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Market Psychology, Market Cycles, and VeVe’s Future - @DiamondHandsDK


Diamond Hands DK

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Introduction

Hello again all old and new VeVe collectors! I wanted to write up an article looking at the current market as of April 2022, market cycles in general, and looking at some charts to try and compare VeVe’s market with other assets. This article will be a very long one and it’s more of an essay. This is because I have received a number of messages indicating that people are concerned about whether prices ever go up again, the fear people have, and I think it’s important to go into detail to really explore the psychology of markets, market cycles, rethinking how we view the market, and discuss why I personally believe now is the best time to be buying and the worst time to be selling. I will also put some thoughts and lessons I have learnt at the end which you might find useful.

Disclaimer is at the bottom!

Part 1 – Market Psychology

A Tale of Two Charts

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Wall Street Cheat Sheet

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“Elsa” Price History and Market Listings

Above are two charts, one is imaginary but is based on market psychology and how market cycles play out and the other chart is a price chart of a VeVe asset so we can consider if there is any correlation between the two and what this means.

Firstly I want you to look at the Wall St. Cheat Sheet chart. You may wonder where we are on this chart today? You can probably guess this by using the emotional sentiments listed on the graphs while not even looking at the chart itself. Ask yourself, within the community what the current sentiment is? Think now, what the sentiment was in January 2022 within the community and the emotions you and others were feeling then. You can probably locate price action on the graph purely based on the emotional sentiment the majority are feeling.

The cheat sheet works in all markets because it’s looking at how emotional sentiment such as FOMO/FUD (greed and fear) and how they feed both the desire to buy and the desire to sell. The chart works for most assets simply due to its focus on market psychology vs individual asset fundamentals. You will see this pattern repeat in with a lot of assets because human psychology is the same in all of these markets. Cycles for multiple assets will not follow it exactly, but I aim to demonstrate an overlap even if it is not 1:1.

OK, now let’s look at Elsa’s price chart since she was dropped. I would prefer to use the total market cap (total value of all assets in VeVe) over time. I have not used this due to the data I have access to only showing the last month, as well as the fact people are currently unable to cash out affecting how much money flows into and out of VeVe. I have elected to use Elsa as an example because she was dropped in November 2021 before the bullish period of January 2022, is a well regarded item that looks to be a good store of value, her listings appear to be real owners vs bots, and this collectible offers enough quality as an item (FA first Disney IP launched) that owners are more likely to see greater value in even when times are tough.

Elsa’s price is listed by the pink line and her market listings are the blue line. Now I want you to look at the cheat sheet and Elsa’s charts and see if you notice any similarities? Both are slightly different, but you can see a clear period where price is relatively flat and unable to break a price point (in the case of Elsa this used to be a resistance around the $1k a bull run that saw her price breakout and rapidly reach around $4k. She then had a retracement that was slower (pre December floor to ATH vs ATH to current price) where she has now hit a floor of just above $1k at a low.

If we refer again to the cheat sheet we can see that this is to be expected and reflects very well with market cycles in general. The similarities you see are indications that this is a market cycle playing out and it’s important to remember that cycle describes something cyclical.

These cycles will play out again over time, there will be more days of extreme FOMO where items are rapidly rising in price, periods where prices are declining, and periods where things are relatively flat. We can look at where we are today on the cheat sheet to get an idea where we are going for the future. History will not repeat itself but it will likely rhyme!

Reconsidering The Best Time to Buy and Sell

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The image above shows a zoomed in image on the cheat sheet and denotes the best time to be buying and selling in market cycles.

The saying be greedy when others are fearful denotes the “trough point of maximum financial opportunity”. This is the point in the cycle where fear is extreme, sentiment is negative, and prices are at their lowest before they begin to increase again. The “peak point of maximum financial risk” is the top of a cycle where greed is extreme and is denoted by the saying be fearful when others are greedy. Market participants are willing to spend high amounts and as the belief is everyone’s going to make millions and the pump will never end (alt season in crypto). People at this point in time are being greedy and you are likely also feeling greedy. Rather than buying though, this is actually the best time to be selling and taking some profits, as beyond the top of the trend we will move downwards.

You may not want to sell all of your assets at the perceived top especially if you plan to hodl your assets for future market cycles to maximise your profits, but it’s definitely a good time to consider taking some profits as market participants who see this coming will also consider selling which triggers downwards momentum. It’s also a bad time to be buying unless you are not concerned about entry price and willing to wait a longer period until the next cycle top. This is not an optimal way to invest though, ultimately if the price is down 75% in 2 months, it’s probably better to wait and buy 4x of the same asset!

