How to find the next big NFT project

Hey there, and welcome back to Decentra Daily, we hope you're spending time outside this summer turning red in the sun, to match the color of your portfolio. We can make this joke because unless you're a savant in investing you're currently down.

Market sentiment analysis: Today is a big old bleh. There has only been 3 million dollars in OpenSea volume, which is extremely low. However, floor prices are relatively stable on major NFTs, with Bored Apes at 86 eth, and Mutant Apes at 17.1, which are our market indicators. To see their floors holding with a complete lack of volume may be a positive sign? Really hard to tell at this point. Will there be another leg down in the crypto market? We have received such bearish news lately that it would not be surprising....but can things really get THAT MUCH WORSE? I asked this in my last relationship, and yes, things did get much worse. 

Estimated read time: 5 minutes

• What makes a successful NFT project

• Winners and Losers

How to find the next big NFT project

Now that we're in the midst of an NFT bear market, we thought it would be helpful to provide insights into how you can be ready to identify NFT projects with strong foundations. Either already existing or yet to be launched. 

Being in this space you see a variety of projects come and go, with numerous founders and artists releasing NFTs, but knowing which of these will be winners is one of the most difficult things in the web3 space. 

With the bear market, the NFT space should hopefully mature and weed out bad projects. However when a new project launches it is hard to know just what is to come. 

It's important to look at the successes of NFT projects like Bored Ape Yacht Club (BAYC) etc., and flops like Mekaverse or Hapebeast to understand where projects have excelled or completely dropped the ball.

Key ingredients to successful NFT projects

1. Community

You think NFTs are a buzzword (abbreviation)? Well if you're in this space you know 'community' takes the cake. Having a strong community is one of the most important aspects of any NFT project. 

Whether you are a small independent artist, or a large brand, community is equally important. Rewarding your holders in should be your top priority, after all, the purpose of NFT projects as we currently know them is to give back to the people buying them.....although some founders need to be reminded of this.

You want to invest in NFTs whose founders intentionally create an audience of followers. For this to happen founders need to understand the reason they are releasing their NFT, what they can realistically achieve to reward their holders, and how network effects of a strong community can provide even more value to the NFT project. 

If a community is centered around floor price talk, this should be a very big red flag!

Here is a list of what we have seen quality NFT projects do to foster community engagement:

• Include the community in roadmap formulation

• Incorporate constructive feedback into the project

• Engage in meaningful ways on twitter and discord with their communities

• Connect with influencers/brands/other projects to increase awareness or network effects of the project

• Offer exclusive giveaways or allowlist spots

• Establish content or games that increase social interactions

• Fairly price the NFTs that the project is selling

• Have a focus of the NFT project! (not too broad)

2. Brand Building

The whole purpose of NFTs is to build reach by increasing brand awareness, whether this be from an individual or a more typical brand. 

To build a brand you must have a focus on what you want that brand to be about. How can it set you apart from other projects? How can you grow loyalty? How can you keep your community engaged? There is competition for eyeballs and money just like every other industry in the word. Many founders don't realize this. 

Some aspects of brand building to consider:

• Creating an engaging story and content strategy

• Having people identify with your art, pfp, or utility

• Build engaging websites, social media accounts, and digital personas around your NFTs

• Innovate, innovate, innovate! Avoid current trends and hype. Real builders stick to their ethos and build their brand while formulating new creative ideas

3. Creating value for holders (roadmap)

So you may be able to get a community started, and have a compelling story. But the most difficult task is creating value for those NFTs outside of price go up = good, and price go down = bad. 

Some projects have attempted to create DAO's (decentralized autonomous organizations) which is a form of joint ownership, think of DAO members as stock holders, but instead of stocks they hold NFTs.

This has the potential for the community to participate and guide the projects direction by  voting, however we have seen this model fail (e.g., Mutantcats), and seemingly DAO's move very slow. So a DAO, to us, is not the best way to create value for holders in the current state of NFTs.

