3 Key Lessons Learned During The First NFT Bull Run (August-October 21')
An Infinite Money Printer, Gas Wars, Scams & Rugs, oh my!
Hello fren, this is PART 2 in an ongoing series about BowTied Golem’s origin story into the wild-wild-world of NFT trading and degeneracy.
You can read part 1 below:
When we last left off, I had hit my first “home run” in NFTs.
I was in shock.
I had turned a $100 purchase to a $10,000 sale in 72 hours.
From 0.03 ETH → 3 ETH in 3 days? That’s a 100x!
That was it.
That was the moment.
I was HOOKED on NFTs.
My euphoria was short-lived however, as within 24 hours of my sale, the floor of the collection had reached a high of around 4 eth, with some 5/6 eth sales here and there.
Here I was, euphoric about making a 100x profit one day, and the next day feeling like an idiot because I “sold too early”.
At the time, I felt terrible, had severe FOMO, and almost APED* back in.
(When I say APE into a collection, that means blindly buying into something, typically because of hype or fomo.)
Thankfully my Girlfriend, not being involved with NFTs or crypto at all, was able to grab me by the shoulders and shake the sh*t out of me to get me to come to my senses.
It was a good thing that she did that too, because within 2 weeks the collection had completely lost all momentum and the floor collapsed back down to 0.8 eth.
This experience taught me A VERY IMPORTANT and VERY VALUABLE LESSON in the crypto space.
LESSON #1 - It’s Not REAL Until AFTER You Sell
People love to talk about their NW* (Net worth) in crypto all the time.
The thing is… 99% of the time when someone is referring to their NW and talking about 6-figure, 7-figure, or 8-figure portfolios, they are talking about their POTENTIAL NW.
I say potential NW because that’s all it is, potential.
Sure, if you could click a magic button that sold all of your assets—all of your BTC, ETH, ALTS, & NFTS immediately for the price they are all valued for at that moment—then yes, you would be worth whatever you said you were.
But that’s not reality.
The REALITY is that it’s not real until after you sell.
Everything else is “paper gains”, meaning your NW went up on paper, not real life.
Or as I often like to say, it’s just “Fake Internet Money”.
With the Black and White Nights collection, I had turned $100 into $10,000 in 3 days with a few clicks of a mouse and speedy fingers.
But I can only say that I had turned $100 into $10,000 because I actually SOLD my NFT for 3 ETH when the opportunity presented itself.
If I had continued hodling and didn’t sell, then it wouldn’t matter that the floor price went up to 5 eth and I still had the NFT.
Because I probably wouldn’t have sold.
I would have been drunk on the POTENTIAL of incredible, life-changing, magical gains and I would have diamond-handed* that NFT thinking/believing that it was going to go to 100 eth.
(Note: Diamond-handing means to hold onto an asset without ever selling it, your fingers are as hard as diamonds and you will never let it go.)
Then, I would have gotten a bucket of cold water dumped over my head when the floor price collapsed a few weeks later to under 1 eth and more important than that, the ATTENTION dried up and nobody was even interested in buying that collection anymore.
Then you’re left holding onto an NFT that nobody else wants to buy off you and a head filled of shoulda-coulda-woulda for letting the opportunity to sell pass you by.
Moral of the story?
It’s NOT REAL until AFTER you Sell!
(WARNING: This lesson is one you will have to learn & re-learn over and over and over again. While it’s the first and most important lesson I learned in crypto, it is also the one that I have continually ignored and been burned by over the past year—as have many others.)
Later that day, basking in the glory of my win, I went on a little spending spree…
Minting 4 NFTs & purchasing 4 NFTs for a total spend of around 2.935 $ETH
And just like that, all of my profits & money gained from the sale that morning were gone!
I didn’t care though.
I was blinded by greed, fast money, and the *thought* that everything I touched turned to gold.
The entire space was on FIRE, there was no way that I was going to lose money on these NFTs—or so I thought.
