Understanding the Decentraland Land Marketplace on a Macro Level | Advanced Analysis
Posted On February 28, 2019
I’ve been trading land for almost a full year and in doing so have learnt a lot about the Decentraland marketplace.
Understanding the Decentraland marketplace, (or any other NFT marketplace), will give us insight as to how future NFT Trading Places will operate and how they will react to certain influences in the market such as Wales, bitcoin price swings, more supply added to the market and a bunch of other factors.
In this blog post I’m going to go through some similarities between the decentraland marketplace and cryptocurrency marketplaces.
There are some interesting parallels we can draw from the two and fully understanding them on a macro level will allow you to better plan for the future of your investment or trading game.
The Decentraland Marketplace can be looked at like a Cryptocurrency’s Order Book.
Let’s take this order book from Nuls/USD on Binance
The last traded price for Nuls was $0.4073 which we see right at the bottom.
If a whale stepped in and wanted to buy 100,000 Nuls, how much would he pay? Is it as simple as 100,000 x $0.4073?
If you look at the order book, (bottom to top), you will see the current cheapest price is $0.4096 and there’s only 253.98 of them for sale.
So in order to buy 100,000 Nuls, the buyer will need to fulfil all of these orders and even more as the total Nuls listed in the above image is about ~13,000 with $0.4223 being the highest.
So a whale wanting to buy 100,000 Nulls will push the price up from $0.4073 to probably about $0.50!
A 20%+ increase in prices. That’s an effect a whale can have.
Now, let’s compare this to the cheapest lands on the marketplace and pretend it’s one big orderbook.
If a whale comes in and wants to buy the cheapest 100 lands, he will need to buy all lands priced between 11,300 and 19,000! (19,000 is the 100th cheapest land).
So a whale willing to spend ~ 1.5M MANA, ($65,000), can single handedly push prices up to lands being worth 19,000MANA+.
Nessie The Whale Short Case Study
This has happened before with a large investor, the community calls Nessie.
Nessie, our friendly whale came in with about 2-4M MANA and completely sweeped the land market dry of any land parcels between 7,000 – 15,000 MANA.
Doubling the cheapest parcel prices in the matter of days.
The Red Circle is where Nessie entered. This is a chart from mydcl.net made by @decentraliser on discord.
He single handedly changed the marketplace forever.
We were seeing 5-10 land sold per day and all of a sudden started to see 20-50 lands sold a day!
Not only was there a big spike but the momentum continued till this day.
Imagine if there’s another whale as big as Nessie? Or two, or three?
Decentraland has some BIG investors that have put over $1M in digital land.
The marketplace can change real quick if someone buys or sells a lot of land and it’s interesting to see that effect.
Consistent High Volume my #1 Key Metric before Looking at NFT’s.
NFT’s, (cryptocollectibles), are a new niche market. Although they are very exciting and it’s easy to buy in, often people find it very difficult to cash out because there’s not as much liquidity in the market.
For example, if I have 100 Decentraland lands I need to cash out ASAP for whatever reason, with the cheapest land being 11,300 on the market right now, how much would I get for all of them?
Maybe the first 10 will sell for 9.5k – 11k.
Then the next 10-20 will sell for 8-9k.
And it will keep going lower as people absorb my lands. But the bottom line is, if I wanted to sell a large chunk of my holdings, is there enough liquidity to absorb it?
That’s why I invest and trade actively with Decentraland only because it’s the only NFT in the space with consistent volume in the high 10s of thousands.
This is the same with trading high volume coins. Day traders look for High Volume coins with good liquidity so when they buy and sell, they don’t lose too much $ to slippage.
Sell Walls, Resistances and Supports
Usually sell walls are put in place to keep the coin under a certain price and to even push it lower. They are hard to push through unless there is enough momentum but once broken can see a strong uptrend.
Decentraland has similar walls although they are usually not put in place to keep prices low.
There are about 10-15 parcels between 12.2k and 12.5k MANA but once bought, there’s only 5 or so that will take the price up to 13.5k MANA.
Sometimes you will see a seller come in and list 5-10 parcels for 12k MANA which takes the market a week or two to absorb.
But when all these ‘walls’ are bought up and there’s a big of volume it can push prices high quite quickly.
What about Supports?
Here is a daily chart for MANA/BTC with a support line drawn for ~900 satoshi that has held for over a year! You can see that whenever MANA has gone down around this line, it has bounced back, meaning there are many investors willing to pick up MANA at this price.
Same deal with Decentraland. When Land gets closer to 7-8k MANA people historically have picked them up real quick.
The Decentraland Second auction was a great indicator of this. To think that 10,000+ lands were added to the marketplace and the cheapest they sold for was ~7,000 MANA is a big testament to the volume capability of Decentraland and confirmation of floor prices.
In the crypto world, if you want to trade a lot of money, you will need more liquidity than exchanges can offer. Or else you’ll end up dumping the price.
Over the Counter services can provide this and allow for the trade to happen away from exchanges.
Decentraland has a similar aspect to it with Private deals.
Sometimes I will make a deal to buy 100+ lands from someone for 9k MANA each. This way, they don’t dump on the market and end up selling many units for 7-8k and I get a good deal below market price.
You wouldn’t think there’s bots in Decentraland would you?
Yes there is! There are bots people have set up to auto buy when lands are cheaper then a certain price. They’re not as complicated or advanced as trading bots in coin exchanges but it’s a bot nonetheless.
The cheap parcels get snapped up pretty quickly and many times people have accidentally put the wrong price in when listing their land for sale. Something like 1,000 MANA, (missed a 0). These lands get snapped up real quick because the bot will trigger.
The more you understand the marketplace, the better decisions you will make. I hope this post allowed you to see the bigger picture.