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How to short NFTs

One of my old friends is an amazing artist and I've been hounding him to get into NFTs. So far he has one for sale: https://ftx.us/nfts/token/504692892962901141

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When I get time I might see if I can make a couple bucks for both of us.
Quoting Goat
{quote} But what's the answer?!? Is licensing really the only privilege that NFT ownership affords? I'm still searching for an answer to that. If there's nothing else, this market should act like the music industry. Someone owns the license but anyone can listen.
The music industry comparison makes some sense but even in that case some money/time/ad attention is transferred in exchange for a listen. I can't find any explanation away from hype and digital clout - It's a status symbol that you can flash online, unlike a Rolex

Quoting Goat
{quote} Where do I get the charts??
Opensea, Rarible, and dapp radar have volume/price data... no charts. So it's far from a complete picture and you have to infer from volume in top collections and new collections. Rarity tools lists some upcoming drops and runs a cool uniqueness analysis if you're into that sort of thing.
  • Post #23
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  • Edited at 2:33pm Oct 14, 2021 2:20pm | Edited at 2:33pm
Quoting yieldjunkie
{quote} If only I was talented enough to make one of those "generative art" algorithms or whatever the hell they are called. I might search fiver for a cheap graphic designer...
That's the same exact thing that came to mind for me too.

You can't borrow existing NFTs and sell them today right? The next best thing is to create new NFTs and sell them today. If you take out a loan in order to pay someone (or multiple someones) to create NFTs for you then that's both the short you have to cover and your leverage.

Kinda makes you think about other examples in this context. The silly band or fidget spinner knock-off competitor that dumps money into making cheaper versions of a fad is actually shorting the market so long as they build for a short-term life span... via corporate structure, funding, sales strategy etc.
If you like my post throw me a Doge: D85YHaQ6nQTp4oT13sHoAZbETn3sADVnF8
Quoting g-force
{quote} That's the same exact thing that came to mind for me too. You can't borrow existing NFTs and sell them today right?
I have heard talk of NFT loaning but nothing more. I wouldn't be surprised if there was already defi structure out there that allowed for this.

Quoting g-force
The next best thing is to create new NFTs and sell them today. If you take out a loan in order to pay someone (or multiple someones) to create NFTs for you then that's both the short you have to cover and your leverage. Kinda makes you think about other examples in this context. The silly band or fidget spinner knock-off competitor that dumps money into making cheaper versions of a fad is actually shorting the market so long as they build for a short-term life span... via corporate structure, funding, sales strategy etc.
This is quite the industrialist method to short - I dig. Taking out a loan in fiat adds another leg to the trade too .

It doesn't even seem that morally reprehensible, either, as the product quality that you are sacrificing is technically abstract. Beauty (in art) is in the eye of the beholder, right?
I had a premonition the other night: The entire ETH network seizes due to skyrocketing gas fees.

Think about it. If you have $30 worth of ETH on a wallet, it's trapped there because it cost $70 to send it anywhere. Now picture this on a larger scale.
I will short this Frankenstein experiment, just waiting for the right time.
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Quoting Goat
I will short this Frankenstein experiment, just waiting for the right time. {image}
Careful using the new Micro ETH futures! I bought 40 contracts and got an email from the CFTC that I now have to fill out CFTC Form 40 for Large Traders. Absolute joke, the reporting level is 25 contracts which is ~$10k! I'm fighting with them to get that level amended but for now I have to deal with the headache of filling out their stupid form.
I think I figured out a roundabout way to short NFTs. It is dependent on having an NFT that is somewhat desirable and being able to loan it out for more than you paid. Easier said than done but definitely possible.

Once you have said desirable NFT you can borrow ETH on NFTfi using the NFT as collateral and just never pay back the loan. Lender keeps your NFT and you keep the ETH. Unfortunately on NFTfi the lender sets the terms and the borrower can accept them or not. If the borrower was able to set terms, you could offer super high APY to entice greedy lenders to lend you more than the floor price of the NFT. There may be other platforms that allow the borrower to set terms but I'm only familiar with NFTfi.

