Welcome my friends to the ninth edition of Nonfungible Alpha.
Each week, I drop actionable insights for both collectors and artists. The focus is the 1/1 market, up-and-coming artists, and the art of collecting.
Alright, LFG
Weekly Quote
I saw that to do exceptionally well you have to push your limits and that, if you push your limits, you will crash and it will hurt a lot. You will think you have failed—but that won’t be true unless you give up.
Ray Dalio
📈 Market Pulse
The 1/1 market has remained slow but steady, ranging between ~$160k and $230k in daily volume between SuperRare and Foundation this week.
SuperRare is on pace for $3.5M of volume for October, which would be its second lowest month of the year after June ($2.8M).
🎯 Weekly Featured Art
Dog’s Garden by Tormius
Available on SuperRare
The Top Ten Mistakes I’ve Made as a Collector, Pt. 1
I’ve done some stupid things as a collector. Not just accidentally buying a toilet jpeg as I chronicled in last week’s edition.
I have no regrets though. I see every mistake as an opportunity to learn and sharpen my edge as a collector.
Today, I’ll reflect on some misjudgements I’ve made. These are mostly broad aspects rather than specific things like collecting or not collecting X. My hope is that you can learn from my mistakes, so you won’t have to make them too.
Disclaimer: different collectors have different goals and preferences so what may be a mistake for me might work for you or vice-versa. Some of these apply more universally than others.
So…in no particular order, here are some of the top mistakes I’ve made as a collector.
note: this started getting long so just sharing the first half in today’s edition and will share the remainder next week
Moving With The Market
Early on, I would “move with the market.” For example, when the market was more active, I was more active too. When everyone else was collecting, I was collecting. When the market slowed down, I slowed down too.
I now make it a point to do the opposite. I try to collect most actively when the market is quiet and to sloow down when the market is hot (and if I’m reselling any work to do it then).
The reason is simple: a slow market means opportunity. It means more amazing new artists and works go unnoticed. Grails go for cheaper too. A masterwork that might fetch ten offers in bull season might just get two or three in a bear.
Meanwhile, when the market is hot, you’re paying higher for the same pieces, and it’s harder to find new, undiscovered artists.
When the market heats up, flippers and opportunists flock in. Sometimes waiting is a better option than bidding up against them. They will likely resell the work to you for cheap a few months later when the market quiets down and they conclude that “NFTs are dead.”
Few people realize that Warren Buffet was talking about NFTs when he said “be fearful when others are greedy, and greedy when others are fearful.” Warren loves jpegs. (jk)
Right now the 1/1 market is relatively slow, so I think it’s a time to be “greedy” if you have the liquidity.
Not moving with the market also means having your own thesis and convictions and not getting swept up in the hype. Easier said than done. But I think this is where real, sustainable “edge” comes from.
Over-indexing on Trad Cachet
By “trad cachet” I mean an artist’s status in the non-NFT art or design world. For example, working with prestigious clients, getting in galleries, winning awards, or having a gazillion Instagram followers.
Early on, I would (unconsciously) give “extra points” to artists with such achievements.
But I soon realized that trad cachet is a poor predictor of success in the NFT space.
Many of these artists (exceptions of course) are not as engaged in the community, don’t make NFTs a priority, and may rest on their laurels and not grind as hard. In some cases, they are opportunists that see NFTs as a way to capitalize on their cachet or celebrity.
In contrast, more up-and-coming artists will grind harder, engage with the community, and more likely support other artists, all things that this space rewards — rightfully so, in my view. They are also more likely, in my experience, to have a mindset of building their own community and tribe rather than seeking permission or approval to join an existing club.
I’m not saying to avoid artists who are accomplished in the trad art world. I’m sure some will be successful in this space. Rather, just not to assign an automatic premium to trad cachet. Vet these artists to see if they are committed to the space and have the right mindset to succeed in a domain that is quite different from the trad world.
Not Doing Due Diligence
When I first started collecting, I just bought works I liked. I didn’t take time to review the artist, to dig into their past work, their vision, their commitment to art as well as the space, or traits like integrity, grit, ambition, and so forth.
In some cases, the artist would abruptly disappear from the space later on or I’d learn later we were not aligned in some way.
Since then, I‘ve come to approach collecting as first and foremost investing in artists and their vision. I must love art to collect it, that is essential. But the most important thing is that I believe in an artist and their potential.
An analogy would be investing in startups. You probably wouldn’t invest in a startup without vetting the founder to see if they are someone with drive, resourcefulness, vision etc.
Similarly, I look for certain traits in artists. If I don’t see these traits, I may still enjoy and love their work, but I won’t collect or invest in them. This allows me to focus my capital, time, and energy on the artists that I have the highest conviction in. Artists that I believe are not only likelier to gain market value over time but who I think will create value for other artists and the space as a whole.
Not Connecting With Other Collectors
This may sound silly, but early on, a part of me viewed other collectors more as rivals than as peers. After all, we were sometimes competing in bid “wars” for the same works.
This was nearsighted. Even if we occasionally vie for the same works, our broader interests are 99% aligned.
We are all trying to legitimize tokenized (and digital) art, push this space forward, and support a new generation of artists. It’s not us against each other, it’s all of us together against the naysayers, against the status quo of the trad contemporary art world.
I also realized that connecting with other collectors is practical and strategic. It helps you keep a pulse on the market and upcoming mints, discover new artists, spread artists in your collection to other collectors, arrange art swaps, and be among the first to find out if a collector is looking to resell a work that you may be keen on. If a fellow collector trusts and respects you, they may resell something to you at a friendly discount.
Beyond that, I just feel a lot of camaraderie with other collectors. I’ve found collectors in this space to overwhelmingly be friendly, open-minded, forward-thinking people who love art as well as markets. I’ve learned a lot from them.
These days, I consider many collectors to be friends, and I probably talk with them almost as much as I do with artists — and increasingly the lines blur as more artists collect and more collectors create.
Not Being Long-Term Enough
A short time after I got into NFTs (I collected my first NFT in 2017 but didn’t get really into it until early last year), the market exploded. It was easy to flip many works for double, triple, or beyond after a couple months or sometimes even a couple weeks.
This market encouraged short-termism, and I fell prey to it to a degree. I flipped a few great works early on. I learned the hard way that the art that is most liquid and easiest to sell is also the art that is most likely to accrue value longer term.
I realized over time that short-termism was not only bad for artists in some cases but also a suboptimal investment strategy. I also realized taking a longer-term stance was more compatible with my personality and preferences and all around more rewarding.
Since then, I’ve adopted a longer-term mindset, thinking more in terms of years, decades, or beyond.
If you’re a long-term minded collector, you will naturally attract long-term minded artists. And these are the best type of artists to invest in.
“Play long-term games with long-term people” as Naval put it.
Stay tuned for the second half of this writeup in next week’s edition
Great one, looking forward to next 🙏
Completely agree. "Long-term games with long-term people."