I notice at least 3 different schools of trading NFTs in the @NFTLlama community. I call them: investing, trading, gambling.
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
Splitting them up is helpful, because advice that applies to one doesn't necessarily apply to the other.
So what are they?
👇
Trading seems most common. Key principles of NFT trading:
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
- short term focus
- doesn't matter what the project is, really
- entry/exit timing is very important
- tracking hype is critical
- frequent transactions
- calculating, largely emotions-free
- works in bull or bear
Gambling aka degen is also very common. Key principles:
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
- no specific focus
- emotional decisions, go with your gut
- can work out very well in bull market; disaster in bear
- aping into stuff because it looks cool
- don't think too hard
- fun if you can afford to lose it all
Investing is imho the rarest type of NFT trading atm:
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
- long term focus
- fund projects that are building something valuable
- mostly ignore volatility
- timing is not very important
- happy to hold through or invest during bears
If you stare at them hard enough, like all artificial mind separations, the boundaries between trading-gambling-investing kinda blur.
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
It's useful to have those terms handy to assess "not financial advice" that you might be getting, tho...
Most of what I tweet is (hopefully quite clearly) with an "investing" lens on. I'm from a startup background and not a particularly good trader, and I also don't like the intense focus needed to time trades... so investing works better for me.
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
I also have opinions about what's better for the overall web3 & nft space in the long term, that lead me to prefer the "grow the pie" approach of investing. Imho trading and gambling are more win-lose games. Investing is win-win. For the space to grow, we need more investors.
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
But people have very different motivations for throwing money into the NFT eth-grinder, and I respect the skills that go into trading and the "let's go with the flow" attitude that goes with degen (so long as it's not just a front to rip off your followers ofc).
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
Whenever I get advice about how to make money from NFTs, I find it useful to mentally categorise it in one of those three bins: investing, gambling, trading.
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
That way I don't end up using that advice in the wrong context. Example 👇
Evaluating a project's hype and evaluating a project's sustainable long term value are totally different.
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
Most of my thread about Roadmaps is irrelevant if you're trading a project's hype. The hype and your timing will make the profits.https://t.co/A5k3ybDmVi
So actually a project that's all hype and no substance could be a great option for you if you've invested your skill points in becoming a good trader. A lot of ppl on the @NFTLlama Discord are like that.
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
But it would suck for me. It's not my thing.
Being clear about this, for me, helps me not feel too much FOMO when I see other ppl making stupid gains in short time frames by swinging in and out of projects with excellent timing. Yeah I'd like this to, but do I want to get good at trading? not all that much.
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
I think it can also be useful to know your style to avoid trading in the wrong market. If you're a gambler (I'm not judging), then when the NFT market turns bear you should gamble elsewhere - or you'll lose all your money.
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
Another question is... which is most profitable? Well, all can work out real well, but my hunch is that investing is the most profitable in the long run, if you invest in the right stuff. Trading is the most immediately profitable if you're good at it.
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
Why can investing > trading? Because if you believe in the fundamentals of the project you'll hold through the volatility until the project value is fully realised. E.g. buying BAYC at mint and holding until 50eth. A trader would have flipped long ago.
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
Can you combine investing and trading in a superior hybrid? Probably. They're all just made-up distinctions at the end of the day, remember? Life is never so simple.
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
Let me know if you've figured it out :-)
TL;DR:
— Daniel Tenner (swombat.eth) (@swombat) December 2, 2021
- Know whether you're a trader or investor or gambler
- Know the style of the person giving you advice
- Be ok with not trading in a style that doesn't suit you
- If your style is mismatched to the market state (e.g. gambling in a bear) - stop for a while.
gm & gl