What trading opportunities are involved in the Azuki Elementals incident?

What are the trading opportunities in the Azuki Elementals case?

Unlike the rebound of the cryptocurrency market in mid-to-late June, the NFT track is going through a painful period of low pressure. However, the expectation of airdrops and a good community atmosphere make Azuki a special case, with a strong floor price of 17 ETH, until the occurrence of the Azuki Elementals incident. Cryptocurrency KOL NingNing wrote an analysis of the process of the Azuki Elementals incident and the market sentiment cycle, and gave two trading strategies that can be implemented currently.

Process of the Azuki Elementals incident: 1) The Azuki team releases a high-quality demo to market a new PFP NFT series, Azuki Elementals. The community market sentiment is optimistic. 2) The Azuki team announces that they will open up new series minting qualifications for Azuki and Azuki BEANZ, and the community market sentiment is excited. 3) Azuki Elementals are quickly minted, and the community market sentiment is in the FOMO stage. 4) The Azuki Elementals are revealed, and the new series highly overlaps with the original series, causing the community market sentiment to be anxious. 5) The Azuki team collects 20,000 ETH in this round of minting revenue and transfers it. The community market sentiment is in the denial stage. 6) The leader of the Chinese Azuki community announces that they have cleared their holdings of Azuki, and the community market sentiment is in the fear stage. 7) The Azuki floor price quickly drops to 9 ETH, and the community market sentiment is in the surrender stage.

The Azuki team is most concerned with the dilution of the original Azuki value and has publicly announced remedies: airdropping a new PFP series of green beans to original Azuki holders. The official also stated that the implementation of the new airdrop will take some time, and during this window, it is a good trading opportunity in my opinion. I can think of two trading strategies: 1) Futures and spot hedging: based on nftprep’s funding rate data, the current short funding rate for Azuki is 0.0621%, and the daily return rate for 1x leverage is 1.49%. If we buy an original Azuki NFT at the floor price while shorting Azuki at 2x leverage, the main expected returns of this investment portfolio are a 2.98% daily return rate + green bean airdrop + nftperp platform coin airdrop. However, the main risks of this investment portfolio are ETH price decline risk and smart contract security risk. 2) Desperate buying during the market’s downturn: when the market enters a state of despair, gradually buy original Azuki at the floor price and hold until the market sentiment recovers before selling. We can judge whether the market has entered a state of despair by whether the nftprep long funding rate has returned to the normal range and whether Azuki whale addresses have started selling original Azuki.

Reference: https://twitter.com/0xNing0x/status/1674231480808247296