Last week, I gave you the rundown on why hip-hop is jumping into NFTs and you should too. Thanks for all of the love on that newsletter...my hottest post to date! Before we get too excited, I don't want any of you to become victims of the next Evolved Apes scam, where people lost millions on a fake NFT project...and the creator fled town like the Monorail guy on The Simpsons. So before you start exchanging those holiday gift cards for Ethereum, we have to discuss the flip side of why NFTs are not worth investing in.
Full discloser: My math education ended with the TI-89 calculator. Invest at your own risk. Remember, this is not financial advice.
Time Suck Sucks: It's past 1:00am. My eyes are bleary from switching between my phone and computer. I think I'm getting carpal tunnel. It's the same thing: Go to OpenSea to see if my NFTs have increased in value. Check the current price of Ethereum. Comment spree on Discord in hopes of getting on a whitelist for an upcoming mint. Scan Twitter for hot tips. Pray to NFT gods for Gary Vee to tweet out something to increase the floor price. This is the life of flipping NFTs. The continuous loop of research, engagement and buying/selling is very time consuming. It's a full-time job. Unless you're living a life of leisure or living in your Mom's basement (and using your earnings to buy another sweet Yeezy x Gap jacket), who has time for all this?!
Wild, Wild, West: NFTs are the wild, wild, west. There's zero regulation, no rules and no playbook. Anyone who says that they're an "expert" is lying. It's all speculative and we're just throwing money at jpegs to see what sticks. I mean, look at the awful photo in the header of this post. Who would want that image? By the floor price, nobody does. So whoever got in cheap and sold at a profit is great. Everyone still holding onto this has a worthless NFT of a sad frog in a N-95 mask. Great. This could very well turn into the Beanie Babies bubble burst all over again. Nobody can predict what pictures of some apes will turn into "I'm quitting my day job" money while others will become "I need a second job to cover my losses" money. Even so-called NFT influencers like Gary Vee have warned their followers not to blindly play with money they can't afford to lose. This message is so important, Gary Vee literally Retweeted himself:
Killer Whales: Speaking of Gary Vee, a whale in the crypto world is any individual or organization that holds large amounts of bitcoins. According to some estimates, these baller investors hold over 80% of all NFTs. So, as much as NFTs are seen as the democratization of finance and opening wealth up to new demographics, for right now, the rich keep getting richer. You'll often see whales pump the floor price by buying up tons of NFTs in one swoop. And just like that...they can also dump them, leaving the
peasants regular people holding the now-worthless bag.
Gimme the Loot: One of the scariest things about dealing in NFTs is how vulnerable you are to being swindled. A few hours ago, I was in the Alien Frens Discord and unbeknownst to me, a hacker was sending out links that appeared to come from the official team. Long story short, the scammer got away with $124,000 of people's money which luckily, the owner of the project has offered to refund. But that's rare. There is no 911 to call in situations like this. Once the ETH is gone, it's gone. Pro tip: Open two wallets so that if you're ever compromised, you cut your losses.
Scammers Gonna Scam: If NFTs are a gold rush, then NFT scammers are the people selling the maps and shovels. See: Sam Brannan for a fun history lesson from the California Gold Rush. There's so many frauds in the NFT space, including insider trading at the marketplace OpenSea. Because hype is important in marketing and pumping the price of NFTs, celebrities, fake gurus and influencers in particular, are getting big checks to shill. I can't tell you how many clout rappers or Detox Tea connoisseurs I see pushing some NFT or new coin on Instagram on a daily basis with zero context or knowledge/passion behind it. Controversial rapper 6ix9ine allegedly bilked his fans with his new "Trollz" NFT (I guess the name said it all) and one reportedly lost $40,000 in the scheme. The Island Boys, who are social media famous for some reason I still can't figure out, are pushing NFTs of digital bonsai trees...currently worth $18.49. Yes, they have 1 million Instagram followers and only two people have purchased these terrible NFTs.
Dude, Where's My Roadmap? In many ways, investing in NFTs is akin to investing in a new business. One of the biggest tell-tale signs of a bad project is a team with zero experience and no direction. The rollout roadmap is vague, overly broad or simply nonexistent. We're going to launch a fashion line! And retail stores! And throw events! And run the free world! All from some clip art?! I can't tell you how many projects highlight nothing more than empty promises of providing "vibes" and doing things "for the culture". Spend a few hours in some NFT Discord servers or Twitter Spaces and you might feel like you're being wooed to buy a beach house timeshare in Idaho. When you get pyramid scheme or Ponzi scheme vibes, run!
Lucky for you, the NFT world is just beginning. We're going to see more established brands, financial institutions and credible names enter the space in the months and years to come. Don't let FOMO pressure you. You're not late- the party is just starting.
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