The NFT market is not in good shape right now. Since mid 2022, there has been a noticeable decline in the market’s performance. Smaller NFT collections started to plummet, some disappearing entirely over time. This situation seems to fulfill Gary Vee’s prediction that “99% of NFT collections will go to 0,” a prediction that initially seemed far-fetched to newcomers. Oh how we laughed at the time! Well, we’re not laughing now, are we.
Even well established projects such as Cool Cats and World of Women, projects run by doxxed teams with significant coverage beyond the Web3 bubble, suffered substantial losses and are now trading for under 1 ETH each. Undoubtedly, it’s been a disaster on almost all fronts.
During this period of upheaval, so-called “Blue Chip” collections such as Yuga, Azuki, Doodles, and Proof became safe havens amid the chaos. While their value did decrease, the rate of decline was significantly slower. Until recently, that is.
Is it all an accident? Or should we don our tin-foil caps and conclude there’s more to this?
The Fall Of Proof
Proof was the first to plummet. Their PFP collection, Moonbirds, had been losing value over time as holders grew frustrated due to the perceived lack of value associated with ownership, aggravated by founder Kevin Rose’s decision to make the entire collection cc0. This was contrary to his initial promise that holders would have the ability to licence their intellectual property from Moonbirds.
— JayJay (🥃, 🦉) (@_JayJay88) May 29, 2023
The final straw came during a Twitter Space session, where Rose contributed further to the decline by making comparisons to BAYC’s price drop and suggesting that Moonbirds’ decrease wasn’t as severe. The reasoning was because BAYC’s ATH was higher in USD, and thus more value in fiat had been lost, in a statement many labelled “bro maths.” Moonbirds proceeded to plummet further, most likely due to a lack of confidence in the man steering the ship.
“Floor It And GTFO!”
Soon after, Doodles faced a similar fate. Their secondary collection, Dooplicators, was minted, and these were being traded on secondary for quite a high cost due to rampant speculation. Rarely is that a good sign!
Founders take note: You tell ONE holder "floor it and gtfo" we ALL floor and go home. You need us more than we need you. A project is NOTHING without the community. You work for us, not the other way around. #nfts pic.twitter.com/sZbOqLm2pf
— Paulina Plazas (@paulinaplazas) March 16, 2023
After months of radio silence on the Twitter account, Dooplicators use case was revealed to be highly underwhelming, and the sell off began. The situation escalated when Doodles founder, Burnt Toast, advised disgruntled holders to “floor it and gtfo” if they were dissatisfied.
A Pattern of decline
Most recently, two collections have suffered similar troubles: Azuki and DeGods.
Azuki’s third collection, Elementals, failed to attract new money during the minting phase, and the subsequent art reveal caused the floor price to plummet from 15 ETH to under 5 ETH. The new collection’s art closely resembled that of the main collection, leading many, to anticipate further developments. “Perhaps this was a swerve and something even bigger was coming!” it was speculated. However, it turned out that the identical artwork was the team’s only plan, a decision that proved detrimental, and possibly only outdone by the team’s inaction following it.
Azuki really sold a 20K collection at 2 ETH exclusively to their own holders extracting $40MM only for the art to be revealed as basically identical to the main collection, immediately trading below mint and dragging its main collection down 40%. Bluechip bagholders in disbelief. pic.twitter.com/IYEZifJjBG
— ♡ Charlotte Fang 🐉 Crown Prince (@CharlotteFang77) June 27, 2023
DeGods faced troubles when founder Frank DeGods announced a shift from Polygon to Ethereum for their secondary collection, y00ts. Although some understood the rationale behind this move, Frank reneging on a deal that resulted in a $3 million loss from the project’s treasury shattered confidence for some onlookers.
The situation really worsened with the introduction of the “art downgrade” for DeGods holders, where PFPs could be updated using the native token $DUST. This change aimed for a more minimalist and streamlined aesthetic, a concept favored by some but vehemently opposed by others on Twitter. Although billed as “Season 3,” much like the Azuki problem, the differences between the pieces were not highly noticeable.
It must be said, among all of the instances mentioned, the DeGods scenario is the least egregious of the bunch.
So, what’s been going on here?! All these instances seem to boil down to founders taking actions that erode community trust. In many cases, doing nothing at all might have been a better approach. For instance, projects like Bored Ape Yacht Club chose to maintain their status quo, experiencing a decline in value but not the steep drop witnessed in the four examples mentioned.
Last Monday, Neo Tokyo News hosted a Twitter Space discussion on this topic, presenting various theories. One perspective shared by myself suggested that these floor demolitions were intentional, possibly to attract investors with deep pockets seeking lower prices. (For legal reasons, this theory was purely for entertainment purposes only!)
Another theory proposed by Citizen Capital’s CMO, Ben Gothard, was that allowing multiple “FUD bombs” to drop simultaneously prevents a prolonged period of value bleeding. While the impact is sharp, it would never drive the value to under 1 ETH eventually, as seen with Cool Cats and World of Women.
In fact, bombarding the market with multiple pieces of bad news at once might lead people to overlook or dismiss individual negative developments, thereby minimizing the overall damage. Moreover, it’s better to execute this in a bear market where price fluctuations are less critical than during a bull market.
Whatever the reasons are, it’s shown that no Blue-Chip is safe now. Aside from perhaps CryptoPunks, that is, which is more akin to high-end art than a utility driven PFP collection. Even then, time will tell.
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