The rise of NFTs … what they are and why they’re valuable … how to invest today
The original plan was to sell them at $4.99 for a pack of 10.
In retrospect, Ryan Maloney is glad it didn’t work out that way …
The artist had created a series of collector cards called Beastly Ballers. Each card featured a cartoonish-looking creature wearing football gear.
Maloney’s plan was to hire a Chinese printer to package the cards, after which he’d sell them in packs of 10, for $4.99.
That plan changed when Maloney learned about the rise of the latest evolution of digital assets and cryptocurrencies — something called NFTs.
Here’s our crypto specialist and editor of Ultimate Crypto, Matt McCall, for what these things are:
In short, non-fungible tokens — or NFTs — are fast becoming the hottest thing in cryptocurrencies.
They are early in their growth cycle.
And growth potential is off the charts.
So, how did this growth potential impact Maloney and his collectible cards?
Well, instead of going to the Chinese printer, he listed his product on an NFT online marketplace. Bids began coming in within just two days.
Rather than selling a pack of 10 for $4.99, he sold 14 cards for more than $700. One card alone went for $85.
NFTs are going to be huge (many already are). And this digital asset space is barely in its infancy. Today, let’s learn more about NFTs, what their future holds, and how to benefit in your portfolio.
***Your NFT primer
So, let’s start at the top. What exactly is an NFT?
Back to Matt:
Fungible means replaceable or interchangeable, so NFTs are digital assets that are unique. They cannot be replicated, counterfeited, inflated, or anything else.
Bitcoin is fungible. One bitcoin is the same as every other bitcoin.
NFTs are one of a kind.
Take the Porsche Macan I bought last summer. Yes, there are other Macans on the road. Some may even be identical to mine … except for the VIN. That unique number makes my particular Macan non-fungible.
Matt’s example of a Porsche as non-fungible is helpful because it points toward a benefit of NFTs — namely, you can digitize just about anything. And since NFTs are run on the blockchain, that means proof of ownership is clearly designated — only one person can lay claim. In that way, you might think of an NFT as a digital deed.
This points toward another benefit — verification of authenticity.
From Coindesk:
One of the main benefits of owning a digital collectible versus a physical collectible like a Pokemon card or rare minted coin is that each NFT contains distinguishing information that makes it both distinct from any other NFT and easily verifiable.
This makes the creation and circulation of fake collectibles pointless because each item can be traced back to the original issuer.
I’ll add that this is a huge benefit in the art world, where fake art sales are believed to make up 20%-50% of the market.
***To say NFTs are popping up everywhere is an understatement
Here are just a few examples, from CNET:
The technology is beginning to touch every corner of art, entertainment and media.
In sports, a clip of Lebron James ruining a fast break sold for $100,000 on Top Shot, the NBA’s marketplace for highlight reels.
In music, Kings of Leon last week became the first band to announce the release of an NFT album, with three types of tokens that include special artwork and perks.
The pop star Shawn Mendez last month announced a line of digital goods in the form of NFTs.
In the media world, the Associated Press is auctioning off an NFT electoral map of the 2020 U.S. presidential contest, which uses data that was published on the blockchain.
Twitter CEO Jack Dorsey is even selling the first tweet on the platform as an NFT.
Now, you might be wondering — why are these things valuable?
After all, why would I buy an NFT of Lebron James when I can go to YouTube and watch a video of him dunking for free? Or heck, why not just watch someone else’s NFT of Lebron?
Well, you have a point …
On that note, here’s The Verge:
… yeah, that’s where it gets a bit awkward.
You can copy a digital file as many times as you want, including the art that’s included with an NFT.
But NFTs are designed to give you something that can’t be copied: ownership of the work (though the artist can still retain the copyright and reproduction rights, just like with physical artwork).
To put it in terms of physical art collecting: anyone can buy a Monet print. But only one person can own the original.
So, the pride of ownership is one reason to own an NFT. It’s 100% yours, even if someone else can enjoy it.
To this end, emotion plays into value of certain NFTs, but that’s not the only source.
Back to Coindesk for more:
Like all assets, supply and demand are the key market drivers for price.
Due to the scarce nature of NFTs and the high demand for them from gamers, collectors and investors, people are often prepared to pay a lot of money for them.
