I’m not supposed to tell you this
I’m not supposed to tell you this
Make assets free again
If you don’t know by now, I’m a firm believer in this philosophy:
Use what tools/systems are at hand, do not fight them.
This is barring any ethical or moral implications obviously, in which case the system should be fought against and disrupted. However, the beauty of capitalism, especially 2.0 capitalism (built on community) is that things that do not work are usually replaced or refined in time.
When it comes to assets, you know that you must be accumulating them. To not do so, is to lock yourself into a prison of your own making. One such “asset” taking the world by storm as of late (and yes these are indeed assets) are NFTs.
If you want legitimate training or development on this world, check out these sources (source 1, source 2). I am not an expert nor do I claim to be. However, I understand assets — and thus have a competitive advantage. My definition of a GREAT asset is as follows:
Store capital
Pay a yield
Grow in value
A good asset can do two of three. A great asset must do all three.
“So Taylor why do you think NFTs are assets they don’t do all three.”
Yes they do. Talk less, read more — the results will be wonderful for you and everyone around you. There are a handful of NFT projects right now that will create their own form of yield (not directly via cash — that would mark them as a security — but indirectly so and based on the underlying “game” that runs them).
I am not going to get into those projects right now because I never claimed to be an expert (so I don’t want to mislead you) and also because I am held to stricter guidelines than most due to my business interests (again, I don’t want to mislead you).
In no way, shape, or form is anything I’m writing to be considered “advice,” because (a) it isn’t and (b) I’m not allowed to do that.
I merely want to share with you what I did last week, and present it as a fun use case that I will likely be doing more of in the future.
The Strategy
I have assembled a private ‘syndicate.’ These are friends of mine that are good at picking projects based on three criteria:
History of creator
Community
Utility
Here is why all three are important.
The history of the creator shows you whether they have a history of successfully pulling off a launch (or not). In most cases, where there is no history, your odds of it being a great asset are cut in half.
Here’s more:
The community behind the project makes it a mastermind, of sorts. For example, a CyberKongz gets you access to a “verified” section on their Discord. This is where the magic happens. A good community = higher odds of rising cost of entry.
Utility is just that: are there extra perks/benefits/use cases attached to the project? BAYC for instance, granting you mint access to new projects before the rest of the world. Cryptopunks-only meetups & facility access.
Buy Strategy
There are multiple schools of thought. The terms “diamond hands” and “paper hands” reflect the extreme sides without providing proper context for the balance in the middle.
Diamond hands never sell. Ever. No matter what. This lifts the floor up (aka the lowest priced token in the project) but it prevents you from realizing gains when they happen. Paper hands are dumb and sell everything whenever they get scared.
As a real estate guy, I have a well rounded approach that favors the middle. To demonstrate, I’ll provide an example from last week.
The project was sent to me by my private syndicate, based on (1) founder history and (2) community. There was no utility in the roadmap but the founders have other projects with great utility so, the hunch was that this would be added later.
The buy price when I looked was 3.3 SOL each (approximately ~$511 per). I got 5. About five days later, the floor price was 8.9 SOL (approximately ~$1380 per). My real estate brain thinks in arbitrage, leverage & long term yield curve. It does not think in “diamond hands” or “paper hands.” That’s a mold that smart people don’t fall into.
Here is what I did:
Sold 1 for 8.5 SOL
Sold 1 for 10.5 SOL
Kept the other 3
Total out: -16.5 SOL (-$2,558)
Total in: +19 SOL (+$2,945)
With 3 tokens left over at a $0 cost basis for unlimited upside. Actually, the “cost” to me for the 3 pieces was a positive $387. This is small potatoes, I’m just getting into this world. But take the percentage and multiply at greater levels and you get a 115% yield in three days without sacrificing the underlying asset that could grow at whatever pace the market dictates in the future.
OR it could crash to zero and guess what? Who cares. You’ve effectively hedged & mitigated all downside and retained unlimited access to the upside for yourself.
Diamond Hands
This is, in actuality, how “diamond hands” are able to function the way that they do. They’re not buying projects at peak and then trying to figure out how to get their money back.
They’re getting in early, then aggregating out their total purchase price. This reduces their risk exposure down to (best case) nothing and allows them to say “Not selling,” regardless of the market pressure.
Again, I’m not an expert.
NFTs are a subject of mystery to me as I’m still diving into the practical applications, use cases, and societal implications as a whole. However, once you understand assets, money, and risk — you can take advantage of a lot of neat ways of thinking that were otherwise restricted for those at the top.
Onward!
