rwx's cool cold reality: november 2022
0xB618
November 10th, 2022

Originally this was going to be a much more put together post, speculating on scenarios that could happen and what artists could do to prepare for them and what they may need to expect as we moved forward in time.

Unfortunately, I didn’t finish anything but the outline and if you’re plugged into the vast ecosystem of blockchain related things… well, you may have noticed that a few other things have happened that I think are speeding us toward a conclusion that I am not thrilled about. In fact, I am chilled.

This is not a post that offers any sort of financial advice. This is a post that suggests where the art-on-chain meta may shift as the frigid air of winter descends upon us. This post is primarily for 1/1 artists.

contents in order of appearance:

  • where we are

  • the value issue

  • the parity problem

  • some other brief thoughts

As usual, this is a word dump. I’m not doing an editing pass. Forgive mistakes and disjointed thoughts if you want. Feel free to chat with me after reading, as this tends to help me formulate how to expand incomplete thoughts found in these journals.


the obvious state of things

2022 is unlike anything I’ve ever seen since joining the blockchain space as a professional in the beginning of 2018 and since being an enthusiast before that. Greed has always been hyper-pervasive in crypto and there have been prior cases of exchanges and protocols going belly up. When this kind of event happens, it’s never good for anyone. To have so many explosive events in the same year is even worse. It’s truly phenomenal that so many organizations, individuals, and technology solutions just fucking blew up, especially coming out of the most prolific positive market action in the history of crypto. It especially behooves me that these organizations were so high off of their own success that they couldn’t even make the bare minimum effort to actually back their products with real, tangible assets.

This year has sent any progress made over the past 5 back and will 100% make the future worse for everyone around the globe. Regulators have been arguing for a long time. You see, banks (maybe you’ve heard of them), hate distributed finance. Most policy makers hate it as well. The current systems benefit the powers that be and distributed finance puts too much control in the hands of individuals.

In the USA specifically, 2016-2020 was huge for pushing pro-crypto policies forward. After the administration changed in 2020, the party in control (which is notoriously less enthusiastic about the promises of crypto -- ironic, considering the platforms they espouse) selected a handful of bureaucrats to run agencies that basically want to kill the entire ecosystem for reasons they claim will protect users from fraud and financial ruin. Even though the system had been stacked against pro-crypto regulation, there were still positive events occuring and allies in the US government, including the CFTC which was very pro-crypto in its stance. You may be familiar with the battle between the SEC and CFTC on who gets to control what. And now there are politicians and bureaucrats crawling out of the woodwork, frothing at the mouth to do as much damage as they can. And the points they make are beginning to sound fair to participants and onlookers.

Well, none of this shit matters now because event after event has given everyone enough ammo to aggressively rush legislation through as undoubtedly people who have been recently impacted will seek justice and retribution. Years of hard policy work across competing blockchain-native organizations (and the philosophies are very different among the different lobbies) just wiped out. It’s a bad look when one of the “faces” of pro-regulation is probably directly involved with the mismanagement and sheer degeneracy of a cocky and insane strategy involving user funds.

So, yeah from a policy and regulatory front things aren’t looking great. And there are probably impacted individuals that were very much pro-crypto that will now be very vocally anti-crypto.

Individual users understand the drive of greed and 90% of them take responsibility for their own liquidations when they have overplayed their hands. Individual users do not like when a “trusted” xyz wipes out their entire net-worth in 3 days.

I have always had a severe distrust of people propped up as authority figures in crypto. Maybe this is because I am a contrarian, but in my professional experience - integrity is only found within a handful of organizations and leaders across crypto. As such, I’ve fortunately never touched one of these protocols or exchanges that have failed and I do not leave money on exchanges (one of the golden rules of crypto, you know). I know I shitpost a lot on the internet, but outside of my snarky veneer I’m sad for everyone and the promise of crypto. I am saddened because the past 2 years have been some of the best in my life, both in bear and bull.

Where we are going will not be, at least for a time.


Value and values

In the above journal from last December, I wrote about the dilemma of a tiny collector pool and laid out a few bullets about value in a bear market - which we were only just entering at the time.

To recap:

In a bull market, it is very easy to determine where demand is for a particular artist or their works. Last time I mentioned that art should probably be judged based on a piece by piece basis instead of “this was created by this artist and their floor is X eth so all their art is valued minimally at X”. In a bear market (which we’ve been in since October) the assigned value of pieces from popular artists tends to drop and the secondary action on most 1/1’s dries up completely.

If you’ve read my first collector journal, you know that I believe value is derived from the buyer. With that in mind, I want to expand on points I made in both journals. It won’t be inspirational. I’ll try to give some glimmer of hope towards the end of this post.

