The market is subject to cyclicality, we are now in the dump stage and there are several reasons for this:
1 Withdrawal of huge sums from the market.
The amount of funds of NFT speculators is limited when a powerful sale occurs (Meebits in mid-May, Larva Labs collected and withdrawn $ 90M from the market) - the market freezes and goes into a dump.
2 The nature of speculation
NFT cycle: I bought it for cheap, the price soared 30 times, I sold it, I went to look for a new sparkling collection.
From July / August 2021, miners, influencers, as well as unethical teams began to interfere with the cycle.
Miners / MEV extractors: they saw that they can buy out almost the entire collection. Now a standing sale - gas for 5-6000 gui.
Miners buy up 30-50% of the collection, their cost per 1 NFT in terms of gas costs becomes 0.5-1 ETH, which forces the project to be dumped on the secondary in order to recoup costs.
Influencers: In keeping with the best traditions of 2017, crypto-twitters realized that you can manipulate the crowd, only unlike the ads for scam coins that you can grind for, in NFT - the shilling cycle is like: “Oh! cool art ", changes the avatar (while receiving several NFTs as payment), after waiting for a small pump, he drops the NFT below the market. Ale op, I have 5-10 ETH in my pocket, but the fact that the collection fell 3 times the next day - well, we are here behind beautiful avatars, it's impossible to accuse the influencer that you bought a JPEG for 0,13$.
Unethical team: some projects have mastered the development cycle:
- artist with FIVER, $ 500 for drawing art
- list of influencers compiled
- make givas on Twitter, so 5-10 thousand people will run into discord
- play 10% of places in WL for discord players
- 40% of WL places to distribute to your own, insiders
- to wash up the secondary sales market before the public mint (conduct deals for 1-2 ethers so that speculators rush to buy the collection in the hope of converting 0.05 ETH mint into 1-2 ETH profit at once)
- dump the market with insider NFTs, start coming up with a new collection - rhinos / lions / zebras / pandas / smoking babies / I think you get the logic.
3 Transferring money
After a powerful bull run on the cue ball in February-April 2021 - money flowed into dog meme-coins, Vitalik Buterin and the Chinese FUD cooled the market until July 2021, meme-coins fell by 90-95%, FTX is raising $ 900M of funding and practically in one person, the crypto market is deployed at the end of July 2021. Almost 30 days of non-stop growth, all alts doubled / tripled and went to transfer money into the hot topic of NFT.
Aug. Sept. The first collections take off, the NFT 10K collection collects a turnover of 5-10K ETH from the market, the market begins to fill with low-quality projects, miners, and scammers.
When collections cease to feel good in the secondary market after a couple of days, influencer pumps begin to disappear within 24 hours, capital starts to flow to where?
You read that right - back to the dog meme-coins (October 2021), here you have SHIBA INU for $ 45B and DOGE COIN for $ 40B.
Due to the rise of memecoins, the network, which favored the development of NFT in August-September (30-70 gwi average gas, put up for sale NFT - $ 25), due to dog madness - gas stably holds for weeks above 100 gwi, which means - put up for sale - $ 100-150, accept a bet - $ 200-300 - almost certain death for the NFT market.
Beginning of November: current state - the played SHIBA INU pump ends, wallets with $ 5B are in motion, degens receive a leisurely -50% free gift in a couple of days.
Gas will begin to drop by mid to late November and the market, fed up with meme coins, will carry its money into the shiny new NFT New Year collections.
And then, the cycle will repeat itself over and over again.
Translation from: DEFI Scam Check
https://t.me/Defiscamcheck
