In this education course we will get learn about NFT cycles and how to know what current cycle is it.
Going through several of these NFT cycles, here is a quick cheat sheet I use to navigate these.
Cycles vary in duration and amplitude due to diverse factors influencing it, however liquidity flow is very similar.
Details below.
1. OG & ACTIVE COMMUNITIES
Out of a bear period, the most active communities and projects with proven track record like OG collections get most of the attention.
Low floor price makes them attractive as they offer a safe R/R ratio.
2. UTILITY & TOKENS
Soon after this first volume increase, utility collections gain interest again. Platforms like lending/borrowing, marketplace, tools, etc. start to generate more revenue and their ROI improves.
Tokens from previous collections also become attractive.
3. DEGEN PHASE
More collections enjoy a floor price increase so new are mints being lined-up, as projects were waiting for better conditions to launch.
Mints become flippable and FOMO spikes on the hyped ones, minting szn is up.
Degens rotate some profits into gambling.
4. LIQUIDITY SQUEEZE
The number of projects accelerates with several launched per day including rugs and cashgrabs.
This is max frenzy and we see early signs of people doing crazy things like tattoos and IRL videos for WL, buying WL at 500+$, etc.
5. LIQUIDITY EVENT
The duration of the bear period can vary from few to several months, until a new event appears.
It can come from several factors changing the equilibrium of the ecosystem: a new narrative, valuable airdrop, profit extracted from an L2 going live, etc.
Obviously there are many variables so there might be some exceptions like an NFT collection defying this cycle.
However money always flows in waves and cycles. Understanding it will help you better manage your positions
So now according to you : where are we today on this cycle ?