Native asset volatility ($ETH, $BTC, etc) means pieces will be sold at a lower price - both in ETH valuation and USD. There will be no secondary market for most 1/1 art.

This point is probably the most obvious to everyone. At the end of last year, I would have leaned slightly toward some retention of ETH value without an adjustment for USD. I feel pretty strongly that moving forward both valuations will be down.

In addition, the volume of sales are going to tank across the board for 1/1 artists. This is for a few reasons.

  • Your collectors have no capital left in reserve as some idiot centralized exchange or broken DeFi protocol has robbed them of their wealth. That’s as straightforward as I can be about this. Likely a majority of the traders with any sort of interest in 1/1’s have been impacted by the FTX ordeal. Reserves wiped out, project war chests gone, savings and dust vanished into thin air. None of these people impacted by the recent bullshit are going to put new capital into the 1/1 art ecosystem right now. If they do, it will not be liquid - only speculative buys to sit on until a hypothetical upswing.

  • Secondary sales (which are already rare for most participants) are going to evaporate. With a lack of secondary sales, speculators won’t throw money at pieces they may have been inclined to before. This is a cascading effect and even “popular blue-chip 1/1 artists” are going to see a massive drop in valuation for secondary sales as impacted collectors capitulate.

  • Some collectors don’t understand art and only follow trends. If there are no trends, there are no speculative collectors. Many niches are going to dry up. Some will persist, maybe yours. But if you are collecting and you don’t actually “understand art” (which is a subjective thing anyways and I’m surprised at the number of people who claim they don’t get it) then the willingness to take a risk on small creators isn’t worth it for them. Influencers won’t move markets so dramatically as general trust in the influencer network has diminished - due to frequent rugpulls, marketing manipulation, and greed. This impacts new volume.

  • The list price of most NFT art is hyper-inflated. This leads us to the parity problem. I’d like to mention that the hyper-inflated price of NFT art during 2021 isn’t a bad thing and it rewarded early adopters both on the collector side and the artist side because somewhere there were people passionate about the future of the space and not strictly here solely for gains.

The Parity Problem

Referencing back to my journals from last year, I presented a prediction as to what would happen if the NFT market hit mainstream saturation.

As many collectors entered from the coin-trading side of things, the quick flip and heavy focus on ROI is a pervasive part of the current NFT marketplace. This is a reality that we have to contend with. Long-term and as NFTs become more mainstream, the reality of the situation is that huge insane purchases will become less frequent as the economy shifts to become more accessible for more people (but we’re some ways away from this I think).

It appears now that I didn’t account for an apocalyptic insolvency metagame. This will have the same impact as adoption will.

A lot of the grift against NFTs outside of the nonsense environmental concerns came from what I feel are fans believing their favorite artist is selling out. There’s a handful of reasons why this may make them feel angry but I think it’s mostly because of being priced out of supporting. It’s no secret that a majority of people who “support small artists” don’t actually support them financially and at best just click a heart on social media. If you visit patreon pages or kofi pages or whatever for independent creators, the most people are willing to throw at an artist at a time is a buck or two a month. If you have enough followers this can add up into a nice monthly income but the reality is that none of these pledge based systems provide a stable living for a majority of creators. Commissions help offset the pledges but as commission market is highly competitive, artists are forced to undercut the market rate due to the sheer number of artists taking commissions. To make matters worse, people who commission art suffer from the same problem of not knowing what goes into the sauce. They are frequently entitled, grouchy, mean, or just not worth the time the artist puts into the commission.

Smaller artists don’t have the luxury of gallerists (a fine luxury of taking a 50% cut on your work for exposure and marketing) and at best commissions and donations give a little extra spending money but never enough to go full-time into producing work.

When I talk about parity, it is the expectation that the price of artwork will need to hit an equilibrium in valuation with these more traditional means of selling artwork online or at conventions. Consider the price of a print in an artist alley. That’s where I’m thinking and unfortunately it will be somewhat of a popularity contest, just like an artist alley.

For an NFT artist, you have a few paths forward to weather the storm.

  • Reduce your prices. Increase your output.

    The difference between NFT art and trad digital art market is that in NFTs, you get to draw what you want to versus strictly relying on commissions. If you’ve had a piece sitting at .50ETH for 6 months and haven’t lowered the list price, it’s likely to continue to sit there. Reducing your pricing to reach parity with normal market rates may improve your ability to generate income and honestly may be the catalyst to start onboarding previous haters to NFT collecting.

    More collectors, contradicting myself here from last year, means more competition to collect works which may result in the ability to slowly return to high valuations. Remember: It doesn’t matter what kind of content you produce, consistent output is key. More output at lower prices may help offset the random monthly sale.

