IofMind

To Flip or Not to Flip

  If you're active in the NFT space, then chances are you want to make some money. If you're a creator, you want your NFTs to sell. If you're a buyer, you want to buy NFTs that appreciate in value over time. Now that's obviously an assumption; I'm sure there are a select few buyers in the space that have absolutely no intention of ever attempting to make money off the NFTs they purchase, but if that was the majority of collectors in the space, then the prices of NFTs would be far lower across the board. Intuitions wouldn't be trying to get in on the action if that was the case, & you would rarely hear anything about NFTs if that was the case. So I think it's fairly safe to assume that the majority of buyers that are "collecting" NFTs are doing so under the impression that there's money to be made off these collections. I say "collecting" because there definitely are NFTs that people buy simply because they like the art & that they wouldn't sell even if they had the opportunity to make money off the initial purchase. NFTs of this sort are the one's that people choose to display as their profile pictures with no intention of selling, but the "buyers" were referencing here aren't one and done; they're collectors. 

  So how can a collector see to it that their activity in the space actually translates into something of monetary value? Well, they have to flip their purchases for a net positive; to put it simply, they have to buy art at lower price, and sell it at a higher price. For some, this sort of behavior put into action comes across as "morally gray." For one reason or another, flipping art just comes across as greedy or wrong, but the reality is that we all want to flip art. It's the primary reason that people buy NFTs that they have no intention of displaying as their profile picture, & its a driving force behind the demand for NFTs. Nonetheless, it can sometimes put creators and potential buyers at odds with one another. Creators can earn royalties on secondary sales of their pieces, but those royalties on an individual unit level pale in comparison to the amount earned by those who successfully flip many units. This potential scenario can lead some creators to list at higher prices, which in turn results in frustration on the buyer side when the margin of potential profit from secondary secondary market sales is greatly reduced. 

If a creator is selling NFTs on the initial drop for 10 Algo, and then buyers are able to flip their purchases for 150 Algo, then the creator will receive a cut of that secondary sale, but not nearly as much as the buyer that successfully flipped the NFT. Now the creator obviously wants to make as much as they possibly can from sales of their Art, & most people would argue that they deserve to earn as much as possible given the fact that they are the ones that created the thing of value central to the transaction. So in many cases, creators will increase the price on their drops, which in turn can lead to frustration on the buyer side. When prices are increased, then profit margins are decreased, and if those margins are decreased enough, then the buyers will likely look elsewhere. On top of that, those who are actively participating in the secondary market of that project will feel the effects of this change. If demand for initial drops decreases enough, secondary market buyers and sellers can indirectly interpret this as a signal that the NFTs aren't actually worth as much as they initially believed. whether or not thats actually true is beside the point, the point is that the change in demand, if significant enough, will result in a market adjustment of some form depending on how people react. Now the problem is there's really no way to actually know how people will react, or whether they'll react at all, but what is clear is that a change occurred in the market. Being that this change occurred & uncertainty was introduced into the economic equation, holders and secondary market sellers are now in a position where their initial valuation is essentially outdated. They bought & acted based on the previous market conditions which are now different, and in many cases these individuals will perceive this change as a reason to get out as to avoid having to readjust their valuation based on the new conditions. Now if this change is apparent enough, then the vast majority of sellers in the secondary market will simultaneously move to quickly sell as to avoid the consequences of this uncertainty and the result will be an increased supply alongside a decrease in demand. This described scenario is when floor prices on projects begin to drop & panic selling manifests.

  Creators obviously want to avoid this, but they also want to make as much as they possibly can from their creations, so what can be done? The reality is that there is no definitive answer; humans are extremely unpredictable, and the slightest change in external conditions can result in a range of potential reactions and outcomes, but what is certain is that the potential for an NFT to be flipped for a profit plays a central role in the demand for said NFT. If the secondary market is reflecting high prices for a given project then that project is benefiting from the increased demand that is a direct consequence of buyers perceiving that project as an opportunity to flip the art and run a profit. Now in a perfect world people would buy art and value art solely based on their enjoyment of that art, but we don't live in a perfect world. The reality is that a large percentage of the demand we see for projects comes from the fact that people perceive those projects as ways to make money. This evidenced in the potential market shifts and changes in floor price that can occur when creators raise the prices on their drops. On the positive side tho is the fact that this perception of art as a means to make money through flipping it, is driving demand for art, increasing the amount of art in circulation, & making the role of a "creator" an economically viable entrepreneurial opportunity. Flipping Art is quite literally increasing the value of art and artists in the wider economic market. In many cases people would have never even heard or seen certain art pieces if it wasn't the case that those art pieces were being sold on the secondary market for extremely high profits. Money is the ultimate way to draw attention to something, & drawing attention to art and artists is a fundamentally good thing. So while it might not necessarily be our first impression of the behavior, flipping art really is a good thing, and I'd even go so far as to argue that if you really enjoy a collection or an artists work then one of the best things you can do to show your appreciation is flip that art for a profit so as to increase demand for said art at drop. We shouldn't be hesitant about flipping art, on the contrary, we should be actively trying to flip art so as to draw attention to the space and generate increased demand for artists work within the space.