Part 2 – Price Trends and Perceptions/Emotions Over ST/LT

OK so you’re wondering why I’m going to discuss BTC when you’re a VeVe investor? Well the aim is to look at a similar asset that also has an established history so we can look over longer time periods, BTC also has a fixed supply in a similar way to VeVe collectibles do.

There are more advanced mechanics that affect the BTC chart, but the point here is to think about how your perceptions at different points in time can change based on price action and how can relate this back to the market psychology I considered in part 1.

You may have experience with the BTC chart or you may never have seriously looked at in your life. The aim here is not to give an extensive in depth look at BTC but to look at some clearly visible trends just by looking at the charts, so please bear with me while I explain.

Asset Market Cycles/Short Term vs Long Term Price Action

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FIG 1. BTC Monthly Chart 2012-Present (LOG SCALE)

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FIG 2. BTC Monthly Chart 2012-Present (LOG SCALE) – With Price Percent Gain Between Cycle Tops

A lesson from Bitcoin

Above are two images of BTC monthly price candle charts, both are exactly the same, but the bottom chart shows % gain from top to top so you can see what buying at one top and selling at the next top would net you in profit %. Price rise over previous month is green and red denotes price decrease on the previous month.

Please note this is a logarithmic (LOG) scale, so price is scaling exponentially rather than linearly (see prices on right side). This is intentional as otherwise any prices before 2020 would look like a flat line as price has grown exponentially. The top chart is free of any data except price and time so you can more clearly see BTC’s trend over time.

With BTC being a relatively new speculative asset that has had some time now to establish a high value over time, we can see that it has had many ups and downs during it’s existence. But when we zoom out and show it’s entire life cycle you can see clearly the clear trend is price moving up over time. This is why you may have heard the saying in crypto “when in doubt zoom out!” What we can clearly see is that the highest gains were made by the people who bought in earliest (remember we are using LOG scale so the price rises are exponential) but that BTC is subject to diminishing returns.

As you can see in the second chart, if you bought early on when BTC was first sold and held to the 2013 top you would have seen a 90x gain on your investment. If you first bought at the 2013 top and sold at the 2017 top you would have gone up around 20x. If you bought in 2017 top for the first time I would guess we hit around a 6x from 2017 top to next top (x amount remains to be seen).

This clearly shows that the earlier in you were to BTC while it was a niche asset with little mainstream consciousness the more you gained hodling over time vs someone who paid 10x more in fiat to buy a few years later!

The lesson is if you buy in early within a successful asset you stand to gain the most.

Diminishing Returns: Investing Early or Later Into an Asset

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Fig 3: BTC chart demonstrating diminishing return curve of price growth.

You will notice in figure 3 BTC has been moving upwards at a near 45 degree angle early on in BTC’s life and also shows the curve of price and flattening of price movement over time! At first BTC moved upwards and downwards rapidly but as it becomes more established it’s price action has and will be slower and less extreme moving up but importantly downwards (lower price drops during periods of FUD).

If you are in early the euphoria is extreme but so is the FUD during downtrends. The asset has less history and is less established, so people are more likely to panic as the asset is still niche. The lesson here though is that if you are able to ride the wave of these up and downtrends and you entered early and bought cheap you stand to make the most substantial gains over the LONG TERM.

When considering the prospects of VeVe we really need to think longer term to see the biggest benefits. But being an early investor although it has maximum financial gain potential, it’s also the riskiest investment. The highs are the highest and the lows are the lowest.

A practical thought experiment

OK so let’s think about this a bit. Say you bought $1000 of BTC in 2013 at the top. Price was around $1k so lets she you then have 1 BTC in your name after you spend $1k. This price makes it very easy to demonstrate my point. You would have then seen a bearish period for a 3 – 4 years after 2013 where price did not break above the ATH set in 2013 at the top, so on paper you appear to have an asset that is still out of profit years into your investment.

In 2015 after 2 years your BTC is now still in loss, many would have likely called BTC dead, and if you remove the prices beyond this and looked at the chart in 2015 you would probably assume it would never reach ATH prices and was dying a slow death. As we know though this did not occur.

Let’s now look at some think about things differently to try and demonstrate how you often have to buy and sell inversely to how the market is feeling.

Now lets consider you HODL’d this BTC in a cold wallet, switched off from anything BTC related and came back today (April 2022). You would have seen a 47x increase from your initial investment! This is more than any blue chip stock achieved!

But from the perspective of your 2015 self you would have likely sold at a loss with a very different mindset about its future vs how it actually performed over the next 6/7 years! Now let’s imagine you invested $10,000 at the same time instead of $1k. You would today have nearly $500k and could buy a house. Although 10k is a substantial investment if I told you that if you invested this much today into VeVe and could leave with the same profit over the same amount of time you would likely bite my hand off for the opportunity.

