With the total market value of the cryptocurrency market approaching the $3 trillion mark, the NFT market has encountered a cold winter, reaching its lowest point in a year. Is it time to buy the dip? This question can be answered by analyzing the fundamentals and on-chain data of the projects.
Table of Contents:
NFT market value shrinks by 50% compared to a year ago
Fundamental analysis
On-chain data analysis
While Bitcoin continues to reach new highs and the total market value of cryptocurrencies reaches a staggering $2.7 trillion, the NFT market seems to still be in the midst of a winter, with both market value and trading volume continuing to decline significantly.
According to data from NFT Go, the total market value and trading volume of the NFT market have decreased compared to a year ago. The current market value is only 2.86 million ETH, a decrease of 50.77%, reaching the lowest point in a year.
In particular, Bored Ape Yacht Club (BAYC), which is considered the first blue-chip NFT, saw its floor price drop below 13 ETH this week, reaching a new low since August 2021. This market performance undoubtedly makes many investors wonder if the NFT market has bottomed out and if it is a good time to enter.
Regarding whether the market has bottomed out, the following analysis by JZ Invest, a crypto analyst, evaluates whether a project is suitable for buying the dip based on the fundamentals of the NFT project and combines it with the distribution of on-chain chips to discuss when investors should enter.
To evaluate whether an NFT project is suitable for buying the dip, investors can ask themselves the following questions:
– Does it have support from large Web2 companies such as Memeland and RTFKT?
– Has it received investments from top VCs, such as Yugalabs receiving a $450 million investment led by a16z?
– Has it gained significant profits from primary market sales and is still operational? This can be calculated from the sale price and number of issuances.
– Does it have sustainable revenue models, such as secondary market royalties, other empowerments, or launching other series?
– Is the community culture and activity sufficient?
In addition, regulatory risks of NFTs must also be considered.
After evaluating whether it is suitable to buy the dip, the next step for investors is to determine when to enter by using tools such as Nansen and Opensea Pro to find clues about the on-chain chips. In summary, what we need to do is mimic the buying logic of smart wallets. Nansen helps us filter out suitable smart wallets, while Opensea Pro provides detailed transaction records of wallets.
Taking BAYC as an example, searching for it on Nansen’s NFT God Mode page will display the following chart. Yellow dots represent smart wallets, and it can be observed that after BAYC dropped below 15 ETH recently, 6 smart wallets made purchases. It is worth noting to exclude wallets that excessively accumulate points, which can be judged based on the frequency and quantity of purchases.
By upgrading to Nansen, investors can copy the address of the smart wallet and paste it into Opensea Pro to view its detailed transaction history and understand the buying logic of the wallet. The screenshots in JZ’s article illustrate possible trading strategies of smart wallets.
Through these analyses, investors can draw conclusions and find strategies that suit themselves (remember not to directly imitate, as whale wallets have inherent advantages in trading due to their large capital).
It is also important to consider the potential upside. By referencing historical highs of NFT floor prices and combining them with the long-term potential of the project, one can estimate the potential upside when the bull market returns. Only when the expected risk-to-reward ratio reaches an attractive level is such an investment strategy worth considering.
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