In 2021, the emergence of blockchain and nonfungible token (NFT) collections seemed to promise the arrival of 10 new Disneys and the next 20 Picassos. The high values attributed to NFTs that year reflected a strong belief in these projects. However, two years later, these “next Disneys” have failed to deliver, leading to frustration and disillusionment in the market among investors and enthusiasts.
While project failures are often blamed on founders, it is important to acknowledge that the greed, anxiety, and irrationality prevalent among Web3 participants have also played a significant role in the ecosystem.
We find ourselves in a complex environment where even the most skilled and visionary founders struggle to navigate market dynamics. This often results in unfinished projects and unfulfilled promises, further eroding trust in the sector.
Greed has had a detrimental impact on the market. To illustrate this, imagine a party with tickets priced at $100. If someone misses the initial sale and turns to the secondary market, they may end up paying $500 for a ticket. However, the experience is likely to be disappointing since the event was designed to offer a $100 experience. By paying $500, the expectations are inevitably higher, leading to a mismatch between reality and experience.
In the crypto market, we see a similar frustration caused by greed. Buyers may pay exorbitant amounts for NFTs that were initially sold for much less, but they need to align their expectations with the original value. Placing too much emphasis on the first price seen for an item, without considering the full context, is known as anchoring bias. This bias heavily influences later decisions and perceptions, leading to a cycle of disappointment when the high price paid for an NFT does not meet the expected utility.
Anxiety also poses a problem in the market. Developing a quality product takes time, but there is often an unrealistic expectation for quick progress. This puts immense pressure on builders and founders, who feel compelled to make continuous announcements to satisfy the community’s desire for constant stimulation and progress. For example, during the last cycle, some individuals believed that ambitious gaming projects built on Unreal Engine 5 would be delivered in a few months, despite the fact that they typically require several years of development. When it became clear that it would take longer, these individuals quickly dumped their tokens, driven by anxiety and impatience.
While opening the process of building to the public can be beneficial, it can also create a toxic climate that negatively affects the mindset and well-being of project founders.
Roughly 75% of venture-backed startups fail, and NFT collections operate in similarly risky and experimental environments. However, the market often overlooks this risk and expects indefinite success and growth. This is driven by confirmation bias, where individuals emphasize information that aligns with their existing beliefs and preferences while ignoring contradictory evidence.
During the previous bull run, the phrase “WAGMI” (We’re all going to make it) epitomized this mindset. However, in a market driven by buying and selling, some participants must lose for others to win. There is no guaranteed success, especially in an environment with low financial literacy and high levels of anxiety. Decisions driven by emotion rather than rational analysis can be particularly dangerous.
On a positive note, the ecosystem has evolved since 2021. Good projects that have adapted to market changes and context are becoming more evident, and there has been significant human maturation. Many founders have had to quickly assume the role of CEOs and have become more mature, prepared, and focused on delivering value. However, the success of these projects depends not only on the founders but also on the maturity of the Web3 community as a whole. Excessive greed, anxiety, and irrationality can undermine even the best leadership. Investors should consider this as we enter the next bull run and strive to improve both financially and personally.
Lugui Tillier is the chief commercial officer of Lumx Studios, a Web3 studio in Rio de Janeiro with BTG Pactual Bank, the largest investment bank in Latin America, as one of its investors.
Disclaimer: This article is for general information purposes only and should not be taken as legal or investment advice. The views expressed are solely those of the author and do not necessarily reflect the views of Cointelegraph.