Current state of NFTs

Current state of the NFT market: Not Good

Welcome to Decentra Daily, where we do the dirty work to bring you insights from Web3 with an emphasis on NFTs. Let's get to it.

Estimated read time: 5 minutes

Market sentiment analysis: NFTs are still a thing? Yep! Despite all the doom and gloom NFTs are still here, and not going anywhere....because that's how the blockchain works. However, prices of almost every project have taken beatings across the board. For some, it has been the macro environment we are in, and for others it is their execution, or dirty laundry being aired (project rhymes with Suzuki).

Here's what is on today's agenda:

• How war, the fed, and a bunch of sh*t are affecting our crypto and jpegs.

• Once a blue chip, is Azuki finished?

Macro environment affecting NFTs (boring title, we know)

Interest rates affect markets similar to how alcohol affects people, they either have a positive affect, or you end up in a ditch somewhere. Right now interest rates are sitting lower than my self esteem, which is what is typically needed to boost an economy, rates usually rise when an economy becomes too strong. But what about when the economy is still struggling WITH low interest rates....and record levels of inflation (8.3% - slightly down from last month). Well it would seem something has to give as people have been borrowing 'cheap' money, and perhaps they have spent beyond their means.

Consumers and government are tightening their belts, as prices of food, gas/oil, and flights all seem to be on Viagra and keep rising. The war in the Ukraine didn't help, raising the costs of wheat and other grains; the lack of trade with China is also causing a shortage in goods, one that US manufacturing can't keep up with, pushing up prices.

The markets in 2020-21 welcomed in hordes of retail investors, and kicked off a bull market despite increasing unemployment and Covid-19....but, bull markets are like love, they don't last forever. Retail needs to pay their rising costs of living, and you can't pay your rent with stocks, crypto, or NFTs (yet).

Decentra Daily's take: Currently governments, banks, venture capitalists, and hedge funds are all trying to make sense of this environment, and if they aren't making money, they sure don't want retail investors to. The environment for the past 2 years was ripe for speculative investing with the government printing money and people being able to borrow it with such low interest rates. This has seemingly changed on a dime in the last two weeks, with signs pointing to this change for a while. People no longer feel safe in crypto, NFTs, or many stocks...how long will this last? Please email us if you have the answer.

Azuki is in trouble as the bubble bursts

The macro environment has got nothing on what Azuki NFT holders have been feeling for the past 24-48 hours. It all started when Zagabond, one of the founders of Azuki posted an open letter about his 'learnings' from previous projects that he founded/was involved in. These projects were Phunks, Zunks, and Tendies. Essentially it is believed that Zagabond was forced into making this announcement by a person that knew of his involvement in these previous NFT projects.

Which brings us to: Rugs vs. Lessons in the court of public opinion. Zagabond was on a Twitter spaces yesterday (2022-05-10) hosted by Andrew Wang. Andrew was asking Zagabond numerous questions surrounding the following allegations and observations:

• Tendies - where Zagabond created fake characters to amplify story based brand building. He found there was not a market fit, and shut down the project. Only 20 days after mint. All socials were subsequently deleted and money was removed from the smart contract making it's way to Coinbase.

• CryptoPhunks - Which were a flipped edition of Cryptopunks. claiming to be a decentralized version, essentially giving the middle finger to Larva Labs. Funds were taken from the CryptopPhunks wallet 8 hours after the Tendies funds were removed. Royalties were also added to Cryotpohunks on Looksrare without announcement.

• Zunks - Zagabond admitted to creating a fake female persona for the in the same theme of building a story around his products. Zagabond said that everything that was promised was delivered upon was delivered. However, the Zunks community denies this.

Zagabond defended his actions on the Twitter spaces with Andrew, stating that these projects were learning experiences, and not rug pulls, and that Azuki would not be the project it was without these lessons. The term rug pull is thrown around a lot in the NFT space, Coinmarketcap defines a rug pull as "a malicious maneuver in the cryptocurrency industry where crypto developers abandon a project and run away with investors’ funds."

Zagabond at the time of the Spaces was still in control of the contracts and royalties of Phunks, Zunks, and Tendies (as well as Azuki). And he seemingly is not actively working on any of those 3 projects. Whether we can define this as a rug or not is dependent on your interpretation of what a rug pull is. Either way it's shady.

The actual Twitter Space was very vanilla, and Andrew tried his best to offer a tempered take. However, there were some issues (or were there?) of bringing people up on stage to ask questions, so Andrew read out written questions. It all seemed very scripted, with Zagabond dodging any real answers of substance, or any sort of meaningful apology.

How does this affect Azuki?

In the short term we can see that the market is spanking Azuki like Zagabond deserves to be spanked by his mom. The floor is down to 7.4 eth at the time of writing, with it being in the 25-30 range less than a week ago.

Clearly the court of public opinion is crucifying Azuki based on it's founders previous actions, whether completely deserved or not. In a way this is a maturing of the space, and hopefully a turning point, where people invest in doxxed founders, and are more considerate before spending for example 420 eth (highest Azuki sale) on a picture that is 'rare'.

The long term future for Azuki is much less clear, there seems to still be a dedicated community, perhaps protecting their bags. But you can't deny the quality of the art, and the Azuki brand being able to capture consumer attention. Is it really so bad that Zagabond learnt lessons from his previous failed endeavors? I'm not the judge.

Decentra Daily's take: Invest in founders. Know the people that you are investing large amounts of money into, there is very little reason for founders to not be doxxed in this space anymore. If they are perhaps they have something to hide? People that put their personal reputations on the line can be held more accountable (well hopefully). In this case it has been way too easy for Zagabond to launch projects, obtain large amounts of money, and ride off into the sunset with his Azuki inspired dirty magazines.

Ideally, Zagabond hands over ownership/royalties of the 3 previous failed NFT projects so those communities can keep building. And for Azuki's future they may need to take a long hard look in the mirror and see if Zagabond is a part of it, but hey maybe he'll come back as someone else again.

Hi Zagabond!