(NARRATOR: He lost money on 5/8 of those NFTs)
1st up we had Evaverse Turtle Troop, a collection that Alex Becker—my defacto NFT internet mentor—was interested in as it promised big things regarding an NFT/Crypto game being built on Steam.
He was bullish and at the time that was enough for me. So I looked for the cheapest/rarest one I could find and I APED in.
Next we had 8 Bit Universe and this collection had A LOT of hype going into it.
The founder was really good at marketing and the entire community was abuzz with the potential of these 8-bit, punk-like, avatars.
Influencers were shilling them, the discord was poppin’, the founder of the project had a punk (this meant he was an OG/Legit lol), and everyone wanted a piece of the action.
Looking back, this was one of the first true Gas War’s that I had participated in.
A Gas War happens when there are a lot of people all trying to do something on the Ethereum Network at the same time.
Since Ethereum can only process around 15 transactions per second, if you want your transaction to get prioritized you must spend more $$$ or “gas” to get pushed to the front of the line.
Me, not knowing wtf was going on at the time, nor how to operate it, I believe I simply clicked “high” on Metamask soon after the Gas War had begun.
Which lead me to minting these two NFTs.
If you weren’t around back then, you don’t understand how insane Gas Wars got on the regular.
In this instance I paid ~.18 ETH ($564) for 2 NFTs & ~.11 ETH ($343) in gas for those 2 NFTs.
That means I paid 61% of the TOTAL PRICE OF THE NFT for the opportunity to BUY THE NFT!
Pause for a second and think about how insane that is.
If you’re shocked and confused as to why someone would pay 50%+ of the price of an NFT for the opportunity to buy that NFT then lend me your imagination for a minute.
Let’s imagine what an NFT Gas War would look like in the Real World…
Following a mega-trend that has broken out around the world, A local store in your city is selling extremely rare and exclusive watches.
Everyone you know wants to get their hands on one of these watches, they’re so rare, they’re so cool, there’s only 1,000 of them and everyone is talking about them, the hype & FOMO is palatable.
The store is also running what seems like a very good deal on the watches. Each person is allowed to buy 1 or 2 watches for $250 each.
You’re seeing advertisements of the Big Sale on TV, your friends/co-workers are talking about it, there are fliers posted all over the city, even your friends that live in other cities are messaging you about the latest “watch craze” that is popping up all over the world, where people are buying these rare and exclusive watches for $100-$250 each and sometimes reselling them for $1,000, $10,000 or even $100,000 in mere days/weeks/months afterwards!
“If only you could get your hands on 2 of those watches, you’ll make BANK!” You think to yourself as FOMO sets in hard.
The day finally approaches and the store is absolutely swarmed with people clamoring to buy a watch or two.
There must be 10,000 or 20,00 people there all looking to buy 1 or 2 of the 1,000 watches!
The store, recognizing the problem says, “Ok, we’re not doing a first-come, first-served line here; we’re doing a highest-tip, first-served here”.
The price of the watch has not changed, it is still $250, but in order to purchase the watch you must “tip” the store first.
Those with the highest “tips” will get priority and the opportunity to purchase 1 or 2 watches from the store.
But there’s a catch…
The store will process 15 transactions per second, so you have about 30 seconds - 1 minute (max) to get your “tip” into the store for them to process it and let you know if you tipped high enough to purchase 1 or 2 watches.
“Why does it go so fast?” You might be asking. Because every second 15 people’s tips will be accepted and they will be able to purchase 1 or 2 watches. If everyone purchases 2 watches, then within 33.4 seconds, 1,000 watches will be sold. If everyone buys 1 then it will take 66.6 seconds. Usually it will vary between 1 & 2 watches per person, giving you roughly 30-60 seconds to send in your “tip”.
