Footprint | Analyzing 5 indicators of NFT projects

When it comes to NFT investments, do you choose to adopt an analytical approach or rely mainly on intuition and madness?

• Jun. 2022, Vincy
• Data Source: Footprint Analytics – NFT Market Overview

NFT prices are extremely volatile. Many people incur losses in trading during bull markets, and even more so during bear markets.With thegrowth in trading volume, more and morecelebrities are entering, and more and more VCs are starting to invest in NFT projects, making NFTs rapidly becoming an alternative investment.

Although there are many debates about the value and sustainability of NFTs, many celebrities do believe that choosing promising NFT projects is a profound art.Even though certain NFT series attract a lot of attention, they still require some indicators to help evaluate the potential and value of the project.

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Using NFTs on Ethereum as an example, understand the 5 indicators for analyzing NFTs

1. Project Team Background

The background and experience of the team are crucial to the value of an NFT project.

What kind of team is advantageous for a project?

Take a look at the teams behind Bored Ape Yacht Club and Otherdeed. Yuga Labs is a perfect example. The team was founded in February 2021, created BAYC, and later in March 2022, acquired CryptoPunks and Meebits. They later launched ApeCoin to pave the way for the Otherside project, driving the development of the Otherside project.

In the current bear market in March, the team completed a $450 million funding round, valuing the project at $4 billion.

If you want to find promising NFT projects, the project team should:

• Have successfully launched NFT projects
• Have a clear long-term growth plan
• Be able to maintain valuation and secure funding in a bear market

These are all important driving factors for the value of an NFT project.

Another team that meets the above criteria is the team behind creating Azuki, Chiru Labs. They have backgrounds in large traditional tech companies like Google and Facebook, which is another criterion for finding potential MFTs.

2. Rarity

Rarity is one of the most basic data indicators, completely separate from the intrinsic quality, utility, or aesthetic value of a project.

Essentially, the supply and demand indicate that the rarer an NFT is, the higher its value.

In the NFT world, a supply of around 8,500 for a series of NFTs is considered very small. There are also projects like Meebits with up to 20,000.

CryptoPunks is the earliest NFT project on Ethereum, with a floor price of 48.9 ETH as of June 17 for a Punk, with only a total of 9,999 Punks. To make NFTs more accessible, Larva Labs – the team behind CryptoPunks introduced Meebits, a 3D voxel collection with 20,000 NFTs. The floor price of Meebits is 15 times lower than CryptoPunks.

Rarity is also crucial in NFTs, including unique features, attributes, and their combinations. Although there are no hard rules to evaluate the rarity of NFT projects, learning and understanding the impact of NFT rarity on projects is essential.

3. Trading Volume and Liquidity

Trading volume is a crucial indicator of market demand for NFTs. Lower trading volume is usually a signal of a bear market, while higher trading volume indicates lower liquidity risk.

With the rapid development of NFTs, numerous projects have emerged. While many NFT projects have stunning unique designs, the market is saturated, and not every new series can become the next CryptoPunks or CryptoKitties.

Many NFTs issued on Ethereum are in a 0 trading state, indicating a lack of liquidity for many NFTs, which is one of the hindrances to the development of the NFT industry.

In contrast, the top 10 NFTs by trading volume, the highest cumulative trading volume is for MAYC at $1.068 billion, followed by Otherdeed at $897 million. If these NFTs can maintain this liquidity, they will be easier to sell in the future.

4. Price Walls

Price walls can indicate at what price level a project may encounter resistance and can be used to determine the upside potential from the NFT prices in that series.

If users are unable to determine the buying and selling prices of NFTs, they can check the prices of the project's NFT collection on the secondary trading market. For example, Azuki has 10,000 circulating units, with only 5 units priced below 10 ETH, and the highest NFT is priced at 9,999 ETH. This indicates that Azuki has significant premium upside potential in its prices.

5. Community Strength

Community strength is one of the most critical factors in determining the success of a project.

In short, the activity on social media can gauge the popularity of a project.

For example, let's compare the community strength of two large, trending NFT projects through social media activity. The first places to look are Discord and Twitter, the most common communication channels in the NFT space. When you visit a project's website, Discord, or Twitter, you should look at metrics like the number of fans, engagement, fan ratio, strategies for increasing engagement through giveaways, official and user interactions, etc.

Below is an analysis of the community strength of Otherside and Goblins based on official Twitter data.

• In terms of fan numbers, Otherside has 11 times the number of fans compared to Goblins. This indicates that Otherside is more popular and receives more attention from users than Goblins.
• In terms of official user interaction, Otherside is still more active than Goblins in posting topics.

This article is from Footprint Analytics Community Contribution

The above content is for personal perspectives only, for reference and communication purposes, and does not constitute investment advice. If there are obvious misunderstandings or data errors, feedback is welcomed.

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