A clear path to providing value to NFT holders has been through airdrops, when there is enough demand for a project we have seen teams successfully 'airdrop' holders other NFTs as a secondary membership. 

This works well when NFTs are stable at an elevated floor price, where new entrants are often priced out. So to reward holders to team can airdrop holders another NFT (e.g., Mutant Ape, Dooplicator, Azuki dirt). This allows for holders to sell the airdrop or their existing NFT to lock in profits, or they can hold both for future benefits. 

It also potentially expands to community if the demand is there to enter the ecosystem, we have seen this demand most with Bored Apes and their ecosystem. However, for this model to work strong demand needs to be there.

Some projects have tried this method with low floor prices and low demand, and it's proven to crush floor prices of all assets and dilute the supply of the ecosystem. 

It is important to consider supply and demand, utility, and community desires when attempting to create value for holders and develop a roadmap. And the decision to make certain aspects of the roadmap public vs private is always a consideration.

The following list are ideas founders have implemented to add value to their NFTs:

• Aidrops

• Merch sales/discounts

• Physical redemptions

• Token drops/staking

• IRL events

• Mint-passes

• Partner benefits

• IP rights

4. Communicate effectively (marketing and managing)

NFT brands need to communicate effectively at every stage to nurture and manage their assets and community.

Most work begins after the mint and selling out, this is what separates the builders and the fakers. 

NFT marketing is a unique beast, currently 'traditional' methods of marketing have very little crossover to the NFT space. Most traditional marketing efforts have to do with the actual product of something, instead of community, and promise for future benefits.

This is why sound projects will have a good amount of information, as well as an element of secrecy to cause some FOMO. And you need these delivered in effective ways to the right people to sustain hype and interest.

Marketing through a variety of channels including discord, socials, medium articles, and the projects website all help the team communicate effectively. Here are some communication ideas we like to see teams execute:

• Ensure that messaging is clear and concise when coming from official channels

• Foster intrigue, suspense, and speculation in positive manners

• Host Twitter spaces

• Make announcements that are followed up on (don't leave a long time between announcements and action)

• Ensure discord moderation team are all on the same page about information

• Effective information flows within projects

Summary

Now, all of these aforementioned concepts provide the foundation for a quality NFT project. Very few projects nail all of the above points, but they should be aiming for all of these.

We always recommend to stay away from projects with un-doxxed founders. You want to know WHO you are investing in, or buying NFTs from. There are lots of scammers and rug pullers out there, stay safe xo.

We will be doing a longer form piece diving deep into successful projects to provide explicit examples of successful NFT project building.

But for now, take these points into consideration when assessing projects. In a bear market like you really do have time on your side to decide which existing projects you want exposure to, or perhaps taking a punt on some new mints.

Winner and Losers

The projects that have stood out to us the most in the past 24 hours, the good, and bad.

Winner: CryptoNinja Partners - Floor price up 57% in the last 24 hours (0.28 ETH → 0.44 ETH)

From the largest DAO in Japan, this is a Japanese produced PFP project, so you know it’s cute! Most of their tweets are in Nihongo, so can’t fully understand what’s going on, but they are launching some sort of side project today and CryptoNinja holders get pre sale mint.

Loser: AneroVerse Official - Floor Price down 61% in the last 24 hours (0.17 ETH → 0.067 ETH)

Although the mint was only a few days ago and I don’t like shitting on projects too early, the mint price was 0.09, it briefly shot up, and is now trading below mint still pre-reveal. Not a confidence instiller!

Headlines of the day

• NFT Platform Immutable Launches $500M Venture Fund for Web3 Games

• Social networking platform purchases NFT worth $1,24 million as its brand ambassador

• A Manhattan Landlord Listed His Office Building in ETH as an NFT. Then Its Price Dropped $12M

• An NFT explosion is taking place in China, but how long will it last?

Disclaimer: Nothing in this article/newsletter should be considered financial advice. The purpose is to inform readers of the current trends and news in the web3 space. We encourage every reader to do their own research and not act upon information put forth by Decentra Daily.