The prospect of longing and/or shorting certain NFT collections with leverage is a fun one. I mean, some people think the idea of these PFP JPEGs is stupid and lame, whilst some think the next billion-dollar brands will emerge out of this emerging industry. Your guess is as good as mine. Anyway, I am here to tell you that you can now put your money where your mouth is - literally. All thanks to nftperp.
In case you’re unaware, nftperp is a decentralised exchange for speculating on the movement of floor prices of blue chip NFTs. The protocol is deployed on Abritrum. At the time of writing this guide, the protocol supports BAYC, Crypto Punks, MAYC, Moonbirds, Milady, Doodles, Bastard Gang Punks, Azuki and Art Gobblers. The devs are constantly adding support for new NFT collections. What you trade here are perpetual futures contracts.
Meaning you’re essentially trading derivatives, speculating on the movement of the floor price of the NFT collection in question. If your prediction is correct, you stand to make a bag, however, if you get it wrong, you can also lose big. I mean, I’m sure you know how leverage works! If you want to learn more about nftperp and dive deeper into it, read our detailed guide here.
In this article, I want to demonstrate how to use nftperp. We’ll go step-by-step and explore everything the platform has to offer and look at an ideal user journey.
For this demonstration, I will be using MetaMask, which is a non-custodial EVM-compatible wallet, and I will be shorting BAYC. Please, frens, this isn’t financial advice. Trust me, I’m not bearish on BAYC, it is simply for demonstrative purposes. Moreover, we’ll be paper trading, so there’s no real risk. However, it’s important to note that a private beta is available for those who wish to trade with real ETH. Let’s get cracking!
Before we can get our hands dirty, I need to get some basic information out of the way. Feel free to skip if you’re a veteran.
- Non-custodial EVM-compatible wallet: In order to interact with nftperp, you will need a private, non-custodial, EVM-compatible wallet. MetaMask is the most popular option. Learn how to set it up here.
- Transaction fees: Next up, you need to account for transaction/gas fees. Since nftperp is deployed on Arbitrum, we’ll need Ethereum (ETH) on Arbitrum to pay for interacting with the protocol and submitting transactions on the blockchain. As such, I have transferred enough ETH to my private wallet, which is enough to cover gas fees.
Well, that’s it, we’re ready to roll!
Click on the “Paper Trading” button in the middle of the screen. Yeah, this is paper trading, no risk involved here, thankfully. No one’s getting rekt here. Alternatively, you can directly visit the dapp here: https://app.nftperp.xyz/trade/bayc
In the top right corner, you’ll see the “CONNECT” button. Click on it to connect your EVM-compatible wallet with nftperp. Also, make sure you choose the “Arbitrum” network.
nftperp supports MetaMask as well as Wallet Connect. As I’ve set up MetaMask to be my default browser wallet, I will select “MetaMask”.
Once connected, you’ll see your wallet address in the top right corner.
Now it’s time to get our hands dirty and actually begin interacting with the protocol!
Get Mock WETH
As we’re paper trading, we’ll need some fake WETH to trade with. After your wallet is connected, click on the “Get Mock WETH” button.
Confirm the transaction to receive 5 Mock WETH in your wallet.
So this is how my position looks.
The pair is BAYC/WETH. The market price, at the moment of writing, is 74.39 WETH. This will dictate the unrealised PnL & liquidation price.
Next, I am going to short the BAYC/WETH pair. As such, I will make money if the floor price falls below 74.39 WETH and vice versa.
I will use my entire collateral of 5 WETH, and that will amount to shorting 0.133 of a BAYC at 2x leverage. Yeah, my size isn’t size… The higher the leverage, the higher the risk and the larger my position will become.
Finally, the slippage tolerance dictates after what price deviation the transaction drops when it is still processing. 0.5% is set by default. Leave it as is.
Scroll down to view your transaction summary.
My entry price will be 74.35. The price impact will be negligible. Importantly, as I am shorting, if the floor price pumps to 105.03 WETH, I will be liquidated. I will have to pay a minor platform fee, and my total cost comes to 4.99 WETH.
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Once satisfied with what you see, click on the “Approve” button to allow the spend of WETH by nftperp.
Next, click on the “Open Position” button to execute the trade.
Double-confirm the important trade details, and click on “Open Position”. Upon confirmation of the transaction, your position will be open.
Voila, you’ve successfully opened a shot BAYC position. Albeit a “fake” one.
To view your position, click on the “My Positions” button.
Here you can view all the important details about your open position.
I can view my average entry price, the current mark price and the liquidation price.
I can also view the margin I have posted, the leverage I’m exposed to and the current PnL status.
To add or remove margin, click on the “Margin” button.
For this demo, I added another fake 5 WETH to add as margin. After you’re satisfied, click on the “Add Margin” button and confirm the transaction.
Confirmation of this transaction will impact your amount of margin, leverage and the liquidation price. Overall, your position will be more secure as the leverage comes down and the liquidation price expands. As you’d expect!
To remove the margin, simply select the “Remove” option and proceed. Again, this will have a reverse impact on your open position. It will make it riskier, as the leverage will rise and the liquidation price will come closer to the mark price. Again, nothing out of the ordinary.
To close your position, select the “Close” button under the “My Positions” section.
You can decide to either close the entire position or a part of it. You can also manage the slippage tolerance.
Once you’re satisfied with what you see, click on “Close Position”. Upon confirmation of the transaction, your position will be closed.
The fake WETH is back in my wallet, minus the platform fees. I neither made a profit nor a loss, as I closed my position relatively quickly. Anyway, I hope this fake 10 WETH was actually real.
Alright, that’s all for today, frens. I hope this how-to guide was informative. You will need access to try the private beta and deal with real funds.