Using NFTs to Protect Your Profit

Market Meditations | September 22, 2021

With Bitcoin trading below $42k and Ethereum below $3k, many investors will be feeling cautious. A combination of the upcoming FOMC meetings and ongoing news surrounding Evergrande’s $300 billion debt crisis, means that recent volatility is likely to continue. In times like these it is important to remember alternative investments such as NFTs can play a role in protecting our profit and that we can use insights generated from Nansen to help!

Source: Nansen (Top 5 Projects by Market Cap)

A quick glance at the top 5 biggest projects by market cap gets us off to a great start. We can immediately note that Art Blocks appears twice in the top 5 with a combined market cap of 550,990 eth ($1.6 billion). So what is Artblocks?

  • It is an NFT platform that hosts curated generative art – where a computer script is written with certain variables that are then altered on a random basis.
  • Because the art is itself code, this can be fully stored on-chain – unlike some other NFT projects that require metadata to be stored on external websites.
  • The reason for the multiple entries is simply because the project uses different smart contract addresses, with the 0x05 address being used for older collections.
  • The project clearly shows the value in generative art, and the value the NFT community put on the ability of the entire NFT on-chain.
  • Diving deeper into the 0x05 address also shows that older, established projects have responded well to the ongoing volatility in other sectors of the crypto market.

With Nansen, not only can we identify narratives and make decisions based on long term shifts, we can also identify shorter term NFT plays. Looking at new projects only (those created in the last week), the biggest project is Anonymice. This is currently sitting at a market cap of 39,371 eth ($116 million) after being created only 6 days ago. Interestingly, just as with Artblocks, this is another generative project that is fully stored on-chain. We are also able to gauge credibility by looking at how many smart buyers are currently buying into the project.

Source: Nansen (Anonymice Sales)

Each dot represents an NFT sale to a legendary NFT collector (a wallet that is in the top 0.1% of ERC-721 token transactions). We can see clearly that smart money got involved in the first 2-3 days after launch but have bought far fewer of these in the past few days. This means we may be best placed to track the project, while looking for new generative art projects.

Like all areas of crypto, the NFT market is cyclical and paying attention to key narratives is what will allow us to profit. Using Nansen we are able to find these long term narratives and identify projects that may give us a potential safe haven for our hard earned crypto gains.