One of the excellent news sources I use for deeper dives into trending business subjects like NFTs (non-fungible tokens) is Toronto-based The Logic. It recently discussed whether NFTs are a “‘short-term fad’ or promising investment.”
I’d be lying if I said I was anywhere near literate regarding this type of asset. It’s right up there with my knowledge and understanding of cryptocurrencies. Beyond the fact I should get to know them as part of my job, I’m not necessarily the guy you listen to about them and then bet the farm.
Not even close.
But what I can do is make an opinion. I’ve always enjoyed quickly sizing up a business or investment and providing my two cents worth. So, I’ll try to do that for NFTs.
The Logic surveyed its subscribers to get their thoughts on the subject. It was a relatively even split when asked whether or not NFTs represented a long-term store-of-value. However, as one of the publication’s subscriber’s pointed out, what makes a digital asset valuable is the asset itself and who’s behind it.
If Will Ashworth is selling his first investment article ever written, I doubt the asset is valuable. However, if Ben Carlson — arguably one of the better financial bloggers on the planet — sells his first blog post, the intrinsic value of this digital asset is likely far higher.
There are lots of NFTs in the news these days. I thought I’d write about some of the best and worst from the first three months of 2021.
The Best NFTs: Beeple and the First 5,000 Days
I don’t think there’s any question whetehr the sale of Everydays for $69.3 million at a Christie’s auction in March represents the ultimate potential of NFTs.
In 2007, graphic designer Mike Winkelmann (otherwise known as Beeple) set out to create a daily digital artwork for the rest of his life. Everydays is the first 5,000 days. According to CNBC, Andrew Goldstein, the editor-in-chief of Artnet News, noted the following after the sale:
“At this point, especially after today’s Christie’s sale, it’s not a question of whether NFTs will have an impact on the so-called traditional art market, but to what degree its impact will be felt.”
The buyer of Winkelmann’s digital creation was willing to pay more than $69 million, arguing that he was buying a “significant piece of art history.” Time will tell if he’s right. In the meantime, Winkelmann’s buyer may put Everydays in a virtual museum for art lovers around the world to enjoy.
NBA Top Shot Moments, Lebron James
Toronto-based tech entrepreneur Sheetal Jaitly argues that the NBA Top Shot Moments are moments in history.
“If you ever collected hockey cards or baseball cards, right away you’ll get it. For people who never found value in those things, they probably won’t get it. In the NFT world, you’re owning a piece of history, essentially,” Jaitly told Global News in mid-March.
Of course, as a fellow Torontonian and Raptors fan, I get why Jaitly says his dream collectible would be Kawhi Leonard’s Game 7, buzzer-beating shot during the 2019 championship season. But this sporty subsection of the NFT phenomenon goes beyond just a couple of Raptors fans.
For instance, in February, someone paid a record $208,000 for an NBA Top Moment where LeBron James flies over a player on his way to slam the basketball. You can watch it all you want on YouTube, but only Jesse Schwarz owns that clip.
In fact, currently more than $500 million in Moments have been sold by the NBA to date. And you can expect all the other pro sports leagues to follow suit. If NFTs can’t make it in sports, as Frank Sinatra didn’t say, they won’t make it anywhere.
The Best NFTs: Funko, TokenWave and TokenHead
I think it’s safe to say that we’re all still trying to feel our way through the NFT growth phase that’s happening at the moment. In fact, I recently started to explain NBA Top Shot to my wife and she calmly asked, “So, does the buyer of the Moment get a royalty every time someone views it?”
Excellent question. And I don’t believe they do.
This is why I like the idea of Funko (NASDAQ:FNKO) buying a majority stake in TokenWave, the “developer of TokenHead, a mobile app for showcasing and tracking” NFTs. According to GeekWire, TokenHead has more than 100,000 visits per day to view the app’s more than 10 million NFTs.
Moreover, Funko will launch a bunch of NFTs in June that revolve around its POP! figures. They’ll sell for $9.99.
“By backing the rarest of the Funko NFT’s with exclusive redeemable Funko Pop!s, we are poised to enter the NFT market in a very unique manner,” said CEO Brian Mariotti.
Because of this, Funko might be the most sensible NFT investment of the bunch.
Twitter CEO Jack Dorsey’s First Tweet
Of course, you might feel that $2.9 million for 20 characters — $145,000 per character — is a ridiculous price to pay for a digital copy. However, the man that paid the hefty sum felt the price was more than fair, comparing it to the Mona Lisa.
Personally, I do think that things that have already been shared with the world shouldn’t carry a ridiculously inflated price. However, it doesn’t surprise me that Jack Dorsey’s first tweet sold as a piece of history. After all, shouldn’t the first Facebook (NASDAQ:FB) post be worth more than the first millionth?
That’s why they have cameras at the start of every race. To capture the moment. NFTs allow you to sell that moment for the best price possible.
The Best NFTs: The Ones That Have Yet to Happen
I happened to be having lunch with a friend who’s got a technology bent. I explained the entire process of NFTs. He immediately asked, “Why don’t artists and other people with valuable gifts to sell offer up their shot of the day?”
