Interest rates are through the roof, FTX wipes out BILLIONS overnight & yet I’m here happily spending THOUSANDS on these goddamn JPEGS. Here’s Why…
I was not expecting nor planning to make this video, mainly because I wasn’t a big fan of NFTs when the big wave hit.
I was around in 2017 and put in my dues throughout the ensuing bear market. Once NFTs hit the scene in 2021, I was wholly uninterested.
I didn’t get it.
I could grasp the technology, but didn’t feel like any meaningful innovations had been made. The why wasn’t strong enough.
Now, after spending years being all in crypto & the past year & a half learning & exploring non fungible world - I’m all in NFTs.
To be clear - crypto still has its place & I will continue to invest, but I am far more focused on the upside of NFTs now - here’s why.
Less Regulatory Risk
Regulation remains one of crypto’s biggest hurdles - particularly regarding securities laws. Precedent has been set deeming Bitcoin as property instead of a security & rumors have swirled that the XRP lawsuit is leaning in Ripple’s favor. Still, the FTX mess will draw more scrutiny than ever.
The key advantage vs crypto is that NFTs aren’t highly financialized pseudo-shares issued by a central entity.
NFTs are a wholly different conversation. Whether its BAYC or Doodles, Fidenzas or Flufs, most NFTs are works of art first & foremost -opting for a digital collectible form factor is more of a creative decision akin to an artist preferring to use oil vs charcoal due to their unique properties & possibilities.
Like Artwork, NFTs are still subject to its own kinds of regulations - particularly efforts to mitigate money laundering, insider trading, & “rugs” aka fraud.
If the Lummis-Gillibrand Innovation Act draft bill is any indication, there’s a chance NFTs will be treated as commodities rather than securities. Expect far more clarity here once the Yuga Labs probe wraps up.
Less Financial Manipulation
…One less attack vector for overzealous, under informed regulators.
For many folks around the world, crypto is their best chance at financial sovereignty, hence why Bitcoin adoption is so strong in developing nations & why DeFi has secured billions in TVL, continuing to function like clockwork when CEXs can’t even seem to manage their account balances. Still, the flood of private pre-sales at undisclosed prices, 50X leverage trading, using tokens as collateral, manipulated prices & Fully diluted value schemes are raging red flags for regulators assessing the risk of retail engaging with the ecosystem.
NFTs are generally non-financialized assets, meaning the typical degen shenanigans & wall street tricks don’t work.
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There’s no 50X leverage trading
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No broad acceptance of NFTs as collateral
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Companies don’t reference NFTs as assets on their balance sheets
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Projects don’t create & sell new NFTs as a means to fund their treasury
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There’s no paper shares of NFTs
Now yes, there are hardcore mint-flippers & NFT traders - Blur’s popularity is a testament to this.
And YES, it IS possible to get leverage on a select set of blue chip collections through platforms like BendDAO, Honey & even some CeFi folks like Nexo - but this only applies to the top .5% of all collections, of which most are tens to hundreds of thousands of dollars to purchase. 99% of people will never participate in this kind of NFT financialization, meaning one less attack vector for overzealous, under informed regulators.
More Transparency
Though transparent in theory, the complexities of premines, private sales, vesting schedules, inflation schedules, burn mechanisms, etc mean that most crypto projects are opaque in practice. These dynamics aren’t wholly new or unique to crypto, but they can be confusing to the average retail investor, making it harder to assess the risks of investing in a token.
NFTs on the other hand are far more straightforward.
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There’s no premine ahead of public launch & allocation limits are stated before mint - lowering the risks of whales controlling the project from day 1.
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Mint price provides a clear cost of admission, making it easier to assess the cost basis for early buyers, & thus the R:R when buying in after mint.
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There’s less dilution risks because of the effort required to create a new collection vs simply “creating” new tokens.
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Total supply for each collection is established prior to launch.
More transparency means better due diligence, instilling greater confidence & higher conviction for investors - key factors for driving a project's valuation higher.
Clear Use Case
Most crypto tokens lack any clear purpose or utility. As such, most tokens are really just attempts to capture liquidity from the market. Nothing wrong with that necessarily, but it makes most crypto a speculative instrument by design.
