State of The Union Address

Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.

Good morning kings. I have returned from my brief hiatus to see that things are… basically the same as when I left them. Frankly, I’m not too enthusiastic about that for the moment. It seems like attention has really started to divert away from AVAX and in more higher volume areas.

I’m going to avoid getting too specific on projects this week. I’m more interested in musing on the general state of the ecosystem and where things seem to stand as someone who plays both sides of the fence on ETH and on AVAX.

The Problem

Volume and overall ecosystem sentiment has been on the downtrend for about a month now. You could blame me for buying the interstellar pico top of Smol Joes, but I think I’m a drop in the bucket compared to other market indicators.

In any case, there seems to be a trend I’ve noticed since getting involved in AVAX NFTs last summer.

→ Everyone gets hyped for new mints / project update
→ Hype cycle lasts for 3 days - 1 week
→ $3 undercutters enter the chat
→ Project fades into obscurity

This cycle is meaningfully exacerbated by the extremely small community and limited number of projects. Highly touted projects can only make accretive updates every once in a while for obvious reasons.

Ultimately, you end up with this clear and predictable peak-to-trough cycle that is driven by new and existing project activity. We’re pretty thick in the trough part of that cycle right now and the result is that people go elsewhere in the interim (like shitcoins).

This is the effect - but what is the cause? It’s pretty clear to me.

I strongly believe we need more speculators here.

Despite popular belief, speculators are indeed a GOOD thing for asset price discovery. Degens with money have driven the price of risk-on assets up for as long as they have existed - this is not a new idea that we can take credit for conceptualizing.

On the flip side, you have relatively ultra conservative NFT market participants who will mint a project for $30 just to undercut the floor for $2. It turns out that high gas fees are in fact a feature.

This is a vicious cycle that continues to play out time and time again and frankly, has created a not-so-great culture. Many ask silly questions in bad faith such as:

“Why do people continue to use ETH for NFTs? Gas is so high, everyone always loses money.”

If you were honest, you would acknowledge that is diametrically opposite to what actually happens. People play on ETH because 1) it was first, 2) speculators exist and 3) you can actually see high returns on good volume on a bullshit free mint. Without speculators, the ceiling for most mints is incredibly low compared to their mint price and hamstrings any sort of staying power that a pump might have.

The validator / DeFi whales who sit on their yield that’s underperforming 6-month treasury notes don’t help either. Outside of 2-3 degen whales that are active and will remain nameless, the rest that exist on AVAX are farming sJoe fees. It’s frustrating and is another component of the problem.

The Solution

I’m not going to pretend like I have the answers. I’m a market participant and occasional speculator who’s opining with my unsolicited thoughts and you can take it or quote tweet this article and complain about my complaining.

With all of this in mind, I do think there are some things to look forward to here. Namely, DAOs are receiving access to funds from Avalabs in the near future.

I think Dom makes a fair point. On-chain liquidity is razor-thin, and I’m open to the idea that I’m being harsh. Now that DAOs are getting GTA cheat code access to money that isn’t theirs, hopefully they can drive up the speculation and fuel the fire going forward.

Circling back to culture, I’m going to shamelessly plug Ferdy Fish once again for not only being a project that is actively contributing to the ecosystem, but is also making an effort to redefine the culture through their memes, GameFi and overall utility.

We need more of this, not less.

The imminent Joe Studios updates (moving forward with The Expansion of Smol Joes and the Peons upgrade) may coincide well with fresh liquidity. This planetary alignment could fuel a leg up for AVAX NFTs. Generally, I think NFTs across all chains will thrive this summer due to market chop. Because of these factors, we may finally break out of this holding pattern in the next couple of weeks.

Conclusion

I want to be clear - I very much still love AVAX and what’s been built here so far, but I thought it would be disingenuous at best to not share some of my feelings on the current state of affairs. Yes, shitcoin season definitely stole some thunder, but I do feel that many of my themes remain constant if you remove that from the equation.

The good news is that I do think that finally, we have some catalysts on the way that could really shake things up again. We’ll see.

Carry on… >Kendrick Perkins voice<.

Cheers,
Chuck