In a 24-hour period in early March, sports collection platform NBA Top Shot generated $7.89 million in revenue, art house OpenSea $4.88 million and digital antiques project NFT CryptoPunks $3.28 million.
For years, the mainstream media has been more interested in NFTs than cryptocurrencies. Publications such as the BBC or the New York Times provide statements and articles that are incriminating. The prices certainly seem excessive: Beeple’s Everydays sells for nearly $70 million at Christie’s, Jack Dorsey’s very first tweet sells for $2.9 million and Alien Cryptopunk changes hands for $7.57 million. Artists like Banksy and Damien Hirst have embraced this trend, as has the music of Kings of Leon, 3Lau and Aphex Twin.
(Alien Crypto Punk, Larva Labs)
Time and again, the crypto community has thought that fast and cheap payments, decentralized finance, DeFi, or the appeal of cash might appeal to the masses – it turns out that the general public is more interested in owning JPG.
Colin Goltra, co-founder of art gallery Narra in Decentraland, believes this is a very good thing, as NFTs bring new demographics to crypto, beyond the usual financial and tech types.
Suddenly, we have this new blood of people exploring the space with fresh eyes, said Goltra, who also heads Binance Philippines, adding: It’s refreshing to hang out with new members of the community – you get really inspired by the art, you have a lot of fun, and it’s like a collectible.
Make sure you get a combination of these, because if you consider it financial speculation, frankly, there are probably other games in town for that.
And how do we get in? To find out, the magazine spoke to some of the leading experts in the field.
A unique opportunity to buy via NFT, this jpeg embraces me. £40m seems reasonable, but I would take £30m to expedite a quick sale. The jpeg is infinitely reproducible, but the unreadable receipt is yours and yours alone! pic.twitter.com/oM2LJSWa3X
– Stephen Fry (@stephenfry) March 12, 2021
How to determine the value in the LFA?
Unlike DeFi protocols, where one can value a project by comparing its revenue and growth potential to its token price and total locked-in value, the value of most NFTs is highly subjective, and sentiment can change in an instant. Earlier this month, CryptoKitties changed hands for an average price of $1,263. By the end of March, it had fallen to $115.
It is also important to understand what you are actually paying for. For example, in the case of digital art, NFT gives you ownership of the unique token associated with that art, just like a certificate of authenticity. But you don’t own the copyright to the work, and you don’t get a physical copy of it, which doesn’t stop anyone from copying or viewing it.
Australian dance music producer Flume has sold NFT’s music and animation, Saccade, for $66,000, but retains the copyright to the music and is making it available for free on YouTube. Nick Carter, founder of Castle Island Ventures, compares buying NFT to buying a signature:
What I actually buy is a digitized version of the signed setlist after the show, or a signed limited edition album cover. As I jokingly say, NFT should be considered a signature, not art.
The blockchain on which the NFT is struck also affects the price. Users pay a premium for Ethereum-based NFTs because the network is secure, decentralized, and expected to remain so for some time. But the choice of blockchain isn’t that hard with in-game assets (which might require a faster blockchain) or something like NBA Top Shot (which uses Flow), since that’s the only place you can buy licensed NBA memorabilia.
Different NFT categories – including art, music, game items, virtual land and collectibles – have different value drivers, says Andrew Steinwold, managing partner of NFT investment fund Sfermion.
According to him, the value of goods in a game depends on their utility (for example, a sword that is ten times more powerful than an ordinary sword should fetch a higher price), while virtual lands are valued based on their content and location. The value of crypto-art is based primarily on the reputation of the artist, while collectibles derive their value from the story surrounding the object.
In all categories, rarity and uniqueness add value – provided, of course, there is a demand for them. The collections often consist of several editions, varying in size and rarity. The first few releases in a series of projects usually have a premium, says Alex Gedevani, an analyst at Delphi Digital. It’s even better if there’s historical significance and/or a strong story behind it, as with the CryptoPunks, the first NFTs.
Aliens and punk monkeys are the most expensive cryptopunks. For Axie Infinity, a blockchain-based game where users collect and fight fantastic creatures called Axies. The rarest and most valuable axes are the Mystic Axes, says Jiho Zirlin, co-founder of Axie and creator of Sky Mavis. They have rare, limited skins, and these skins will have a deeper evolutionary path than other Axis body parts.
