based on my experience since the
turn of the year
November 2nd 2021

22 Retweets107 Likes
(vi) Market conditions

The broader market conditions can impact the price of NFTs.

When there is sharp volatility in cryptocurrency prices, for example, the NFT market
tends to slow down for a period of time.

(vii) Future

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Consider which events are taking place in the future that may impact your holdings.

There may be events like future drops, staking, burning, or collaborations which could
influence your decision on holding an NFT.

Alternatively, there could be absolutely nothing on the horizon. Are you comfortable
holding in that circumstance?

(viii) Utility

By providing you some tangible benefit from holding, an NFT might be useful or lucrative
for you. Consider how much utility an NFT has to you.

Final thoughts

Enjoy yourself.

One of the most enjoyable things about buying NFTs is that often it puts you in touch with
like-minded people.

People who like art; people interested in “digital ownership” and the implications of the
blockchain; people a bit tired of “centralisation” and Web 2.0; people who dream of a
more open, permissionless future; people who are happy to stick their neck out to bet on -
and defend - the future.

Thanks so much for reading. Happy holidays!

See you next week.

Disclaimer: The content covered in this newsletter is not to be considered as

investment advice. It is for informational and educational purposes only.

I hold some of the NFTs mentioned in these newsletters.

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