NFT Trading Strategy

Market Meditations | August 26, 2021

1️⃣ Short term flipping

Method 1: Riding Momentum

When you see prices soaring and huge figures like Gary Vee buying an ape punk for $3.7 million, you’re normally near a top or about to explode. This was the latter and someone like KeyboardMonkey flipped a punk for $1 million in two days.

This is our preferred method when trading crypto. The principles of trading a trending market carry over. When popular accounts and influential figures start to invest in something (such as CryptoPunks) there is the opportunity to quickly buy and sell to take advantage of growing hype/interest/momentum.

Easier said than done, continuing on the CryptoPunks example, many people are scared to enter a trend (leveraging events such as VISA’s CryptoPunk purchase to claim a ‘top signal’).

Despite the consistent rise in the price of CryptoPunks, when the news came out that VISA bought a CryptoPunk, people like cryptonekoz leveraged this to flip two punks for +$50,000 and +$200,000 profit.

The idea is simple: Spot hot news as it happens (using twitter, newsletters, networking or discords) and profit off of the trend.

Method 2: Identify a narrative and look where others aren’t

Andrew Steinwold came on the Market Meditations podcast and really blew us away with his NFT expertise. Our first podcast with Andrew is available here and we’ll be releasing another via the newsletter tomorrow. He explained another short term strategy: look where other people aren’t looking.

This is a lot more difficult. The win rate is lower but the upside is higher. You can get trapped in highly illiquid positions so risk management and patience are essential. You also need to know where to look. That’s where daily newsletters like the Market Meditations and Zima Red can really give you an edge. Making you aware of emerging trends and themes before they skyrocket.

? How to get burnt: 

  • Mistaking short term plays for long term strategies. The goal here is to get in and out quickly. This will require emotional discipline. You’ll see the trend continue and you need to be able to sell. You can’t get greedy and hold on beyond your pre-determined sell point (the level of profit you deemed a success before you entered the trade).
  • The trend will reverse or end at some point and the idea of a short term play is to have exited by that point.

2️⃣ Long term investors

Similar to investments in DeFi, long-term investors invest in NFTs because they believe in the long term use case and product market fit. Perhaps, you decide to invest in DeFi because you believe that long term, traditional finance is unsustainable and has significant shortcomings that are addressed to a large extent by DeFi. In a similar fashion, you may believe that NFTs and digital ownership which can be tracked on the blockchain are the future of: art, music, gaming, land ownership and more.

One of the features we love about crypto and NFTs is the option for long term investors to actually become contributors to the success of the project. Taking Axie Infinity as an example, the Play to Earn NFT game, a lot of the investors are gamers. They are streaming, interacting with the community, adding value and helping build the community and game!

Find something you believe in and are passionate about then immerse yourself in the industry/asset.

? How to get burnt:

Don’t be a long term investor that can’t afford to hold through the dips. That means, you can’t sell to pay your rent or to buy a present for your friend’s birthday. You need to set aside funds that you will not touch for the long term. If you’re a long term investor, short term bumps are part of the game.

0