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
I've only hung out in Decentraland a few times. One of the times was to check out a
If you happen to have made boatloads of money in crypto (which sadly isn't me), one sensible thing you could do is put some of that money into luxury residential real estate. You know, to diversify your portfolio.
According to this recent WSJ article, it is already happening, with some developers and some homeowners now accepting cryptocurrencies in lieu of US dollars and other fiat currencies. This is helpful if you've managed to accumulate a bunch of crypto and don't want to convert it. It can also be easier when it comes to moving the funds around:
Avi Dabir, vice president of business development at FTX US, said he sees real estate as a growing sector for the company because crypto transactions are faster and more efficient than traditional deals, which rely on an often-cumbersome banking system.“If I want to send a wire transfer today using my traditional bank account, it’s got to be banking hours, I need to make sure I hit that wire cutoff time and I can’t do it on the weekends,” he said. “That’s not a problem with cryptocurrency. It’s open 24/7.”
But of course it is still early days for crypto. The article suggests that most developers and owners are arranging for any crypto received to be immediately converted into US dollars at closing. This is presumably because of how volatile cryptocurrencies tend to be -- at least right now.
To accept crypto, PMG had to partner with a regulated exchange that could quickly convert crypto to U.S. dollars, then convince an escrow agent to accept down payments from the exchange, rather than directly from the developer. Mr. Shear said most escrow agents looked at him like he was crazy, but “20 lawyers, one year later, and a lot of brain damage, everybody got comfortable.”
There are also tax considerations (that I am really not an expert on). If you bought $100 worth of Ethereum and it is now worth $10 million, you are responsible for paying tax on this gain if/when you sell, trade, or otherwise dispose of the crypto. And it is my understanding that if you were to use this $10 million in Ethereum to buy something like a condo in Miami, it would also be considered a taxable event.
Maybe all of this becomes commonplace or maybe it doesn't. But it sure is interesting to see crypto already starting to flow into hard assets like real estate.
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
I've only hung out in Decentraland a few times. One of the times was to check out a
If you happen to have made boatloads of money in crypto (which sadly isn't me), one sensible thing you could do is put some of that money into luxury residential real estate. You know, to diversify your portfolio.
According to this recent WSJ article, it is already happening, with some developers and some homeowners now accepting cryptocurrencies in lieu of US dollars and other fiat currencies. This is helpful if you've managed to accumulate a bunch of crypto and don't want to convert it. It can also be easier when it comes to moving the funds around:
Avi Dabir, vice president of business development at FTX US, said he sees real estate as a growing sector for the company because crypto transactions are faster and more efficient than traditional deals, which rely on an often-cumbersome banking system.“If I want to send a wire transfer today using my traditional bank account, it’s got to be banking hours, I need to make sure I hit that wire cutoff time and I can’t do it on the weekends,” he said. “That’s not a problem with cryptocurrency. It’s open 24/7.”
But of course it is still early days for crypto. The article suggests that most developers and owners are arranging for any crypto received to be immediately converted into US dollars at closing. This is presumably because of how volatile cryptocurrencies tend to be -- at least right now.
To accept crypto, PMG had to partner with a regulated exchange that could quickly convert crypto to U.S. dollars, then convince an escrow agent to accept down payments from the exchange, rather than directly from the developer. Mr. Shear said most escrow agents looked at him like he was crazy, but “20 lawyers, one year later, and a lot of brain damage, everybody got comfortable.”
There are also tax considerations (that I am really not an expert on). If you bought $100 worth of Ethereum and it is now worth $10 million, you are responsible for paying tax on this gain if/when you sell, trade, or otherwise dispose of the crypto. And it is my understanding that if you were to use this $10 million in Ethereum to buy something like a condo in Miami, it would also be considered a taxable event.
Maybe all of this becomes commonplace or maybe it doesn't. But it sure is interesting to see crypto already starting to flow into hard assets like real estate.
Here are some other figures. In 2019, about $54 billion was spent on virtual/digital goods. These are things like game skins. This is compared to $42 billion at movie theaters and $30 billion on recorded music. So things that are purely digital (and have a very low marginal cost) are already a huge deal and people are spending a lot of money on them. Last year, the market cap of NFTs also surpassed $40 billion. The naysayers will tell you that you can just "right-click, save as" instead of spending any crypto on NFT images, but clearly something broader is underway.
JP Morgan is of the opinion that it is only a matter of time before the metaverse infiltrates every sector of the economy in some way, shape, or form. Would you agree?
Image: Decrypt
Here are some other figures. In 2019, about $54 billion was spent on virtual/digital goods. These are things like game skins. This is compared to $42 billion at movie theaters and $30 billion on recorded music. So things that are purely digital (and have a very low marginal cost) are already a huge deal and people are spending a lot of money on them. Last year, the market cap of NFTs also surpassed $40 billion. The naysayers will tell you that you can just "right-click, save as" instead of spending any crypto on NFT images, but clearly something broader is underway.
JP Morgan is of the opinion that it is only a matter of time before the metaverse infiltrates every sector of the economy in some way, shape, or form. Would you agree?
Image: Decrypt
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