The Cryptocurrency space is absolutely blowing up. Every single blockchain seems to be doing the next big thing, and technically, they are. The amount of enthusiasm that is just seeping from every ecosystem is awe-inpsiring. Across the world, many brilliant programmers & artists are grinding away, trying to pave the way for a fundamentally new economic system. You'll find these committed & passionate individuals within every crypto community & within every crypto community you'll find die hard believers in the future of their favorite blockchain. So what gives? Why doesn't it seem like there's really a clear winner in the pack? Well there's a number of factors we need to consider:

1. There's money involved. This is an obvious one, but it's nonetheless an important factor to consider. Many of these people that are borderline preaching their faith in a specific blockchain are heavily invested in said blockchain. This means they have the most to gain when adoption is concentrated in the ecosystem they bought into. You can't fault them, this is basic human behavior & most people will do the same.

2. Different Values & Features. Different chains function differently. There's nuances in the technical details that the average person would never think about, but people close to the technology feel a deep sense of commitment to a particular implementation. They have a distinct vision for what this implementation will lead to in the future. The only way to really understand this is to read up on the block size debate from early on in Bitcoin's history. 

3. This is revolutionary technology. It doesn't matter what blockchain you choose, if it's a semi-legitimate project, then the team behind it is working on cutting edge technology & problems at the forefront of innovation. Great minds want a chance to leave their mark, & a lot of people are trying to get into newer ecosystems as a way to establish themselves early on. This trend will continue for some time until the underlying infrastructure is really optimized for its purpose. Until then, you can expect more and more projects to pop up, on a range of different chains; each gaining the spotlight for a given period of time. 

4. The hype creates uncertainty & FOMO from the people who didn't buy in early. You see this constantly across the ecosystem, enough so that I'd argue it's reflected in the change in the market cap of crypto at large. You'll see huge amounts of money flow into an ecosystem suddenly and then move on to the next one. This kind of behavior creates a sense of uneasiness in a lot of people that have money in the space, & can lead them to doubt their commitment to one particular project vs the new hyped up one. The reality? Hype goes back and forth.

The complete list of factors influencing behaviors in the crypto ecosystem is obviously much longer than these four points, but I believe these to be very important factors to consider. The situation is something like this: we are living through a time of unprecedented levels of innovation, and we are following projects that are deeply entrenched in one of the most revolutionary economic events in recent history. We can't even begin to understand what the future holds because so much is happening so quickly & no one can definitively tell you what's going on or what's going to happen. We really are in uncharted territory, and because of this, the only logical way forward is diversification & attentive research in the space. It just doesn't make sense to keep your eggs all in one basket in this scenario; the future is just too uncertain. When it comes to calling one winner over another it's a blind endeavor, but what is certain is that crypto is here to stay & the technology will radically transform the economy of tomorrow. So rather than choosing one blockchain & one community in the space, choose them all. Embrace the totality of the crypto space, and go explore the platforms of tomorrow with an open mind. See the ideas spanning the entire space; buy into good ideas not ideas that conform with your beliefs, & set yourself up to harness the power of the technology of tomorrow by maintaining a Blockchain Agnostic stance. One blockchain won't come to dominate all the others, a variety of high quality projects will coexist ~ each with their own communities, unique features, & niche use cases. Explore the whole space & commit to the whole space; tribalistic identification with specific blockchains will only lead the ecosystem to destroy itself from the inside. It's about the underlying technology.

~ Liam (xlpqii), "Blockchain Agnosticism: What & Why?" IofMind, 2021.