Personally I don't have the balls to short anything in the crypto space, but I may lend against some NFTs on NFTfi and try and scoop some good ones for cheap.
Quoting BTCmailman
I'm fighting with them to get that level amended but for now I have to deal with the headache of filling out their stupid form.
I remember the day the CFTC designated me a Large Trader. I returned my paperwork within 20 minutes and swaggered around all day thinking I was Steve Cohen.
Quoting BTCmailman
I think I figured out a roundabout way to short NFTs. It is dependent on having an NFT that is somewhat desirable and being able to loan it out for more than you paid. Easier said than done but definitely possible. Once you have said desirable NFT you can borrow ETH on NFTfi using the NFT as collateral and just never pay back the loan. Lender keeps your NFT and you keep the ETH. Unfortunately on NFTfi the lender sets the terms and the borrower can accept them or not. If the borrower was able to set terms, you could...
Sounds like a legit method, just requires some elbow grease.

This brings up a point that's been bothering me about NFTs. Seems like it's extremely easy to create a fake market for an NFT by buying it from yourself over and over.

1. Create an NFT
2. Buy it from yourself for $1,000
3. Buy it from yourself with a different user for $1,500
4. Repeat step 3 several times with escalating prices
5. Sell it to a sucker for $20,000

This is some easy scamming since the buyers and sellers are anonymous, and there's no trusted intermediary.
Quoting Goat
I will short this Frankenstein experiment, just waiting for the right time. {image}
I take this^ back. After thinking through some scenarios, I see a possibility that ETH implodes without losing value.

Going back to my doomsday premonition, if gas fees skyrocket we could see a scenario where nobody can transfer ETH, not even to short it. The price wouldn't go down even though ETH is rendered completely useless. Half a trillion dollars would be trapped in the ETH network, like a sunken gold ship waiting to be found by future generations.

As of today, any wallet with less than $78 is already seized...
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Everybody and their mom wants to jump on the NFT bandwagon now - Japanese gaming giant Square Enix released a letter on the first day of the new year which highlighted the company’s plans for expansion. In the letter, Yosuke Matsuda, CEO of Square Enix, revealed that his firm will be focusing on implementing and expanding metaverse, NFT, and block-chain technology so that it can be integrated into future projects. The letter commented on the rising importance and influence of NFTs, metaverses, and blockchain technologies.

From what I've seen, their players aren't too happy about it.
Quoting Goat
This brings up a point that's been bothering me about NFTs. Seems like it's extremely easy to create a fake market for an NFT by buying it from yourself over and over. 1. Create an NFT 2. Buy it from yourself for $1,000 3. Buy it from yourself with a different user for $1,500 4. Repeat step 3 several times with escalating prices 5. Sell it to a sucker for $20,000 This is some easy scamming since the buyers and sellers are anonymous, and there's no trusted intermediary.
I was actually considering doing this but you have to deal with royalty fees on a lot of projects (typically 2.5%) along with platform fees (2.5% on Opensea). That doesn't include gas fees, potential tax implications, etc. but there is definitely some friction which could make it costly to create this fake activity.
Quoting Goat
One of my old friends is an amazing artist and I've been hounding him to get into NFTs. So far he has one for sale: https://ftx.us/nfts/token/504692892962901141 {image} When I get time I might see if I can make a couple bucks for both of us.
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What did he buy it for!? (Or did he create that himself?) That's quite the jpg! I'm no art dealer that's why I avoid this stuff.
Can't believe I didn't think of this sooner but the best way to short NFTs at the moment would be to short LOOKS. LOOKS is the token for the decentralized NFT marketplace LooksRare and its' value comes from the fees generated by activity in the marketplace. If you think NFTs are going to crash then the fees earned by LooksRare will plummet and the token will crash. Surprisingly you can actually trade it on centralized exchanges, I thought it would only be on DEX for sure:

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Quoting BTCmailman
Can't believe I didn't think of this sooner but the best way to short NFTs at the moment would be to short LOOKS. LOOKS is the token for the decentralized NFT marketplace LooksRare and its' value comes from the fees generated by activity in the marketplace. If you think NFTs are going to crash then the fees earned by LooksRare will plummet and the token will crash. Surprisingly you can actually trade it on centralized exchanges, I thought it would only be on DEX for sure: {image}
Called a top on LOOKS and didn't even know it


