The Illusion of Success
Well, as you all know, it’s that time of year that everyone loves, especially crypto investors: tax season.
I’m sure most of you are seeing something similar in your net income calculations for 2022 when it comes to NFTs: a negative sign in front of the total. Let’s face it, it was a rough year for crypto investors, and holding NFTs only seemed to compound the losses.
Back in late 2021 and through early 2022, I was known as one of the biggest investors in Doodles. I bought in very early, just after mint, and I also traded regularly. I probably gave a lot of people the impression that I was making money hand-over-fist with my Doodles. Well, I’m here to report that that was not the case; not even close.
Unfortunately, the release of Doodles nearly coincided with the all-time high for ETH, around $4500 USD. Investors were therefore behind the eight-ball from the very beginning, needing to triple the value of their Doodles in ETH terms just to break even today.
I was someone who liked to dabble in the rarest of Doodles (coffee heads, pickles, a whale, a skelly, etc.), and picked most of them up at a very high price (in ETH) when the price of ETH itself was very high. Not only did I end up taking a loss when measured in ETH, but the price of ETH dropped simultaneously, compounding the loss.
There was one Doodle, in particular, that did the most damage to my portfolio: the whale Doodle (ironic, isn’t it)? I acquired the whale through a trade that involved several other rare Doodles. Given the estimated value of those Doodles at the time of the trade, my cost basis was around $415,000 USD (130 ETH at $3192 USD/ETH). No, that’s not a typo.
I ended up selling the whale for 73 ETH (after the Open Sea fee was deducted) at $2872 USD/ETH for a net loss of $205,637. If I had held until now and somehow sold the whale for 73 ETH, I’d be down an additional $90,000! Likely though, I’d imagine that whale wouldn’t sell for more than 40 ETH today. I’ll let you do the math on that, yourselves. All told, my net loss for Doodles was around $400,000.
So, what’s the takeaway? Not everything was as lucrative as it might have seemed, in the world of NFTs. Just about anyone getting into NFTs in late 2021 took a loss, regardless of the quality of the project or the community. Even those of us that appeared to know what they were doing were probably getting taken to the cleaners.