The issue lies in that we don’t know the future and people naturally have periods of belief and doubt. FOMO is the extreme of this where people are of the mind the asset is going to the moon and price spikes sharply over a short period. This is usually a good time to take profits (Selling). On the other hand FUD leaves the market depressed and angry and while prices are low this is the best time to be buying or hodling and waiting for the next run up.

Part 3 – Being An Early Investor in VeVe and Price Action Over Time

You’re an early investor in VeVe NFT’s what are the benefits and pitfalls?

OK so you have bought into VeVe assets early in it’s existence (less than 2 years as of April 2022) and at some points you have been extremely excited and perhaps currently due to low prices you are feeling deflated.

I cannot be sure that VeVe are successful long term, but it’s my belief that the assets themselves being tied to some of the worlds largest IP, assets that stand out from nearly all NFT projects I have seen so far, and the fact that you have first appearance collectibles/comics for some of the worlds top IP gives me confidence that despite ups and downs my assets are likely to over time continue to accumulate value.

Essentially, despite all the issues currently I do believe fixes will come as ultimately VeVe will look to continue to grow their product and profits that come with this growth. If anything the fact that floors have stabilised recently and are not moving downwards significantly once hitting previous resistance prices shows that an item like Elsa now has an established value of around $1k and when listings go below this they are bought by market participants.

Let’s be clear, is not to say that VeVe will follow the pattern of BTC for example, it’s a different asset, it’s price will move differently, crypto is also now established and somewhat mainstream etc.

The point is to illustrate that in the short term that there have been periods where BTC looked to be dying or that prices would never rise again (for years at a time!).

The committed people who held through the darkest days though who believed in the fundamentals of BTC over the FOMO and FUD periods in the short term were the ones who made the most.

Again as the saying goes when it doubt zoom out!

What is the bottom? How Low Does Price Go?

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This isn’t a simple question to answer as there are a large number of variables that can impact price. In a period of maximum FUD prices can affect belief in an entire asset especially if it is newer! But even looking at Elsa’s price we can see that her price is flattening and this is similar with most of the more established assets.

So right now we are around peak FUD, maximum depression, maximum anxiety and this usually is a good indicator of a bottom in price. This is not to say that prices cannot dip by 20% on a day when news/rumors circulate that create negative sentiment, but that I would be surprised to see prices fall significantly from where we currently are today.

Price History Chart

You can see on the chart above the price of my total vault over the last month. I have not updated this in this time with new collectibles and comics so it should be somewhat representative of the overall market. I also have a diverse collection vs a stack of 1 or 2 items so again this should make it more representative of the overall market.

As you can clearly see we have been trending downwards. I have added a yellow line here to clearly show though that there is a price point where we bounce off, and we have done this twice now, you can already see after hitting this line in recent days we have started to very slowly trend back upwards.

If you want my opinion of when we have reached the bottom, I would argue based on current information, right now appears to be the bottom. It’s not impossible we dip below this line, but I would be surprised if we dip continuously below this rather than for a short period where floor increases again as people buy floors up.

You will also notice in mid March we had a dip and people bought into this heavily as they likely believed this was the bottom (I was buying on this day in particular also).

The last thing to note is currently with bot activity this may be artificially dictating floors, but most older items are not and these offer a better indication of where real floors lie vs newer drops that have been heavily botted.

Why aren’t prices moving up?

Consider now that those who bought all of their assets before the bullish period in January are unlikely to be at loss but most of the newer users who came in and started buying around December onwards are likely to be at a significant loss. We can think back to optimal buying and selling periods to understand this, but we can also see this isn’t abnormal when looking at BTC or the cheat sheet for example.

Let’s check back once more to Elsa’s chart, we can see that her price is dropping, but you may have also noticed her market listings are dropping also. This doesn’t indicate panic selling and if anything suggests hodlers aren’t keen to list their Elsa at the current prices as they are unwilling to sell at this price point or do not expect to sell at higher price points.

This suggests to me that we are in a highly illiquid market currently. Essentially there are not enough full price gems being bought with fiat and price movements are likely redistribution of already purchased gems from one collectible into another. For example you want to get the latest big ticket drop and you have no gems or desire to buy more, so you sell an item at a lower price to gain liquidity. But as market sentiment is extremely negative and people are uncertain about the assets right now, people are less willing to jump into investing right now even though this is the optimal buying time.

In order to see price rises we firstly need to inject new liquidity into the app. Right now VeVe is not marketed and relies on community and word of mouth. The user base is growing, but not rapidly enough to bring in the USD to push up floors and new drops are increasing the total supply on VeVe. As most of the people going for drops are existing users they are simply recycling old gems into new items.