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Too bad I didn't short it
Quoting Goat
This brings up a point that's been bothering me about NFTs. Seems like it's extremely easy to create a fake market for an NFT by buying it from yourself over and over. 1. Create an NFT 2. Buy it from yourself for $1,000 3. Buy it from yourself with a different user for $1,500 4. Repeat step 3 several times with escalating prices 5. Sell it to a sucker for $20,000 This is some easy scamming since the buyers and sellers are anonymous, and there's no trusted intermediary.
I've been thinking about this same thing for a while, too. I don't think we're the only ones: https://www.cryptocraft.com/news/113...t-wash-trading

Like mailman mentioned, fees probably bleed this business. But... maybe it's more of a barrier to entry. If you've been selling enough NFTs, you probably wouldn't care about fees. I'm sure there are enough suckers out there for this type of racket to keep on rolling for those OG dirtbags who already made their quick bucks and want more.

Quoting Goat
As of today, any wallet with less than $78 is already seized... {image}
This is clever. I wonder if there's a dashboard that can track total value of those seized wallets
Quoting BTCmailman
Can't believe I didn't think of this sooner but the best way to short NFTs at the moment would be to short LOOKS. LOOKS is the token for the decentralized NFT marketplace LooksRare and its' value comes from the fees generated by activity in the marketplace. If you think NFTs are going to crash then the fees earned by LooksRare will plummet and the token will crash. Surprisingly you can actually trade it on centralized exchanges, I thought it would only be on DEX for sure: {image}
Great call here!! Seems to check out, though, it took me forever to make sense of their fee/reward/staking structure. Defi makes my head spin.

Here are the details for anybody interested: https://docs.looksrare.org/about/rewards/platform-fee

Quoting BTCmailman
I think I figured out a roundabout way to short NFTs. It is dependent on having an NFT that is somewhat desirable and being able to loan it out for more than you paid. Easier said than done but definitely possible. Once you have said desirable NFT you can borrow ETH on NFTfi using the NFT as collateral and just never pay back the loan. Lender keeps your NFT and you keep the ETH. Unfortunately on NFTfi the lender sets the terms and the borrower can accept them or not. If the borrower was able to set terms, you could offer super high APY to entice greedy lenders to lend you more than the floor price of the NFT. There may be other platforms that allow the borrower to set terms but I'm only familiar with NFTfi. Personally I don't have the balls to short anything in the crypto space, but I may lend against some NFTs on NFTfi and try and scoop some good ones for cheap.
Have you tried this out? Sounds like a good bit of financial engineering could turn this into a short, depending heavily on pricing since you'd have to be long an NFT first... (and short the crypto you bought the NFT for, technically... I think.. is USD still the base currency here? )
Quoting yieldjunkie
Have you tried this out? Sounds like a good bit of financial engineering could turn this into a short, depending heavily on pricing since you'd have to be long an NFT first... (and short the crypto you bought the NFT for, technically... I think.. is USD still the base currency here? )
Nope, have not tried it out yet from the borrowing side. But the more I think about this it's more like a long put vs. an outright short. The only difference being I pay the put premium (loan interest) at the end of the loan term, and only if the floor price at loan expiry is above the loan amount. If floor price at expiry is below the loan amount then I can just keep the ETH, let the lender keep the NFT & buy a floor NFT if I still want the NFT exposure.

As far as hedging crypto exposure, if the loan is in ETH I could short an equivalent amount of the Micro ETH futures to lock in a USD amount. But there is the option to loan in DAI stablecoin, although the market for DAI loans is smaller than the market for ETH loans (source: https://app.nftfi.com/stats)
I was thinking that war bonds could be an interesting use case for NFTs. Ukraine has raised a surprising amount of money ($50 million so far) via crypto donations. I imagine that they could raise even more crypto if there was some chance of a return on the investment.

Ukraine could auction off zero-coupon war bond NFTs that promise to pay the holder of the NFT 1 ETH a few years from now.

If these kind of war bond NFTs where a thing, I could see shorting them as possible.
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