There are some more stipulations…
You must give your whole “tip” + cost for the watches to the store when you hand in your money
If your “tip” is accepted, you will spend the entire amount of what you gave
If your “tip” is rejected, you will get refunded the amount you would have paid for the watches
ALSO if your “tip” is rejected, you may or may not get refunded the tip you paid; either partly, or in full. It depends on how well the store runs its computers (aka smart contract)
Finally, you may end up paying MORE or LESS than what you had originally thought when you sent in your “tip”, since your “tip” was an estimate based on demand and how well the store runs its computers (aka smart contract)
(Fun, innit?)
Also there’s a few more things complicating the sale…
You don’t know what everyone else is paying for their “tip” or how many watches they are planning to buy.
You simply have a vague notion of the average cost of the “tips” being paid every 8-12 seconds when a guy wearing a sign called “etherscan” yells out an update.
You also don’t know how many watches are being sold or how many watches are actually left.
Since people are buying them so fast, the store’s sign counting how many watches are remaining is struggling to keep up as every second 15-30 watches are being sold.
Finally, you will only get 1 chance to submit your transaction to the store and it must be done within the first 30-60 seconds; if you “tip” too low you will lose, if you “tip” too high you will waste $$$
With all this information swarming around in your head, you’re barely able to think straight.
Your heart is pumping hard, your hands are starting to sweat, and the excitement is about to reach its peak.
And the sale begins!
That my frens, is what it is like being in an NFT gas war. (Simplified of course)
So yes, as far as I remember, 8 Bit Universe was the first real Gas War that I participated in.
It was also the first blatant rug pull that I had participated in.
I don’t remember all of the details, but basically the founder/project promised a game and a whole lot of stuff.
Something broke during the mint and the most rare characters in the collection were all minted #1-100.
This immediately lead to a huge FUD* storm (rightly so) and the founder of the project did not handle the situation well, at all.
(FUD = Fear, Uncertainty & Doubt)
They quickly gave up on all their plans, took all the money and ran.
Someone later tried to revive the project but was unsuccessful.
I still remember that mf “greengrass” the founder of the project who rugged and stole everyones money.
He apparently was semi-prominent in the Punks community and he took his 1+ million rug pull and went on his merry way buying more Punks & NFTs.
He has since deleted his account & sold his punk on 11/08/21 for 125 $ETH and *vanished* but I’ve no doubt he’s still out there doing shady sh*t.
Maybe an armchair detective reading this can see if they can find him, here’s the punk that he sold.
Later that day, I would go on to purchase:
“Somewhere Else” by Will Nichols an incredible photographer and all-around great guy who I’ve become frens with since. (Also discovered by Alex Becker lol)
“Chain Guardians” an NFT card-game, also something Becker was into.
2x “Evaverse” mints, the “main collection” behind the Evaverse Turtle Troop, building a crypto game on Steam, something Becker was into.
And finally a “Mooncat” for the history & culture and because there was a lot of talk about historic NFTs doing numbers.
As you can see, I was very much in the “Follow everything (insert influencer) does” camp when I first started in NFTs.
In my case it was Alex Becker, but really it could have been anyone.
This leads nicely into our next major lesson in the crypto space…
LESSON #2: Learn How To Think For Yourself Or You’re NGMI (Not Gonna Make It)
In the beginning of my NFT journey, I had no idea what I was doing.
Nobody does.
I had found a few influencers that I liked, I followed them closely, and I copy-traded them.
A big one being Alex Becker.
Looking back, I’m not ashamed of it.
Finding profitable influencers that you like/agree with and following their trades to learn is one of the most important stages of growth during a trader’s journey.
Also, it was because of him that I had my first 100x win, so even if I lost out on a few others, it was okie.
The trap that many traders (with Coins & NFTs) fall into is that they never leave this copy-trading stage of development.
They become life-long followers & copy-traders, never thinking for themselves and never leaving the comfortable confines of their favorite influencer’s shadow.
Don’t get me wrong, you can definitely make money copy-trading successful influencers.
Especially during the first NFT Bull Run, it was often very profitable to follow wallets and see what the “smart money” was buying & selling.