  • Consider editions, think of them like prints

    Prints and merch fuel many creators and while 1/1’s are magical, low-priced editions may also result in some haters checking things out as well as a more affordable entry point for all of our friends who got wiped out.

  • Use a commission platform like recomet.

    Yeah, I know I just said that one of the benefits of NFTs is drawing what you like - but by now you should have a pretty loyal crowd of collectors that are fans of your work. Leveraging a request platform may present new opportunities without the headache of dealing with traditional commission requests.

  • Don’t change your strategy at all. I could be wrong about everything.

    Let’s say we wake up tomorrow and some lunatic has just saved the cryptomarket. Maybe I’m wrong about this strategy stuff. Maybe the bear season only lasts a few more weeks as to all of this will be null and void. I’m an artist - not some sort of financial genius. I’m not giving out financial advice here and I’m often very wrong.

You may be wondering if you’re going to start rolling back to reach parity with what existed before what the point of sticking around is. Here’s a few bullets that I can think of.

  • You own your accounts and since there’s not a centralized payment service, you can sell work to people around the world and not just be stuck with whatever is available in your local area. Also paypal and similar services suck.

  • You have mindshare here. Assuming there’s a recovery, sticking through the bad times will present you with better opportunities during any future cycles. Recovery encompasses more than just finance, but to the general engagement between participants in the space. I may be speaking from a biased experience perspective but did you know I did NFT art in 2017? No one knew what the fuck NFTs were back then, we didn’t even call them that. I continued being involved in blockchain and when I got pulled back into digital collectibles the efforts I had made over several years seemed to be paid forward. I think there’s a lot of value in sticking it through, even if you decide to court both traditional income and NFTs at the same time.

  • The haters still exist.

    They are a potential new audience but if you took the risk to enter the space, it’s still a point of contention to deal with. I personally would prefer never to have to deal with those people again and dabble in collecting and making with the passionate people I’ve met over the years.

To summarize: if we survive the regulatory hell that’s coming, maybe things get to go back up again. I think maybe they actually will! But during this winter, stay consistent and play the game if you can. It’ll be worth it should the gas come back.

I also want to say that while there are as many degenerates in NFTs as shitcoin trading, the difference between the two markets is that NFTs are the only mean to prove true ownership of a digital piece of art. This is tremendously transformative and I really don’t see this dynamic ever going away. Some people will continue collecting pieces at high prices and others will collect when they can simply because they believe in the promise of the space. NFTs may survive slightly better than shitcoins because in markets like this people shift more into fundamental trading. Collecting art because you love art is the fundamental, especially when there’s nothing else happening.


Some other thoughts

Outside of horrific market conditions, there’s a lot of other nonsense happening in NFTs. A lot of it created due to bear market conditions and traders wanting to scrape as much as they can from purchases they made in manic streaks. The worst of which is the attempt to destroy the promise of royalties. I’ll need to write about this in the future but the same mindset that brought people to the point of arguing about royalties, after it was used as a selling point to onboard new talent into the space, is creating a toxic and aggressive scene that just isn’t fun to a lot of people right now. There’s an incredible amount of unfounded FUD and people rejoicing in the failure of others. That’s pretty fucking stupid to participate in if you’re here for the promise of what could be.

Dig into your subcultures and niche’s during times like this and avoid some of the broader talking points. Change can be made simply because people are having fun. Don’t vanish and burn bridges with people you made true connections with. I think that’s important. People yammer on about BUIDL. It’s stale but often true. And when you’re building, you don’t actually need to be “building” some product. You can build connections, collaborate on work, and just stay engaged when you have the mental fortitude to (though take breaks if you’re taking psychic damage).

Lastly: please stop doing 10k projects. If you’re a small artist and you think a 10K project is your way to financial independence, I would urge you to talk to others that launched their own. It is a grueling line of work and in the current state of things, most of them tank immediately after reveal. These floor price drops lead to nothing but painful words from random anons that believe you are the reason for their misery. You will burn out.

Instead, consider limited runs. Collections are awesome but there’s not even 10,000 people actively speculating on PFPs right now. Limited collections leveraging any series of new platform functionality can still create a bit of income without the hell that comes leading a 10K derivative project. More on this and the broader speculative trader mindset another time.

Anyways, I hope that things improve quickly. I’m personally more concerned about regulation than I am worried about NFTs just disappearing. Be empathetic and kind to others, this is a hard period for everyone. You’ll be mostly remembered for how you present yourself in the coming years. You’ve taken the risk by entering the space so don’t throw away goodwill in pursuit of seeking engagement through negativity.

I’m here to stay. I hope you are too.


All artwork in this was generated using various stablediffusion models. AI video essay is coming out next. Thanks for reading. Opinions are my own.

CC BY-SA 4.0
CC BY-SA 4.0

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

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