Some NFTs also have the potential to make their owners a lot of money.
For instance, one gamer on the Decentraland virtual land platform decided to purchase 64 lots and combine them into a single estate. Dubbed “The Secrets of Satoshis Tea Garden,” it sold for $80,000 purely because of its desirable location and road access.
Another investor parted with $222,000 to purchase a segment of a digital Monaco racing track in the F1 Delta Time game. The NFT representing the piece of digital track allows the owner to receive 5% dividends from all races that take place on it, including entry ticket fees.
As you can see, some NFTs offer real, intrinsic value, such as recurring cash-flows.
As to the other type (back to the Lebron James example) you might think of them as artwork. To some people, a Jackson Pollock is worth tens of millions of dollars, while to other people, it’s a paint-spill that belongs in the garbage can.
Regardless of your take, the growth in the NFT space is stratospheric.
For that, let’s return to Matt:
Throughout their history, there have been nearly $375 million worth of NFTs sold.
In the past month, there have been almost $178 million worth sold.
I’ll save you the trouble and do the math for you. Nearly half — 47% — of all NFT sales (in dollars) have come in the last month.
That gets us to more than $2 billion projected sales here in 2021 based on the monthly run rate. But … that rate is going through the roof, and my team and I believe it will be much higher. As in possibly more than $20 billion!
***So, what is the tie-in here to the crypto/altcoin universe?
Well, not everyone has the money to buy a hot NFT.
For example, an animated clip of Donald Trump lying face down in the grass, covered in graffiti, recently sold for $6.6 million.
Few people have $6.6 million laying around. That’s where altcoins have come in …
From Coindesk:
The price tags for these “non-fungible tokens,” or NFTs, might seem daunting, inaccessible or downright ridiculous to the average person.
That’s why some cryptocurrency traders, rather than buying NFTs directly, are buying digital tokens affiliated with the marketplaces that have popped up for trading NFTs. This way traders can bet on the NFT industry’s growth without having to go all-in on some sky-high priced digital artwork or trading card.
Investors think these tokens “can serve, in a way, as index bets on the growth of the NFT marketplaces they power,” said Alex Gedevani, research analyst at Delphi Digital.
Select NFT-related altcoins have, in fact, been exploding recently. According to data provider, Messari, the 10 biggest digital tokens related to NFT platforms are up between roughly 60% and 900% on the year.
Ultimate Crypto subscribers can attest to the huge gains from NFT cryptos. Here’s Matt with more:
Our propriety MAG (McCall’s Altcoin Grading) System tipped us off to a couple of NFT altcoins very early, and they have been big winners for us — one is up 1,230% since January of 2020 and the other is up 770% since April.
They have contributed to our Ultimate Crypto portfolio’s 675% gain in just 15 months.
Matt writes that more NFTs are flashing higher scores in his system. (Technical indicators are roughly 20% of the score.) And given their enormous potential, he plans on adding more to the portfolio.
***Three ways to get involved in NFTs
One, become a creator, like Ryan Maloney. Digitize your product, create your own series of NFTs, and bring them to market.
Two, become an investor. Similar to buying artwork, you’ll sink your capital into an NFT that has cash-flows attached to it, or that you believe will appreciate over time, or that you simply enjoy, similar to a piece of fine art.
Three, invest in the altcoins that are related to the growth of the NFT space. But if you go this route, make sure you have a system for identifying the truly valuable altcoins. As Matt has pointed out many times, there are countless altcoins that don’t deserve a single penny.
Before we wrap up, I’ll throw in that news on the day reports that the artist, Beeple, has just sold an NFT for $69 million.
Up until October, the most that Beeple (Mike Winkelmann from Minnesota) had ever sold a print for was …
Wait for it …
$100.
But now, Beeple is among the top three most valuable living artists.
I’ll give Matt the final word:
This is the future of finance — or decentralized finance to be more precise. We are heading toward not only a digital world but a tokenized world.
Sending money anywhere will take seconds and cost mere pennies. Buying a home will take days, not weeks — and the transaction will cost a small percentage of what it does today. Even tracking a vaccine from the time it was created to the needle going into your arm will be done on the blockchain.
This transformation continues to unfold, creating a once-in-a-lifetime financial opportunity for smart investors who act today.
Have a good evening,
Jeff Remsburg