Since so many people were simply aping into whatever “smart money” or “big influencers” were buying scammers quickly took note of this and developed a new scam.
They figured out how to mint NFTs directly to influencer’s public wallet addresses.
People that were wallet-trackers would see that and go “oh man, this influencer just minted 10 NFTs of project XYZ; this is gonna be big! I need to go mint this right now!”
And they would go and mint.
1/2 the time these NFTs were worthless and you would simply lose the money you paid to mint it
1/2 the time the sites were actually malicious and would drain your wallet completely
These are some of the dangers that you run into by not thinking for yourself.
I wrote the article below to help teach people who were just starting out in NFTs everything they need to know to get from 0 → knowing more than 80% of other people out there.
In that article, I go over 5 main traits that I look for when deciding whether or not to invest into an NFT project.
Those 5 traits are:
HYPE
COMMUNITY
DEVELOPERS/TEAM
PRICE ACTION / UNIQUE OWNERSHIP
ART
Despite it being nearly a year since I wrote that article, I still stand by those 5 defining characteristics behind whether or not to invest in an NFT project.
It’s not written in stone but it is an outline/mental checklist that I usually go through when I am deciding about whether or not to buy an NFT.
There are more things that I do now—which I will explain in further articles—but the basics are always the same.
Come up with a list of qualities/qualifications that an NFT project must have in order for you to consider investing in it.
Then, THINK FOR YOURSELF about whether or not this investment makes sense.
Also think about WHY you are buying that NFT.
Is it because you believe in the future that the NFT is striving for?
Is it because you are trying to do a quick flip?
Is it because you are fomo-ing in at the top?
All too often people buy first and think later.
This leads to many people getting REKT and/or losing money.
Now I’m no master and I’ve had my fair share of aping into projects only to get rekt later on, but me experiencing that pain is why I am harping on this point so much.
You MUST think for YOURSELF!
If there is one thing that I can accomplish writing these posts, it’s to help people come up with their own tactics/strategies and learn how to think for themselves when it comes to buying/selling NFTs.
It’s the old adage: Catch a man a fish, he eats for a day; Teach a man to fish, he eats for a lifetime.
I’m here to help teach you how to fish, fren, and the MOST IMPORTANT thing about learning how to trade NFTs is that you must THINK FOR YOURSELF.
Which leads nicely into our next and final lesson of the day, young degens.
LESSON #3: How To Avoid Scams In The NFT Space
This lesson alone is well worth its weight in gold.
It’s so important that I actually wrote an entire article that goes very in-depth about this topic earlier this year.
I recommend you read it.
The truth of the matter is that it is almost impossible to not get rugged in some way or at some point in the crypto space.
What we are aiming for here is to do three very important things:
Teach you how to recognize scams off the bat
Protect you from getting hacked
Learning how to limit your downside so you don’t lose everything
Story time.
The first time I got rugged was about 1 week after I found my first success trading NFTs, on August 26th, 2021.
I remember the day because I fell for a very simple scam on Opensea and I can’t believe how stupid I was.
There was this project that was minting was called “Shabu Town Shibas”.
It had loads of hype and I was eager to mint one.
(It’s long since dead now, RIP.)
But I was too slow and the collection sold out before I could get in there.
So… crazed off of the heat of the moment & the FOMO I was feeling I quickly went to Opensea to see if I could buy one of these from someone for around the price of mint because I was sure this project was going to go gangbusters.
I typed in the collection into the search bar and I found it.
Not only that but people were selling them for only a tiny amount above the mint price, I was in luck!
Mint was 0.1 and they were being sold for 0.125 or something.
I bought 2 of them for a total of around 0.25 eth + 0.05 eth in gas or so.
I was hyped!
About an hour or so later, I saw that the floor price of these little shibas had doubled up to 0.2 or so.
I happily went into my Opensea account to go sell one and recoup the ETH I had spent.
Except when I got to my account page, the two NFTs I had bought were nowhere to be seen.