What did he mean? Well, imagine buying a picture from Ansel Adams back when he was still alive and which he had taken on his morning walk.
If you’ve ever looked at the artist’s stuff, I don’t think there’s any question that his digital work is worth more than the average smartphone shot. But that’s just an example. My point? This is where I see all kinds of future value generation.
Another example: imagine if a collector had approached a young Michael Jackson and his family in the 1960s and paid $50,000 for a picture of the Jackson 5 performing “ABC” while on TV? The odds are good that he would profit on that bet down the line.
What I’m saying is that the best NFTs appear to be those that will appreciate for the future. And if you have to wait a while for them to appreciate, so be it.
The Worst NFTs: CryptoKitties
Now, though, we’re on to the worst NFTs of 2021, the first of which is CryptoKitties.
I’m a cat owner. I like animals of all kinds. But that doesn’t mean I understand what all the fuss is about when it comes to collecting virtual kittens. Created by Dapper Labs — the same people behind NBA Top Shot — I find it unfortunate that people would actually spend money on CryptoKitties.
Why? Well, to give you an anecdote, I’ve spent the last three weeks fostering four cats from the Bahamas. They were flown here along with 284 other cats and dogs because the Bahamas Humane Society felt they had a better chance of adoption in Nova Scotia. But all of this costs money — money that any animal-related charity could use.
Meanwhile, CryptoKitties has generated more than $40 million in revenue. Those are funds that could have funded approximately one-fifth of the U.S. Humane Society’s operating expenses in 2019 (Page 23).
Hopefully, Dapper Labs has raised enough new funding through NBA Top Shot to get out of the digital cat business. To me, it’s a complete waste of resources.
One Calendar Year of Recorded Farts, Alex Ramirez-Mallis
Ramirez-Mallis and four friends recorded their farts for a WhatsApp group chat from March 2020 t0 March 2021. They compiled the farts into a 52-minute audio file that’s received a top bid of $183. The group is also selling individual farts for $85 or 0.05 Ethereum (CCC:ETH-USD).
Of course, the creator of the farts audio NFT says that the very idea of NFTs is ridiculous. Yet he still hopes to profit from the craze.
“I’m hoping these NFT farts can at once critique [the absurdity], make people laugh and make me rich,” Ramirez-Mallis noted according to The New York Post.
That said, the creator does make an excellent point about the concept of NFTs. Ramirez-Mallis notes:
“Buying and selling art purely as a commodity to store value in has been around for centuries, and NFTs are just a digital way of representing that transactional nature of art.”
However, that doesn’t make a 52-minute audio file of farts a good NFT investment. Absurd indeed.
The Worst NFTs: Mars House, Krista Kim
Next up on this list of NFTs, Toronto-based designer Krista Kim created a digital house that’s meant to be experienced on the Metaverse augmented reality platform.
This NFT is called the Mars House because it recreates a glass house on Mars. But that’s not the only thing novel about this pick; Kim has even partnered with Jeff Schroeder of The Smashing Pumpkins, who provided the music accompanying the file. All told, the house is meant to provide “a zen, healing atmosphere.”
Of course, I’m not suggesting that creating a meditative experience like Mars House isn’t valuable. Rather, I find it hard to believe that it’s worth the 663,000 CAD dollars ($527,000) or 288 Ether that the anonymous collector paid for the file.
That said, Kim does make a good point that selling Mars House as an NFT removed an intermediary, thereby cutting the commission fees to zero. This point helps illustrates how artists could start relishing the medium in the future.
At the end of the day, though, that’s still way too much to pay for an experience.
You Can Own a Poker Star’s Best Sayings
This one has made the negative part of this NFT list because of one simple question: why, oh why, would you want to own poker star Tony G’s most iconic poker sayings?
Let me explain a little further. As it turns out, you can now own Tony G phrases like “Ace From Space” and your “On Your Bike,” two classics from the poker player’s vocabulary. But again, why in God’s name would you do so?
Of course, if you could sell me one of Muhammad Ali’s one-liners like “You’re that ugly fella” — and were the only one to get it one video — I would definitely pay top dollar. But for comments from Antanas Guoga? Forget about it.
The Worst NFTs: Will a SPAC Buy an NFT?
To the best of my knowledge, I haven’t heard of a special purpose acquisition company (SPAC) combining with an NFT. However, with both trends hyped up right now, it’s fair to say that it may happen someday.
Many have criticized both NFTs and SPACs as get-rich-quick schemes that are bound to hurt many innocent buyers, likening both kinds of investments to gambling at a casino. I think there’s a lot of truth in those criticisms.
As we’ve seen throughout this article, the downside of NFTs is that anyone can decide what value means and make it so by paying the price. At least with stocks, there are plenty of buyers to ensure the price paid is a relatively fair one.
In the future, though, I could see a SPAC cobbling together half a billion dollars worth of NFTs to create the world’s largest non-fungible token.
True, it hasn’t happened yet. But I think it will.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.