I just boarded my flight from Chicago heading to New York to NFT.NYC, the world’s biggest NFT conference. I am excited to attend the 3-day event but I can’t help reflect on these past 6 months in the crypto space. What a crazy year it’s been.
In 2020, I didn’t know what a Non-Fungible Token was. I didn’t own Bitcoin, Ethereum or any Cryptocurrency. I didn’t care about Crypto. I had friends in the space who were obsessed with the industry and it sure sounded like they were doing well, but I wasn’t interested.
That changed when Jack Dorsey, the owner of Twitter and Square posted an essay on his Twitter feed. The essay explored the history of money. This started my deep-dive into Cryptocurrency.
At the time, Warren, a client who I had been mentoring, left his successful content management business to become a full-time Crypto-currency trader. I remember talking with Warren as he told me about the incredible opportunity in the cryptocurrency space. He was taking the relative-value lessons he learned from our options and futures program and was applying them in the fragmenting market of cryptocurrencies. It was a good choice; I knew it – Warren was in his 20’s with the entire world in front of him. I was proud (and impressed) that he was willing to make such a big shift in his career path. I respect folks who instinctually pivot when they see opportunity.
As I learned about Crypto, Warren became a phenomenal resource for me as we kept in close contact. He was building a hedge fund, along with a consultancy service for other traditional hedge funds, looking to get into the Crypto space. The trade he was doing was awesome. He had the right technology allowing him to trade Bitcoin, Ethereum and other DeFi (Decentralized Finance) coins on multiple exchanges. What he was doing (and is still doing) was pure arbitrage. It’s what traders should be looking for when trading their money, or someone else’s. The fact that he had found an edge in a growing market,was engaged, happy and doing great made me proud.
I started Masters in Trading 2015 to offer something that wasn’t available for retail trader. I wanted to offer professional-level trading education. The space was littered with marketers and technicians making outlandish promises about the trillions of dollars up-for-grabs if they would just follow their special system. Watching trading videos on Youtube about the same technical analysis nonsense was comical to me, so I set out to change the industry.
I have since learned that trading education is a game of marketing. The best content doesn’t necessarily win. The best marketing wins, which is not that much different than any other industry. Over time, to make my content more digestible for retail traders, we have developed technology to provide value to our clients. They seem happy. When my clients are happy, I am happy.
As I learned more about Bitcoin and Ethereum, I gravitated to the former. Ethereum spoke to me because I understood the utility of the contract and I saw the practical application that it presents. What grabbed me next was Non Fungible Tokens (NFTs). I’ll explain why, but before I do, I want to go back to Warren.
Ethereum spoke to me because I understood the utility of the contract and I saw the practical application that it presents.
Warren and I were routinely meeting in the beginning of 2021. He was incredibly generous with his time and I was learning so much. This was the most excited I had been about education since the 9-month grueling training session it took to complete Ironman Wisconsin.
Do you know what biggest risk athletes face when training for 10+ hour endurance events? I didn’t. Nutrition. – facing stomach issues by not consuming the right kind of sugars and either too little or too many calories. Hydration – competing the Ironman was the equivalent of taking a masters class in nutrition. Back to crypto…
As we continued talking, I had come to realize there are many directions one can go in the Crypto space but my interest were starting to deviate from Warren’s. Warren is a trader, and a darn good one. He was looking to build a Hedge Fund to invest money so clients can get a great return. For me, I’ve been there and done that. I’ve traded my entire life and the thought of diving into a brand-new trade wasn’t that exciting for me. As I reflect, I’m certain the reason for this is trading can be a selfish profession. A career trader spends days staring at a computer hoping to ring-the-register by days end. It’s fun, and can be extremely lucrative, but you’re not doing anything for anyone. You’re not creating anything. It’s only about money.
As I learned more, instead of spending time looking for arbitrage opportunities between Bitcoin on one exchange vs Bitcoin on another exchange I was fascinated with smart contracts. These were groundbreaking to me, smart contracts would allow digital ownership for the first time in history. These smart contracts were called Non Fungible Tokens (NFTs).
