We’re about to see a wave of roadmap NFTs run out of money. This means they’ll close their doors, do community transfers, and more or less conclude whatever roadmap they had planned.
In this video I explain why the situation is likely worse than people think, and why I’m staying away from certain projects even though they ”look cheap” after dropping 70-80% from their highs.
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0:00 start here
1:30 how roadmap NFTs raise money
2:53 where did the money go? HUGE problem
5:57 REVENUE (no one is making it)
7:05 going broke (time bomb)
9:12 the risk spectrum
Warren buffett once said only when the Tide goes out do you discover who’s been Swimming naked well if you look at nft Prices lately you can tell that the tide Has most certainly gone out and there Isn’t a single bathing suit in sight It’s a straight up nude beach hey guys So i’m making this video to answer a Question that i’m getting a lot lately You see people are noticing that certain Nft floors have dropped by 50 60 70 And at the same time you have the value Of each that has also dropped by 70 And so the combination of the two is how You’re leading to these crazy looking Price drops like board apes which at one Point dropped to 85 000 from 450 000 a Couple of months ago and so then they Come to me you know after they’ve proven That they’ve been smashing the like Button over the years and they asked me Is this a good time to buy because i see The discounts and i’ve also seen those Quotes about why you should buy when There’s blood on the streets and the Streets are certainly looking bloody Right now well you might not like me Very much today because i’m here to tell You that even though things look ugly Right now It’s very likely that they’re about to Get much worse specifically there’s a Ticking time bomb in the market and over The next few months we’re going to see a
Lot of collections go completely bust And so buying the dip right now is Basically like handing somebody a life Raft but also while taking their place On the sinking ship but don’t worry stay To the end because i am gonna finish off On a high note and talk about some nfts That might not be as exposed to this Coming risk now to understand what this Time bomb is you first have to Understand something very important About how these nfts are set up in the First place and specifically i’m talking About road map nfts you see roadmap nfts Are basically startups that begin with a Vision for how they want to scale up Some brand and then they need to fund That vision and the way they do so is Typically by selling nfts and let me Illustrate how this might work so Imagine that your boy came up to you and Said hey guys so i’ve partnered with This amazing artist and we’re going to Develop 10 000 of these dope chihuahua Nfts and trust me when i tell you that This is going to be the next disney okay So a year from now we’re gonna have that Netflix special we’re gonna have a game On the switch and it’s just gonna turn Into a household brand but to do this of Course we have to raise a little bit of Money and so i sell those 10 000 nfts at A mint price of 0.08 eth which gets me To 800e and let’s say i did this a while
Back when eth was at 3 000 And so that gets me to 2.4 million Dollars now let’s say that we also got a Bunch of secondary trades on openc right I was able to hype this up i got a bunch Of flippers that came in and so after About a month we had a thousand eth in Volume and i had a five percent royalty On there which leads to another 50 eath Or a hundred fifty thousand dollars so All in let’s say we have roughly 2.6 Million dollars now you might say that’s Not so bad right we got 2.6 million Dollars that might be enough to just get This to work but of course the story is A little more complicated than that Because first off you have to pay your Taxes right and here in the united States uncle sam wants his cut in Exchange for you know a little Protection and in the u.s revenue from Nft sales is considered ordinary income Which ranges from 10 To 37 percent but in this case let’s Take a middle ground of 25 so all in you Would owe 600 000 in taxes and this Could be even higher if you include a Self-employment tax but we’re taking a Conservative road here and by the way Guys keep in mind that taxes are based On the price of eth at the time that you Made your sale now if you moved all of Your treasury into stables before eath Crash then you’re gucci but if you’re
One of those teams that kept a large Percentage of your treasury in eth then It might be a scenario where you owe More than you actually raised and trust Me there are a lot of zombie projects Out there they’re not going to tell you Of course but some people are going to Be screwed but anyways in this case we Assume they did the right thing and They’re left with 1.8 million dollars And so here you might say okay that Still sounds pretty good right and if i Assume that the creator just pays Himself only a hundred thousand dollars Or something like that then that still Leaves a lot of money for the project Itself but here’s the thing let’s be Real why on earth would you believe that The creator is only gonna take a hundred Thousand dollars for their personal use Was that in the contract that you never Sign because let’s be honest you Probably haven’t even entered the Discord before minting let alone ask for A detailed assessment about how they’re Gonna use their money like i’ve Literally gone through thousands of map Nfts over the last year and There’s gotta be less than a dozen Projects that actually gave a detailed Breakdown of their budget so in most Cases you can safely assume that the Creator is taking a very large Percentage of the money raised you know