“WTF?” I thought to myself. “Where the heck did my NFTs go?”
I looked at my activity tab and lo-and-behold the purchases were gone!
Panic set in.
I went over to etherscan and found the transactions of me buying the 2 NFTs.
The purchases had went through but when I looked into it, I was transferred an “Opensea Storefront” and not the “Shabu Town Shiba” NFT that I had thought I bought.
When I went to try and lookup the contract for the NFT I bought on Opensea, I got an error page saying the collection had been deleted.
So there I was, the NFT collection I had wanted was popping off and… the NFTs I had bought that I thought were that collection were gone.
I got rugged.
Do you know what happened, anon?
I will explain.
Often times after a collection mints, especially if it is a popular collection, scammers will go onto Opensea and copy the project.
They will copy the art, the website, the page, everything will be a direct copy with the legitimate project.
Opensea will usually find these copy-cats and delete them within 30 minutes to an hour or two after they are created.
But people that are in peak FOMO mode will often find them first, and purchase these fraudulent NFTs believing that they are purchasing them from the real collection.
How do we prevent this from happening?
That is easy to do fren.
Only use official links by the official team in discord/on twitter/on their website that have been posted in-advance
Wait for Opensea to officially verify (blue check) the collection (SLOW)
Find the official contract for the NFT collection on etherscan, copy the contract address, and paste it into the search bar in Opensea (RECOMMENDED)
Nearly all scams/hacks in the NFT space rely on the person being scammed to be operating in a rushed/emotional state.
These are times when people let their guard down in order to cop a fast-flying mint or have been lulled into a false sense of security.
I honestly believe that over 90% of scams can be avoided by simply stopping what you are doing, taking a deep breath, and thinking for a few seconds before acting.
The best way to protect yourself in web 3 is to recognize that:
You are entirely in control (everything is your fault)
There are no do-overs (can’t reverse txns)
People are actively trying to scam you (all the time)
In this case, the best defense is to honestly ALWAYS be a little paranoid that you are going to get scammed or hacked.
Verify first, then act.
Do not blindly trust anyone or anything in this space—not even me.
If there is a “surprise mint or announcement” on a discord/twitter that you trust without prior details
It’s probably a hack/scam
If there is a “too good to be true” deal in your DM’s for one of your NFTs or about a mint or about winning something you weren’t expecting
It’s probably a hack/scam
If there is a website asking you to sign something or approve a transaction and you’re not 1,000% sure it’s legit and what you wanted to do
It’s probably a hack/scam
The moral of the story is that a little bit of paranoia goes a long way in this space.
Oh, and make sure you get yourself a hardware wallet by Ledger or Trezor.
The point of a hardware wallet is to protect the BULK of your assets.
You put your most valuable NFTs on there and most of your coins/anything you are not actively trading on there.
Therefore, if your hot/minting wallet gets hacked or drained, you don’t lose everything in 1 go.
So really, honestly, and truly—get a hardware wallet.
It’s like $100 to get one from Ledger or Trezor.
And for the love of Vitalik Buterin please do not ever type in your seed phrase to any of your wallets on a computer or phone.
Never take a picture of it.
You write your seed phrase on a piece of paper or metal and you keep that hidden away safe and sound.
Then you act like it doesn’t exist.
And that’s all folks!
I hope you enjoyed reading 3 Key Lessons Learned During The First NFT Bull Run (August-October 21')!
It is my wish that you take these lessons to heart and use them to further your own trading career.
There are plenty more lessons, anecdotes, stories, and degeneracy that Golem got up to over the past year and I plan on telling you all about it over the coming weeks.
In the meantime, if you’re not already subscribed, if you could type in your email address below and subscribe I would really appreciate it!
If there are any topics in particular you would like me to talk about or go more in-depth about, please feel free to drop a comment or a DM and let me know.
Otherwise I’ll catch you on Twitter @BowTiedGolem where I talk about this stuff 24/7/365.
Until Next Time.
Your fren,
— Golem