Quick lesson – Bitcoin, Ethereum, USD are Fungible. These are fungible because one Ethereum can be transacted for another Ethereum, it’s still just Ethereum. In trading the word Fungible is used as well, for instance: If I buy an option on the Chicago Board Options Exchange, and then sell that option on the Philadelphia Options exchange, the option is Fungible to each exchange, meaning that both exchanges will respect the price and value of the option regardless of where it came from.
If a photographer, let’s say Ansel Adams, arguably the most well know photographer, takes 5 different photos of the Grand Canyon, each of those photos is distinct, they are one of ones. They are unique, making them similar to Non Fungible tokens. If Ansel’s photos were NFTs, we couldn’t trade one of his photos for another and expect the value to be the same. Demand might be greater for one photo over another, which renders them as non-fungible.
Non Fungible tokens are built on top of various Blockchains. The NFTs I began following were built on the Ethereum blockchain, but other NFTs such as Solana, Polygon and Binance also have a growing NFT presence.
Let’s expand on NFTs further continuing with photography as the example. In the past, a professional photographer would take a photo on a digital camera, and then send that file to an art gallery. The gallery would then print, mount and frame that photo and offer it for sale to collectors. The photo may sell for $2,000, the artist takes $1,000 and the gallery might take $1,000. This would be the end of the transaction for both parties.
Here’s the beauty of NFTs using the exact same example.
A photographer takes a photo with a digital camera but instead of sending the file to a gallery, they post the file on an auction site similar for $2,000 USD. The collector purchases work for $2,000 and the artist collects $2,000 (less minimal expenses). The gallery owner doesn’t play a role anymore. Now, the collector has the options to print, mount and frame the work and display in their home. Once displayed, they are welcome to resell the NFT if they choose (or keep the digital asset, it’s up to them).
This is already an improvement from historical procedures, but there’s more!
In the past, a gallery would sell to a collector, the collector would own an illiquid investment that they could enjoy but selling is nearly impossible. In 1999, I purchased two Andy Warhol pieces for a total of $17,000 at a contemporary art show in Chicago. I enjoyed those works for 13 years until I decided to sell in 2012. I reached out to major auction house, Sotheby’s, to initiate the sale. The Warhols ended up selling for close to $75,000 each – WOOHOO! I was expecting $150,000 less some fees… but, those fees ended up costing me over $50k, not to mention the 3 months the entire transaction took to complete. I was happy with the trade, but the process was awful.
NFT’s simplify this process. When the collector eventually sells the photo, the artist continues to get a portion of futures sales, industry standard is 10% as I write. If the work appreciates and sells for $3,000, the artist gets a $300 cut. If the work again sells again for $4,000, the artist gets a $400 cut. This process continues forever! In the past, when an artist’s work appreciated, it would result in zero benefit to the artist. This is a GAME CHANGER for the art world! The term ‘starving artist’ will be a relic of the past.
Warren was surprised that my interests deviated from trading the arbitrage opportunities he was finding. I remember him encouraging me… he would say, “…with your background, you would have incredible EDGE in trading cryptocurrencies.” He was probably right, but the technology of smart contracts and the Ethereum Blockchain had me mesmerized. This was the most fascinating technology I had ever seen.
I’ve always loved art and the supply and demand of the art market. In my first year on the floor of the Chicago Mercantile Exchange, I was blessed to have earned close to $1.5m trading S&P 500 Futures and Nasdaq Futures on the floor of the Chicago Mercantile Exchange. Trading was easy, but I’ve come to learn that the market was forgiving at that time. Trading, in general, is challenging – regardless of what some crooked gurus might tell you. The trade at the time had edge for the floor traders because in order for the public to trade, they had no other option than to trade through the markets the traders presented. The markets in the early 2000’s were also transitioning to the computer and the older generation was afraid of computers. My contemporaries and I jumped right in and gobbled up every tradable edge we could find. We were building spreading software that would find us great trades before humans could value the markets. I learned that you need to keep pushing forward. You need to change, adapt and be nimble because the markets were always changing. Traders that didn’t change got left behind.