So What Now?

What we need to progress is a catalyst. This could be for example a billionaire who discovers VeVe and invests heavily over one evening. Let’s say they buy 10M USD and spend it buying up floors of the most popular items, prices could jump overnight. This is unlikely to happen today, but it shows how sentiment could rapidly change if something like this happened.

I believe the next catalyst that brings in new liquidity will be MTL as this will essentially make VeVe collectibles have much more appeal to traditional investors who are looking for an asset that meets KYC standards and also have the ability to take profits. This may initially cause some price reduction but will eventually be a way to drive liquidity into the market. What I am currently waiting for is MTL to start seeing another bullish period, and I recognise now is a good time to buy or hodl and patience is essential so I don’t sell my assets at loss. Currently the market is dull and flat, but this isn’t causing me any panic. I believe a fresh injection of new liquidity will drive the next cycle and those who invested recently will be rewarded in time.

There will be future catalysts and one of the huge ones will be OMI to NFT which will bring in crypto investors and add another avenue for a huge amount of liquidity! You may not think you are early, but you very much are in this market. This platform will eventually give regular people with no knowledge of crypto an easy way to buy using their debit/credit card and cash out in their local currency, as well as give crypto rich investors to opportunity to participate purely using crypto assets and have a way to cash out using an ETH token.

There may be FUD and no one knows the future, but it’s my belief that eventually once VeVe have ironed out the issues there will come a day that hodlers today are able to make life changing money in VeVe. This is my personal belief and I am investing accordingly.

Part 4 – Some Final Thoughts

It’s important if you are fearful or feeling emotional to identify why this is?

It may be because you have not experienced market cycles and bought in at a bad time, perhaps you overinvested into VeVe when the mood was positive or a range of other reasons. Here’s some things I think about myself that I recommend considering and thinking about more going forward, these are just my opinions based on my own journey investing.

  1. If you’re at loss, it’s OK to admit you bought into the hype while prices were high and reflecting on the past that you would have made different choices. The focus now should be on changing your strategy accordingly, being willing to admit mistakes to yourself, and identifying rationally what you can do to be better prepared for the future. They say that madness is doing the same thing over and over and expecting different results.

  2. I am well aware of the shorter term issues and concerns and people are right to feel frustrated about this, so do I, but I do not fundamentally believe these issues affect my belief in the assets themselves over the longer term. The data currently does not support this, and until it does I am investing based on this. This is a speculative market and NFT’s are a brand new market, no one can guarantee the future, so you need to understand what you are invested in. You also need to think realistically about the timescales you need to think in to make money, and how your biases and everyone who’s bought into VeVe affect price floors.

  3. I believe that you have to DYOR, have faith and conviction during the darkest hours, and hold your nerve while at times being very patient to make maximum profits if that is your aim. Investing as a simple analogy is a bit like a relationship. If you believe fundamentally that the person you are with is a high quality partner and you marry them when times are good, you have to expect bumps eventually along the road and be willing to try and ride them out to gain the most from investing so much time and effort into them. If you are only there for the good times the marriage is unlikely to succeed and you may end up worse off. But there may come a point where there are serious issues and you feel the investment is no longer worth the effort, and it’s important to be honest with yourself and exit the market if you truly have lost faith in the asset. Just think carefully before making big decisions.

  4. Do not invest more than you are willing to lose, over-leveraging yourself in the belief the asset will perform and then not seeing this can cause panic, fear (as you may need this money for other things in life), anger, irrational decision making, and financial loss. If you are going to invest heavily be sure you are committed for the bumps along the road. The term HODL means “hold on for dear life”, times like this are what actually tests your conviction to hold your asset most. The uncommitted will be bled out of the market, a market does not care about how you feel unfortunately, so be unemotional with it as best as you can.

If you liked the content! Ideas and feedback always welcome.

Want to give me a follow you can find me on Twitter @DiamondHandsDK, or in app by searching for DKExcel.

DISCLAIMER: Please note these are my personal thoughts and opinions and not financial advice. VeVe is a young project and as with any investment there are risks to consider. VeVe NFT’s are volatile assets that can move (price wise) rapidly up during bullish periods and have heavy retracements during downtrends, this is fairly standard with a newer asset class that has not established value. You should consider a range of opinions and data and make decisions based on your own research and convictions that make sense for you. I can’t predict the future, I just look at trends, try to make informed guesses, and consider things that could effect long term price growth. I am not a professional or financial expert just an investor and someone who believes VeVe is a unique financial opportunity. This is my OPINION and is subjective.

I am also working under the premise that VeVe continues to success but nothing is certain, you have to decide for yourself if you fundamentally believe in the project long term.

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