Poof looks at capital flows in crypto and how it leads NFT market performance
Poof looks at capital flows in crypto and how it leads NFT market performance
NFTs are so not fully back yet, but they probably will be.
We are so back, but not NFTs (yet)
We are so back. Crypto is up. BTC over $40k. NFT volumes are up!
The next NFT bull is here right?
It’s probably coming, but not quite here yet.
I rarely look at dailies, but given the price action… Let’s take a look at our handy core metrics dashboard for NFTs through 12-4-2023:
As I shared in my earlier post, I believe year over year wallet activity is the most important metric to understand building health. We want people who were out of NFTs to come back in to signal true “bull” activity. So far, people are just spending some of their money in anticipation of this it appears.
And while I have you, here’s what the weeklies look like (about the same):
So, how do we figure out when NFTs will come back? When will there be more onchain activity? If you did the homework from last week’s post, you’ll be slightly ahead of the curve (if not, just continue on…).
Capital Flows and Mania
Significant thanks to this Glassnode post for making this data so clear
Capital typically flows in Crypto from lower risk / higher scale to higher risk / lower scale. So when we see the acceleration of crypto value it will typically start with significant accumulation of Bitcoin, then accumulation of ETH, then Stablecoins (which is typically simultaneous with or indicating alt trading).
If you look at this chart, you’ll see that Bitcoin typically leads. Take a look at 2021 Jan. The price of BTC starts going up. The demand increases and there’s a net capital flowing — a big orange wave. Green (stables) go up along the way as do ETH. Then ETH accelerates, green continues.
They take a pause and a similar behavior continues although this time it was ETH catching up to BTC. Ultimately, we know there are specific market dynamics that will make each cycle different. But the structure is fundamentally the same.
If we zoom in to our recent time period, we know the same process is kicking up. And thus… we are so back
But when do NFTs go crazy too? Looking at the trends, we saw the last NFT cycle occur during “Mania” (sometimes Altseason is used interchangeably).
Mania can be seen when… capital flow into ETH is accelerating upward AND capital flow into stables are simultaneously accelerating upward.
If these two things are occurring together, the market is feeling like it’s free money millions getting tossed around and now they need a new place to go speculate… The name of that place is Alts, NFTs, Shitcoins, etc.
So, we know when mania will occur. It happened last time. And then NFTs went crazy and we are all going to be good right?!
Well maybe, maybe not. NFTs were the dominant narrative of 2021 and 2022. It’s possible that the next mania cycle will have new competing narratives (there are a ton I can imagine). So expect that NFTs may not be quite as dominant. It’ll have a place though, for certain.
So… let’s ask the important question
WEN are NFTs back?
Once these two bars (net 30 day increase in capital in ETH and Stables) are BOTH increasing. Right now, ETH accumulation is starting up. Stables are peaking a bit. We are looking for both of these to be accelerating upwards — which, again, looking at the prior cycles is probably contingent on another few months of “up only.”
tl;dr
We seem to be at the start of a crypto cycle. It’ll take time before we are “so back” on all of the fun stuff that we love so much.
Take a look at some of these dashboards. Go use this time to make weird and good and interesting shit. I’ll continue to do this once a week until it gets boring for everyone.
You’ll lose track of time once the madness starts. And don’t forget to put it in context, we are all going to die.