18 “uncomfortable” truths about non-fungible tokens

by · August 29, 2022

Nonfungible token (NFT) analyst and blockchain detective “OKHotshot” has highlighted his picks for 18 of the most “uncomfortable truths” about the NFT industry.

In a long 20 part thread to his 45,000 Twitter followers on August 27, OKHotshot exposed many of the problems currently plaguing the NFT industry, including irresponsible celebrity endorsements, hacking, and the kind of projects that are almost always destined to fail.

The analyst made his name in the industry as a full-time chain analyst specializing in NFT audits and Discord security operating under as @NFTheder on Twitter.

Most NFT investors will lose money

One of the most sobering “unpleasant truths” shared by the NFT analyst is that most people will lose money investing in NFTs.

OKHotshot said there are “no reliable stable investments in NFTs” warning that if an investor hears the term “blue chip NFT” to “run away.” He also warned that “diamond delivery” is not the best way to make money, instead investors should take profits when they can.

“Not all of us are going to make it. Most NFT traders trade at a loss.”

Earlier, Cointelegraph reported on a poll that found that while 64.3% of respondents said they bought NFTs to make money, 58.3% claimed to have lost money on their NFT journey.

The analyst advised anyone interested in NFTs to stay on top of announcements, because “when you hear about a new project in the Twitter space, you’re late.”

He also warned that volume and liquidity are often more important calculations than floor price, and time is more valuable than any asset, so planning ahead is essential.

“If there are no buyers, you can’t make a profit,” he explained.

The majority of NFT projects fail

The NFT analyst also cautions anyone interested in getting into a particular NFT project early as tokens often fail to hold above the coin price, also adding that “derivatives rarely outperform the original NFT collections.”

NFT project Pixelmon sparked controversy in March this year after revealing the finished art for its long-awaited project – the quality of which turned out to be far below expectations.

The project raised approximately $70 million, with each NFT minted for three Ether (ETH) each. However, the floor price on the OpenSea NFT marketplace has dropped to just 0.26 ETH, worth approximately $370 at the time of writing.

Phantabear, another NFT project, was initially minted for 6.36 ETH and drove record trading volumes on OpenSea when it was first released in January, but has also seen a large drop in value since then, bottoming out at just 0.32 ETH ( $463) at time of writing.

A March study by blockchain analytics firm Nansen found that most NFT pools either don’t make money or end up making less than they cost to create.

Celebrities and influencers have no idea

Several of the shared “unpleasant truths” are cutting celebrities and influencers.

OKHotshot said that despite what famous influencers may claim or imply through social media posts, noting that “celebrity NFT projects are notoriously bad investments.”

He also added that “Web2 marketing is extremely ineffective in the NFT market.”

Recently, Cointelegraph reported on warning letters mailed by a consumer watchdog group to nearly 20 celebrities for their role in shilling NFTs.

Related: Justin Bieber, Paris Hilton among 19 celebrities called out for shilling NFTs

OKHotshot’s final point revolves around the idea that most NFTs have no intrinsic value. The analyst warned that NFT projects without terms of sale are worth nothing, and that NFT benefits do not go to downstream buyers unless specified in the terms.

“NFT projects with no terms of sale sell you a token ID with a hyperlink to an off-chain asset. Without terms, nothing is defined. You can’t own a hyperlink, so you probably haven’t bought anything.”

That said, he believes the price of NFTs continues to be controlled by hype and market speculation, noting that savvy investors can “use this to your advantage.”