The Financial Times recently reported on “the great NFT sell-off” here in this article. Daily trading volumes on OpenSea, which is the largest NFT marketplace, are down 80% ($50M) from their high in February ($248M). Bored Ape Yacht Club, which is the most expensive NFT collection out there, has seen its average daily price come down by about a third (see above). Of course, they still remain extremely valuable NFTs. And a recent CryptoPunks auction was just pulled from Sotheby’s so that the owner could “HODL” until things recover.
I don’t think any of this should surprise both NFT holders and the naysayers. This is a high-risk space and it is all very speculative. You can’t run a discounted cash flow (DCF) model on a Bored Ape and most other NFTs (though some might actually produce cash flow through, for example, secondary sale royalties). The more important point of all of this is that we are living through what many people believe is the creation of a new kind of internet. Cryptocurrencies are what underpin these new digital economies, but we are still figuring out how they will function and what their long-term business models will be.
For me, this is an exciting thing to be a part of. I’m not a venture capitalist, but buying NFTs and doing other crypto things feels a bit like I am an amateur one. Holding ETH or SOL is similar to holding Canadian or US dollars (currencies that underpin economies). So what I am doing is using these currencies to put money into ventures (NFTs) that seem interesting. And to do that, you look at the art, the team behind the project, the roadmap, and how well they appear to be executing against that plan. Indeed, many of the most successful NFT projects are naturally run by teams who are constantly building and shipping.
At the same time, I mentally write off every NFT I buy to $0 as soon as I purchase it. I am also limiting my total crypto allocation to between 5-10% of my non-real estate investments and buying with a scheduled dollar-cost averaging approach. So if this whole web3 thing went to zero tomorrow (which I firmly do not believe will be the case), my life would still go on. None of this is, of course, investment advice. Please do your own research and make your own decisions. But I can tell you that it is a lot of fun following and learning about what smart, creative, and entrepreneurial people are doing in this emerging space.
If you’re interested in NFT photography, check out my global citizen collection on Foundation.
Chart: Financial Times
The World Economic Forum estimates 10% of global GDP will be on the blockchain by 2025.
The catalyst for this change is right before our very eyes, but the market is as irrational as it is slow to react. This is often the case in emerging markets, particularly in tech. This is partly why ponzis like doge, shiba, most NFTs (sorry), or borderline vaporware like Cardano have accrued such high market caps. Eventually this part of the bubble will burst and that value will flow to the few fundamentally sound projects.
But if most of the market is a scam (it is), what is left and how will 10% of global GDP flow on chain? What underlying infrastructure could allow this to happen? Ethereum is a piece of the puzzle, but only a small piece. The big piece of the puzzle, the major value capture in all of this, is the decentralized middleware that allows for connectivity between blockchains and legacy systems, APIs, databases, etc. It is the blockchain of blockchains without being a blockchain.
I can’t tell you what this is specifically, i hate when people shill, but i can tell you this:
Data is the sword of the 21st century, for those who wield it properly, the samurai.
Follow the data.