PITFALLS OF NFT COLLECTING

The Melted Penguin by Boris Z Simunich

DECEMBER 8TH, 2021

I consider myself a seasoned collector when buying and selling NFTs. But I have a confession to make. It hasn’t always been this way. I’ve learned these skills the hard way.

When I started NFT collecting there was no instruction manual or collectors' guidelines. There were no superstar ‘blue chip’ artists and you could pick up an XCOPY NFT for a few hundred dollars. I dived into the auctions on SuperRare. My bids for an artist's work were in line with the price of their recent sales. Sometimes the artist accepted straight away, sometimes someone outbid me, and sometimes my bid sat there indefinitely.

Little did I know that in making a bid, my crypto was tied up in escrow until either I won the piece or I withdrew my bid. This meant my ETH was not available to bid on other artists’ work. One artist even removed the art from the platform before it sold. This created a #404 error when I tried to view my bid and I had to manually remove my bid to free up my ETH, this cost me 'gas' on the Ethereum blockchain with nothing to show for it. I later contacted the artist directly through Twitter to ask what had happened to the artwork and how much they would accept for the piece. That way I avoided spending more gas on an unsuccessful bid.

After a few purchases, I started observing the behaviour of other collectors and noticed @TheDruid would make bids of 0.01 ETH. That’s when 1 ETH was $300 so the bid was $3. I thought it was like the 99 cents minimum bids on eBay and lots of bidders would pile in until the piece sold for a decent price. I had no idea how insulting my bids were to the artists. Turns out, the reason @TheDruid was making these low bids was simply to get stale NFTs that he thought were worthy of attention back to the top of the activity feed so they could be highlighted to new collectors who hadn't seen them previously.  It wasn't until I became friendly with some artists that I realised how offended they were  by lowball bids. Whilst I was having fun, I was toying with the self-worth of artists.   

When testing my new account on Nifty Gateway in anticipation of the Trevor Jones, Picasso’s Bull drop, I accidentally bought an NFT. Without paying attention, I clicked on the first thing I saw on the screen and bid $5 over the original sale price intending to withdraw my bid later. Instantly, I saw confetti and ’CONGRATULATIONS! You just collected Big Burb by Goldweard.’ I wasn’t thrilled with this purchase but over time I grew to love it and it turned out to be popular on the secondary market. Since then I’ve grown to love the Crystal Pops collection and have bought several others. In hindsight this was a happy accident as they now have utility as avatars in a computer game.

I also sold art by mistake! Warren Buffett – Decentral Eyes – Variant 06 by Coldie was originally bought for $600. Another ‘CONGRATULATIONS you’ve just Sold for $2,700.’ WHAT! I loved that piece. This artist’s latest collaboration is with Snoop Dogg. Had I HODL’d, my NFT would now sell for over $15,000.

My biggest regret is not buying an unknown artist called Beeple for under $1,000. Every time I see a Beeple, I kick myself. This was one of his first drops in December 2020. An artwork called Bull Run featured a huge bull with a giant Bitcoin on its back. I love Bitcoin, and I love bulls so it was the perfect addition to my collection.

But, 3 things stopped me from hitting the ‘buy’ button that night:

1. I’d never heard of Beeple

2. At $969 the cost was high for an unknown crypto artist

3. It was an open edition which was a new concept so there was no way to know how common or rare it might be

I decided not to gamble. 

BIG MISTAKE! HUGE! 271 editions were minted. Three months later, Beeple smashed the record for the highest-selling NFT ever and Bull Run was selling for $199,999.

Inspired by historic projects such as Rare Pepes and Cryptopunks, I stumbled across the Creeps & Weirdos collection launched by DADA in October 2017. Pre-dating Cryptokitties and the ERC721 Standard, the significance of this iconic collection was DADA’s decentralized marketplace which introduced an important innovation: automatic royalties coded on smart contracts and distributed on-chain for the first time in NFT history. Only a maximum of 200 editions of each piece in the collection would ever exist and I knew demand would be high. To avoid bots buying up all the editions, a whitelisting process was put in place with a maximum of 10 editions that collectors could purchase. With haste, I filled out the whitelist form and provided my Ethereum wallet address to ensure I could purchase as soon as the collection dropped. On the drop date, attempting to connect to the marketplace, to my horror, my wallet address was invalid. It turns out, I hadn’t read the instructions fully and only MetaMask wallets were compatible with the DADA marketplace. Fortunately, I was able to explain my mistake to friendly moderator @Sparrow in the Discord server who took pity on me, whitelisting my MetaMask wallet in time to buy several artworks including The Melted Penguin by Boris Z Simunich.

There have been times when I was delighted to sell art for a profit. For example, I was lucky enough to win a draw to buy a limited edition of FEWO DRIP by FEWOCiOUS x RTFKT STUDIOS for $1,500. A few months later I sold it for $7,777 and was ecstatic until I realized why it had appreciated so quickly.

RTFKT STUDIOs had just announced a special utility giving owners of the NFT minting rights to create their own NFTs. I’d missed the announcement and the opportunity to revise my selling price. I had no appreciation of what value the utility of minting would add. A day later, the floor price was $20,000. Talk about going from a glass half full to a glass half empty.

When making a purchase transaction on the blockchain, if you see an error message e.g. 'hashing error' check if the transaction completed successfully before hitting the buy button again. I didn't, and ended up buying multiple editions of La Calavera Catrina Rosa by Violet Jones on Rarible. Luckily, there were only 2 editions available or I would have kept trying to buy it until I emptied my ETH wallet.

My most embarrassing mistake happened when attempting to link my Crypto Finney collection on WAX to my Discord account. I misread the instructions and accidentally transferred a Finney out of my wallet. Huge thank you to the Discord community, especially @b00n and @EmperorQuack who managed to get it back.

Regrets, I've had a few, but then again, too few to mention. The NFT space continues to be a land of opportunity. We’re so early, I’m sure I’ll make a few more mistakes before I’m done. Like my friend who bought a Grimes NFT for $7,500 by credit card hoping to flip and make a quick profit. They ended up selling at a loss to pay their credit card bill.  But as long as the highs balance out the lows, who’s counting?

The question now on everyone’s lips is, ‘Who will be the next big thing?’ There’s no crystal ball, but at least with an UNDRGRND Membership Card, there’s no need to worry about missing out on the next big artist.