As a young 20 something with loads of cash, I was able to dive into my love of contemporary art. My mom was my wingman when it came to attending art shows. We would fly to Miami and go to Art Basel, and in the early 2000’s, Chicago had a phenomenal contemporary art scene. My cousin, a gallery owner in NYC with a PhD in Art History helped curate my earliest purchases. My mom passed in April of 2019, but I wish she could see the art market now. My mom would most certainly get NFTs. She would love most that artists were getting properly compensated for their work in the new age of Web 3.0.
In February 2021, I was convinced of the practical application of Ethereum and NFTs and ready to put capital to work. Other trading gurus in the space had started talking trades in Bitcoin, but it was the same technical analysis nonsense that many were doing in stock and options. I had no doubt cryptocurrency would eventually go mainstream but I also knew these stock and options ‘teachers’ would follow and immediately claim to be experts without doing any work. They would follow the hot topic of the day, just like they had in the past.
How could I differentiate myself? How could I get in front of the curve and prove to my audience that I wasn’t selling a course to make money? How could I convince those who trusted me that I was genuinely looking to help? I wouldn’t say that I was an influencer, but there’s no doubt my clients put trust me and I have influence.
It is already happening. Today I got an email that said – Solana is up 200% for the year, Ethereum is up 250% for the year – now, come to my webinar and buy my course. The email did not say that Solana was a Layer 1 Blockchain that might have better, faster technology than Ethereum. The email just showed a chart and said, “Look at this chart! If you bought Solana at this level and sold at this level you could have made xxx%.”
What a bunch of horse-sh*t! This is more of the same nonsense that consumes our collective email inboxes.
In February, I started buying Ethereum at $1500 and Solana for under $50. As I write Ethereum is trading close to $5,000 and Solana ($SOL) is $240. Both of these assets will trade much higher in my opinion.
The BIG move I made, the move that said to my closest clients that I’m going ALL-IN on the Ethereum blockchain was purchasing a Cryptopunk for 25.97 Ethereum (see the transaction below). Today, this Punk is easily valued in excess of 150 Ethereum.
What’s a Cryptopunk? The Cryptopunk is one of the earliest examples of a “Non-Fungible Token” and were the inspiration for the ERC-721 Standard that powers most digital arts and collectibles. To me, a Cryptopunk is like investing in the Printing Press. The most desirable, and highest prices transactions are below. Those are some expensive JPEGS!
It didn’t stop there – it wasn’t even close! I felt so strongly about this opportunity that I poured money into Ethereum and other historical artifacts on the Ethereum Blockchain. I wanted clients to see that I was putting my money where my mouth is. I was not some doofus talking technical analysis nonsense without any skin-in-the-game.
I purchased and sold the first musical beat ever generated on the Ethereum Blockchain. You can see the full transaction below; buy and then sell.
Next, I dove into a new form of art called Generative Art – Gen Art is new artistic medium that I am betting on to be as commonplace as photography, pastels or charcoal in the coming years. Ten years from now museums will have wings solely for Generative Artist, at least that’s what I am betting on.
My commitment was to educate my closest clients, the ones who bet on me years ago and never left my side. Clients like Warren who are now making more money than he ever dreamed of in NYC. Clients like Pablo Lucena who left Facebook, to build tools for my trading community, and trade the markets full time.
I truly believe that NFTs represent the future of the art world. It’s a future that favors and respects the hard work, talent and creativity of the artist, while also improving the process by which collectors obtain and manage their art. I’m thrilled to not only be part of this future, but to have ability to share this knowledge with my closest clients so that they too, can share in the journey.
Thanks for reading -
Jonathan Rose owner Mastersintrading.com