I remember when doodles came out i was Impressed that they were even willing to Commit i don’t know somewhere around 30 Of the mint to a community treasury Intended to develop the doodles brand Think about that okay at the time Committing even 30 was seen as a big Deal because in reality most nft Creators take over 50 Of all the money raised okay and in many Cases they’re taking 90 or they don’t Even give a number at all so let’s say That with chunky chihuahuas we go with The doodles ratio and decide to pocket 70 of the money raised that means that From the 1.8 million dollars about 1.3 Million dollars goes to me crypto walt Disney which leaves about 500 000 for The project itself now i also have to Keep the lights on so i hire a couple of Community managers a developer a collab Manager maybe a personal assistant and All of a sudden i’m spending 50 grand a Month which gives me a runway of less Than a year before i completely run out Of money and keep in mind that’s just For a baseline team right if this were a Project where i was trying to create a Game or buy a bunch of metaverse land or Produce a netflix series then obviously My runway would be a lot shorter because Those projects are way more capital Intensive but again this is just a Bridge until we can create a sustainable
Business ourselves right and so maybe we Should start thinking about how we’re Gonna actually make money now Traditionally projects have relied on Two main sources of revenue okay you Have number one selling a companion nft To the public and then number two Relying on a continuation of secondary Royalties so let’s start with number one Okay what’s a chihuahua without a home In the metaverse right and so i Naturally come out and say that the First step on our roadmap is to launch 20 000 chihuahua bags so half goes to Existing holders half gets sold to the Public and it’s a great way of expanding The community before our big netflix Special now the problem here is that Even if creators are able to sell a Million dollars off of this second Collection chances are they’re just Gonna pocket 70-90 of that anyways and So it’s not really the cash infusion That you might hope and that’s if They’re even able to sell right because Now more recently we’re seeing even Well-known collections like forgotten Runes having to pause their public sale Completely just because people weren’t Buying in then if we look at revenue Generator number two which are the Secondary royalties yes that worked for Some time and collections were able to Make some millions of dollars off of
That but now we see that the volume has Completely collapsed and so going Forward we can probably kiss those Royalties goodbye and so ladies and Gentlemen here’s where we get to the Ticking time bomb see a large percentage Of these road map nfts are slowly but Surely running out of money and as far As i can tell no one has really figured Out how to turn a collection into a Sustainable business meaning that Basically nobody is making more money Than they’re actually spending now Obviously this is a huge problem but it Gets even worse because if this were a Normal startup then sure things could be Bad for a while but at least you have a Founding team that is incentivized to Stick with the project over the long Term because first off when they receive Funding they don’t just pocket it right Most of it goes to the project and then From that they pay themselves a modest Salary beyond that startup founders Usually take an equity package that Comes with a vesting schedule and this Means that their shares unlock over a Period of time usually more than a year That keeps them engaged because they Aren’t rich yet and their best chance of Getting rich is to get their startup to Work but nfts are a completely different Story because not only is the creator Rich from day one as we said they’re
Pocketing most of the money but also There are no vesting schedules that tie Them to the project over the long term Not only that but there’s a legal gray Area around the fiduciary duty that they Have to their holders in other words It’s not clear if there are any Repercussions at all if they were just To say well we tried our best and then Just walk away so what does this all Mean well it means that if we stay in a Prolonged downturn where these creators Still haven’t figured out how to Generate revenue and they no longer have Secondary royalties coming in then They’re just simply gonna run out of Money and if they see the writing on the Wall then chances are that many of them Are gonna leave early with the money That’s left instead of just burning it All the way to zero so before buying Into anything just because it’s off 80 From its highs i recommend going into The discord and just straight up asking If you can see their treasury wallet or If they’re keeping their money off chain Then at least ask them to make some kind Of comment about how much runway they Have left and how they’re going to use The remaining funds the last thing you Want to do is buy into a collection that Has maybe two or three months of runway Left because there isn’t really going to Be even collectible value around these
Nfts that were built around a promise so Most likely when they close for good It’s just gonna go to zero all right so As i promised let’s go through some nfts That might not be exposed to this coming Risk so if you think of this as a Spectrum then at the top you’re gonna Have the nft funded roadmap projects as We said most of these raise you know a Couple million dollars the creators Probably pocketed most of it and so they Almost all have less than our year of Runway left next you have the top one Percent projects so these are going to Be your board apes your doodles or your Moon birds and so on these are going to Be collections that have generated Enough money where they can weather the Bear market and they’re also closer to Figuring out how to create an actual Sustainable business you can also Include pfps like clone x that are Funded by a large corporation in this Case nike after that you have your cc0 Projects which don’t really rely on a Centralized roadmap and it was always Going to come down to the community to Figure out how to grow the ip and then Finally at the bottom of the wrist curve You have art nfts which don’t rely on a Road map at all so there you have it as You can imagine i would recommend Staying away from that top part of the Risk spectrum because even though many
Of those collections are off you know 70 Or 80 from their highs if you ask me the Chances are that they’re probably gonna Close for good within the next six Months thanks again for watching i hope That was helpful and i’ll catch you the Next video
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