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Sentiment Shifts Markets

Sentiment Shifts Markets

Breaking down the sharp shift in collectors sentiment in the Web3 world...

Matt O'Brien
November 12, 2023

GM frens,

In today’s edition of The Ground Floor we are breaking down the sharp shift in positive sentiment in the Web3 world…

Digital Assets Ascension

“Failure” by Jack Butcher

Collectors sentiment has shifted.

Less than one month ago, the consensus within Web3 was a prolonged bear market, however, at the end of October ~ collectors sentiment shifted.

Let’s dive into the details to understand what’s driving this rally, and how long this positive sentiment can sustain within the Web3 world.

New Liquidity

In the last 2 weeks, following the successful launch of $MEME, a token created by Memeland that boasts a $1.4 billion market cap, the NFT market has rallied with almost every established NFT collection rallying more than 50%.

The floor-based valuation of the top 10 NFT projects is now $3bn, up 71% from a month ago.
— NFTstats.eth (@punk9059)
8:30 PM • Nov 11, 2023

The tokenomics of this token launch are complex to say the least, with collectors unlocking tokens over a long period of time, however, what is crystal clear is that massive amounts of capital are finding their way to NFT collections.

Additionally, after much anticipation, The Simpsons released an NFT focused episode whereby Homer (Bart’s dad) minted Bart as an NFT and Marge (Bart’s mother) was tasked with going “into the blockchain” to take Bart home.

(Marge Simpson inside the blockchain)

While this episode didn’t paint NFTs in the most positive light, the episode was an accurate assessment of the NFTs which added additional steam to the positive sentiment that continues to gain momentum within the Web3 world.

This momentum has led many collectors to declare the return of an NFT bull market, with many signs certainty suggesting a bear market is brewing.

Bear Market vs Bull Market

During a bear market, capital is as rare as water in a desert, posing significant challenges for even the most talented creators to successfully sell out collections.

In bull markets, capital becomes as abundant as leaves in an autumn forest, and flows freely towards even the most speculative projects in this space.

Signs of a bull market?

First, and foremost, NFT collections are rallying at the same time as ETH is soaring in value ~ up 32% in the last month alone.

This contrasts with the trend observed over the past 18 months as collectors sought to sell NFTs whenever ETH increased in value.

Secondarily, the silly season is here once again.

In the last week, the top spots on OpenSea's transaction volume tracker are increasingly occupied by collections with unrevealed artwork, projects promising future token releases, and collections featuring low-effort AI artwork.

Additionally, we have seen the the FTT token, issued by the bankrupt FTX increase in value by 300%, and Terra, the token created by the collapsed Luna increase in value by more than 80%.

This shift suggests a return to a more speculative and potentially less substantive market that seems to be part of the package we call bull markets.

How Long Can This Last?

The good times the NFT market experienced in 2021 attracted many bad actors who exploited collectors willingness to speculate on new NFT collections.

Right now the NFT market is in a state of excitement as market participants continue to proclaim the return of the bull market, however, there is a note of caution to be considered.

The demise of the Web3 world in 2021 was largely due to the proliferation of low-quality projects that exhausted collector capital, leading to many departing the space, dissatisfied by unmet expectations and financial setbacks.

Looking Forward

The wave of activity we have seen in the last week certainly suggests a bull market is brewing, however, it would be premature to make any declarations that the bull market is back for the foreseeable future.

Yes, the Web3 world has made significant strides since the previous bull market of 2021, as highlighted in a past issue of TGF, and this progress presents a solid basis for optimism that this space is ready to regain the momentum it lost.

Nonetheless, the likelihood of low quality projects absorbing all the available capital coming into this space seemingly remains high as people chase the next 10x opportunity.

This behavior is undoubtedly the biggest barrier for any long lasting bull market in NFTs.