Token Smart

It’s time for another Friday Focus with yours truly, sponsored by @Meta_Winners (metawin.com/t/ac3c5180) This week, let’s talk about the significant ETH price drops we've seen recently across the majority of historic NFT collections. Over the last 30 days, these collections have been at the receiving end of a hammering of their floor price (ranging from 30-60% in ETH terms). With @BoredApeYC down 35.4%, @doodles down 52.9% and @azuki down 41.1%, according to @MagicEden. It’s worth noting that ETH itself is up just over 50% against the US dollar over the same 30 days. However, what people outside the market often don’t realise is that Ethereum NFTs don’t have a history of being tied to dollar values, unlike those on @flow_blockchain or @WAX_io. Essentially this means that they don’t directly and immediately relate to the price of ETH. So, what is driving this price action? Despite headlines suggesting NFTs are dragging behind, indirectly insinuating a strong connection between high Ethereum price and a sudden increase in NFTs, the reality is different. [1] History suggests that when we see substantial gains for major Cryptocurrencies, NFTs tend to suffer in the immediate aftermath. Interest moves away from NFTs as short-term collectors and speculators often chase money, volume and quick gains. @dlnews suggests that rising fees and Gas prices are to blame - and this can form a small part of the picture. However, if they assessed the patterns in NFT trading across the years or analysed events, like the @OthersideMeta mint, they might realise that if somebody wants a high-end asset, they don’t mind paying the fees to claim it. One of the major contributing new factors in this particular cycle is the growth of lending and loans against NFTs. The downward trends of the last 30 days have been strengthened by the mass liquidations of loans against certain collections. Users can now essentially ‘short’ or ‘long’ NFT collections and receive liquidity against their NFTs to purchase and borrow even more NFTs from the same collection. If the price drops, these loans can default and cause a spiral of liquidations - therefore dropping prices further and faster than previous cycles. The notorious high point of the last NFT market occurred in early May 2022, where BAYC hit a floor of 145 ETH. However, Ethereum had hit its all-time-high price of the cycle ($4,891.70) a whole 6 months before this, in November 2021. In this 6 month gap, countless traders and speculators moved away from the major cryptocurrencies and looked to invest their newly found profits into other assets, such as NFTs. NFTs also provided these investors with the ability to flaunt their digital wealth on social media and the blockchain. In Psychology, it is often said, “The best predictor of future behaviour is past behaviour”. Now, admittedly, our evidence is limited by only a short market history for NFTs. This aside, it could easily be argued that now is a good time to buy some of the established collections in ETH terms. It may not be the perfect entry point, but it could be seen as a strong one. [1] dlnews.com/articles/snaps…

Recently we've seen an insane number of Revoke.cash impersonation websites and Twitter accounts pop up, with over 10 being reported just in the past two days. See the thread below for a reminder of some tips to stay safe against these forms of phishing.