AOTB – Mini-Series
Hello Bubble Riders!
Let me start this one off with the problem that needed solving.
We haven’t had an algorithm for trading NFTs themselves, yet, for an obvious reason. NFTs, by definition, are non-fungible (= not-replaceable). And trading algorithms work by treating items as if they were replaceable.
(For the nerds: Yes, I know. Social data algos use graphing mathematics and that does work by building individual profiles. But even there, a key aim is to identify digital doppelgangers to give person B what doppelganger A liked as a recommendation. The algos at best aim at “limited series” individualism.)
But the industry has evolved and we now have an emerging standard metric: an NFT collection’s floor price.
The idea is that the cheapest NFTs are, given how common their properties are in the collection, basically fungible. You can stake them and borrow against them (causing recent problems for BAYC stakers recently). And sites are now presenting these floor prices as a way to gauge their performance. For example, here’s CoinGecko’s NFT floorprice tool. I’ve sorted them by market cap.
You’ll notice that BAYC is just barely above the CryptoPunks (also now owned by Yuga Labs). So, there is a near flippening afoot in the NFT world. The CryptoPunks are poised to reclaim their cown as the top NFT project.
But returning to the main point, the availability of the NFT Whale portfolio has made algorithmic analysis of NFTs possible by using price momentum and not mere sentiment analytics (which typically yield sub-optimal returns for limited volume offerings such as NFTs).
This is the third new algorithmic strategy the AOTB team has rolled out in as many weeks as part of our new revamping of all our offerings to better serve subscribers.
What I’m going to do is explain how the NFT Whale works and why it’s free for the moment. As a note, NFT coins, such as $APE, are already included in the NFT portion of our daily updates for paid subscribers. This one is about trading the NFTs themselves.
Let’s get to it.
Stage 1 – The NFT Whales
I never like trading momentum strictly. The reason is simple: such metrics are quite noisy (= have lots of false signals). If you have a broader industry indicator, you can cut down on a lot of that noise and improve your returns significantly.
Nansen is one of several places you can get NFT sector data. Here’s their Bluechip – 10.
The problem with broad sector data like this is that NFT collections are so small relative to coins (or stocks) that you can’t use it in the same way. We need something else to get us some lead time.
Here’s some of their data on the NFT buying action of “smart money” (= whales, for our purposes) that they have.
We can aggregate this data to determine if NFT momentum is heading in a positive direction or not. It looks predictive too … but this is still a live walk forward.
Stage 2 – Floor Price Momentum
Now we can use that floor price momentum — where the data exist. This is still very new data and every source I’ve seen calculates the floor price for each collection a bit differently.
Still, here’s a simple LSMA 50 algo thrown on the BAYC floor price (using TradingView’s data).
The idea is that if the floor price is below the trend line, then buying the NFT is a bad idea. If above (and the industry momentum is positive) then it’s a buy.
Why Is It Free?
We’re going to be giving the results of this algo away for a bit.
One reason why NFT Whale is free is that it’s promotional. Let me explain.
TheArtofTheBubble.com website was initially a newsletter repository. Now, we have real products but you can’t even see that on the page (unless you go hunting). You definitely can see how well we’re outperforming the competition.
Here are the results of our two recently introduced algos in their performance against the world’s biggest NFT Whale (with literally dozens of analysts on their teams).
Yes, our algos have beat a16z, Binance, and Coinbase (and the benchmarks too). I just don’t think people know how good they are. So, in part, I want to draw attention to the performance of our offerings.
The other reason is that these data are new and the algo is in its walkforward period (just like the crypto whale watch algo). If you want to get the free signals, just follow me on Twitter @lspurcell and the team @ArtofTheBubble for the fastest updates.
For the proven stuff, there’s a cost (of course). But historically, these strategies have literally beat the world’s best known crypto investment firms by miles.
This week I wrote a number of pieces that are related to this post, so you might want to have a look if you’ve missed them.
That’s it for this week. Remember to join us on Discord if you haven’t already.
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