NFTs are very clear in what they’re trying to be: a work of art, a digital memento, an access pass, a claim on a digital item, etc. Projects that forego roadmaps altogether are even purer examples of this “what you see is what you get” approach. It doesn’t mean the NFT won’t eventually have some semblance of functionality or utility, but at least you buy an NFT knowing its baseline purpose & value independent of any potential appreciation in price.
A Future Beyond Web3
Crypto communities are usually composed of people interested in tech or in speculation. Both are fine, but its a different energy & feel, much more like investing in a traditional company through the stock market. The innovations may be great, but not much else feels compelling or interesting.
NFTs are uniquely positioned to leverage IP to craft worlds & experiences that appeal to global audiences, providing ample opportunity to scale far beyond the small walls of Web3.
NFT communities are steeped in culture, that of their own project but also of other communities & projects across Web3 and Web2. This emphasis on culture is vital in helping projects scale from a few thousand folks in Discord to becoming an established fixture known by millions. Whether its events like VeeCon & ApeFest, installations from Aku World & Doodles, or partnerships with world’s biggest brands - NFTs are uniquely positioned to leverage IP to craft worlds & experiences that appeal to global audiences, providing ample opportunity to scale far beyond the small walls of Web3.
Stronger Communities
Community is the foundation of all great NFT projects. The best teams go out of their way to ensure holders feel like part of the family - amplifying the voices accordingly.
Building on the prior point, NFT culture is firmly rooted in community - its the literal lifeforce for projects. This core tenant means holders are viewed as an extension of the project & the most important stakeholder, amplifying their voices & opinions in - hence why AMAs, Twitter Spaces, polls, Discord updates & more are all so crucial.
Holders serve as a check/balance system - driving greater accountability & communication from the founders & the broader team. When done particularly well, the community serves as a hive mind of creativity & inspiration pivotal in shaping the project’s future with their opinions & feedback.
In the strongest communities it’s typical to find people building genuine connections with each other, from chatting to playing games and watching movies. You may not want to be THAT involved, but this level of engagement is what leads to people holding long term instead of flipping the project the moment they see an inch of profit.
More Upside
Crypto is far out on the risk curve, NFTs are even further. As such, they also provide more upside.
If you assume strong crypto projects like Ethereum will surpass prior ATHs, its logical to expect the same for strong NFT projects. Buying at depressed prices could provide outsized returns as floor prices increase in tandem with the fiat price of ETH climbing. Since most NFTs are ETH denominated, the appreciation potential is less obvious at first glance.
Take a recent acquisition of mine as an example: a Gen I ASM brain with almost a year of historical data.
The sustained floor for ASM has been as high as 4.5E, ~13.5K at the time. Some months pass, some black swans swoop in, & boom, major correction. I acquired one for .71E (~$862) when the floor was .69E. That’s a ~94% discount from ATH, squarely within generally the sweet spot for bear market lows.
If ASM regains its ATH floor while ETH is at least 3K - thats a 15X return. If I were to clock those ETH gains and then ETH runs to 6K, (a conservative estimate as its only 25% higher than its ATH) that would be a 31X return. At 9K, that’s a 46X return.
This isn’t even factoring in possible airdrops that could be noteworthy gains in their own right!
Another key consideration is the “long tail” value of NFTs. Though there’s many factors at play, the main driver of value for NFTs is relevancy + popularity, not any underlying technology. Instead of seeing diminishing returns as the tech adoption cycle matures, the most culturally significant collections will see parabolic growth in value as more people seek to own a piece of the project’s early beginnings.
As projects establish themselves beyond Web3 & start to become globally recognized IP, brands, games & more- they create a flywheel of attention, further cementing them as cultural staples. This has already happened with Yuga Labs & I fully expect to see several more collections grow into multi billion dollar businesses.
Conclusion
Ultimately, if you think crypto is going to have another big run, NFTs will have a bigger one. Its early in the market life cycle for the NFTs & history shows us that the returns drop off after each cycle. Seems like a prime time to acquire strong projects before they make the next big leg up.
Nothing written, ideated, shared, referenced or communicated herein is financial or legal advice*. I’m merely a man making moves & shooting shots based on the best information I have, making them open & freely available to you.*
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