Over the past several months the entire NFT space has almost unanimously been bullish on the upcoming Yuga Labs aka Otherside Land Sale happening this Saturday at noon Eastern. The problem is this, in the investing world if 99% of people are doing one thing, it’s more likely that the 1% is going to be the profitable players. This applies to the upcoming land sale as well. Depending on several variables you will be more or less likely to make a profit in the sale this weekend. I will go over those variables in this article, the primary of which is if you are planning on buying land on the secondary market on Saturday you are more likely than not going to lose money on this trade.
The success of Bored Ape Yacht Club and Mutant Ape Yacht Club has understandably built an absolutely tremendous amount of hype for the Land sale this Saturday. There is a major difference between every Bored Ape release up to this point and the Bored Ape release happening Saturday. Up to now Bored and Mutant Apes were a social movement. They were an exclusive (30k total between BAYC and MAYC) online identity that a large amount of original holders grew an incredibly strong emotional connection with. This emotional connection led to diamond handing, which led to lower supply, which led to higher prices. The higher prices led to FOMO which led to even more demand. None of the factors I just went over apply to Otherside Land. Otherside Land is a completely new paradigm in the Yuga Labs ecosystem. Otherside Land is a 200k (!) collection of land with different resources on them. This is not an exclusive online identity, this is a widely available piece of code in a larger piece of software. The Mutant Ape you see on my Twitter and blog represent me. These plots of land will represent nobody online. They will not be in anybody’s hexagons. They serve the exclusive purpose of potentially bringing a new digital experience in the future. This shifts the experience of owning the NFT from a personal, emotional connection to a purely one way relationship of hoping this plot of land produces value. Between this shift in the experience of holding the NFT and this unbelievably large supply, there are a lot of headwinds on the value of this project.
NFT projects have been trying to produce experiences with land assets since the advent of the technology. Companies with game developers have either produced boring, almost unplayable experiences like Decentraland or they are professional game trailer makers like Sandbox. Projects that don’t have game developers take the short cut and build Ponzi schemes disguised as point and click adventures and call it a Play 2 Earn experience. Bored Apes are almost exactly one year old. It is an almost impossibility in the 12 months of existence of Yuga Labs that they have created anything close to a AAA video game experience. An actual, playable metaverse is without a doubt years off. That’s fine though, in leaked investor decks Yuga Labs hints at a P2E experience that will bridge the gap to a real digital experience. While a P2E game involving swapping Ape Coin for resources on plots of land sounds interesting, here is the issue- not everyone can make money in P2E games. In fact, very few people make money in P2E games. Almost 100% of the time the only people that make money in P2E games are the people that got in the earliest and also hold the most assets. All money flows up to these early whales. Every P2E game I’ve studied has suffered from this. This realization leads to people selling which leads to price depreciation. Price depreciation in a 200k supply project will happen fast. That is a lot of potential sellers. Another big headwind for this project.
Here’s the thing though, making money in the NFT space isn’t about quality or execution. It’s about buying and selling at the right time. That’s why despite these factors I went over, I believe there will be some winners. Those winners will be the ones who get in the earliest and sell into the astronomical amounts of FOMO that will be happening on the secondary markets. A couple of months ago Yuga Labs posted an ominous message on their Twitter urging people to a new website “somethingisbrewing.xyz”. It led to a KYC platform that had users submit every piece of personal information possible in order to get approved for….something we weren’t aware of yet. The sentiment in the NFT community leaned negative. Many shouted “This is anti web 3!”. A lot of people disregarded this link and didn’t sign up. Even among those that signed up struggled to get approved, most got denied in the process due to technical issues and quickly gave up. Only a small portion of the community got fully approved. Well as it turns out only the people that went through this process will be able to participate in the auction this Saturday. This means only a select few will be able to get in on the retail cost and determine the market price. This select few will be selling a large supply of 55k auctioned lands to the rest of the market. The market will FOMO in and without a doubt we’ll experience some sort of pump. Here’s the issue, the market will be fighting over an incredibly large supply of lands entering the market. Eventually, this price pump will slow down as more and more land becomes available. Price discovery will happen that will settle the price at a certain level. The 100k initial supply is already an extraordinarily large amount that will put headwinds on the price. Then come this summer, another 100k land plots will release, bringing the total supply to 200k. By this time demand and emotions have probably calmed, meaning supply increased but demand didn’t. The laws of supply and demand almost guarantee the prices will go downwards at this point. The people who bought from the auction made money on the FOMO, and the people who FOMO’d in on secondary just got 100k plots of land dumped on their market. As with many NFT projects, those that got in the earliest profited, and everyone else got dumped on.
I went through a lot here so I want to summarize my main points.
- This is not the same thing as a Bored Ape PFP, changing the nature of the project
- The supply is outrageously high at 200k, much larger than almost any other project out there
- This is focused around a digital experience that will either be years off or will probably use the P2E model that fails a majority of the time
- A select group of people will get early access to the supply, they will be selling into FOMOers
- After the first wave of lands, a new 100k supply of land will be dumped on the FOMOers who bought through secondary
- You will have a very difficult time making money on this project unless one of two things happens: A) you got in early during the auction or B) Yuga Labs pulls off an absolutely revolutionary game experience that in the short term has to be able to have parabolic growth in order to attract new money.
If you are a super long term speculator and have no plans to sell this for years then go right ahead, buy up land. You are betting that Yuga will pull off something truly revolutionary here in the Software space. If you are short term or cannot handle large dumps and high volatility for possibly years on end, I would either recommend somehow getting in on the auction or sitting this out until emotions dry up and the true price of this 200k supply collection is found.
This is my opinion based on the information available at the moment. Up until this point, almost every single leak about Yuga Labs has been pretty spot on, so I feel comfortable speculating based on this information. This is strictly my opinion and not any sort of advice, but it is based on this thesis I will be acting on Saturday. I KYC’d myself and will be a part of the auction and will most certainly be scooping several plots of land to quickly flip on secondary. By having this hypothesis I am well aware I am going against the so far undefeated trend of “Bored Ape price go up”. Every single Yuga Labs asset has done nothing but go up since their launch. Based on the information I presented here, I theorize that this will be the first project from Yuga to not be a large financial success for speculators. It will almost certainly be a winner for Yuga with the incredible amounts of royalties they’ll make off the market, but I do not believe a majority of buyers on the secondary will profit off this. If everyone is looking left, you have to look right.
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