On NBA Top Shot, sports moments with low serial numbers bring higher prices, as do those whose serial numbers match the player’s jersey number. The collector recently turned down a $1 million bid with serial number #1 matching player Zion Williamson’s jersey number, #1.
We have news of the first $1 million bid so far @nba_topshot!
They were S1 Holo Zion Williamson #1 and S1 Jersey Match.
And @JerLevine said no. pic.twitter.com/j0Ct0EH7wI
– Own Moment (@Own MomentNFT) March 11, 2021
The NFT art scene is probably the easiest for beginners. As in the real world, established artists with large audiences have higher prices than newcomers. Please note the artist’s oeuvre: Someone producing 10 NFTs a day can quickly saturate the market. But contrary to what you might think, big-name artists can actually have a lot more work than others.
NFTs can be produced in runs of 10, 50 or even hundreds – just as a real artist prints 500 prints and signs them by hand – or they can be produced as one-off, stand-alone pieces.
As you might expect, single issues are the most popular, which is why Goltra focuses almost exclusively on them. I love the idea that I can be unique with beautiful photos or a beautiful piece of art, he says.
What should investors avoid?
Red flags are raised for projects that only care about the money, and Gedevani warns against clones of successful projects such as CryptoPunks and Hashmarks, as well as NFTs that seem to be quick to extract money from their audiences. He doesn’t mention Lindsay Lohan or Paris Hilton by name, but he probably shouldn’t either.
Another trap is buying stolen art. Russian artist WeirdUndead is furious that her stolen work is for sale on OpenSea after someone automatically tweeted it with tokenized tweets. She tweeted:
I tried to ignore all the #NFT hysteria, but WHAT FUCK
I’m not giving permission (ESPECIALLY to random idiots) to make tokens out of my content, and I’m so angry pic.twitter.com/E9UKF1AXug
– Don’t give up, Skeleton (@WeirdUndead) March 9, 2021
This is a constant problem, given how easy it is these days to invent NFTs. Artist Rosa Menkman also discovered that four of her works had been tagged by another website called MarbleCards and auctioned on OpenSea. Ethical issues aside, it’s hard to see how the NFT’s stolen art retains its value when its creator abandons it.
Even if the art is authentic, Steinwold says it is important to appreciate the context and motivation of the creator of the NFT:
Was it a famous athlete who discovered the NFT last month? Or is it someone who has worked in the NMT ecosystem for years and has created thoughtful assets with a compelling story?
Steinwold may be thinking of NFL star Rob Gronkowski, who sold $1.8 million worth of NFL memorabilia to OpenSea.
In a gaming world where blockchain is ubiquitous, Zirlin recommends staying away from bloated but unsubstantial new projects, or as he puts it: Chasing the latest fad, trying to kill a bad project instead of joining a more established one with potential.
In the art world, Goltra avoids NFT platforms that are not very picky about the works they offer, such as OpenSea and Rarible. Large open spaces like this are great for new artists and investors, he said, but they also bring logistical challenges.
NON-FUNGIBLE ELONS pic.twitter.com/KZDpYGVWvz
– beeple (@beeple) 16. March 2021
There’s so much work to figure out to find something of quality, he says. He prefers platforms with filters, including SuperRare – which offers only one version – Nifty Gateway, and Foundation.
Miko Matsumura, general partner of Gumi Cryptos Capital, recommends avoiding just about anything. Almost everything in the NFT will be useless in the future, he says, with the rare exception of those that can be authenticated as having historical significance, such as CryptoKittes or NBA Top Shot collectibles. Don’t buy items with no historical value from non-authoritative sources, he warns.
Is a potential financial return the best way to achieve NFT?
In a word, no. Those interviewed by the magazine agree that collectors with a genuine interest in a category are most likely to succeed in this emerging sector. If someone enters the collectibles market with the intention of making a profit but does not understand the nuances of the project, it is unlikely to end well, Gedevani said, adding:
We are still experimenting with collecting items in many categories, such as sports, avatars, gaming items and more. It’s best to focus on the niches that really interest you and where you can find an advantage.
Gabby Dizon, co-founder of Yield Guild Games and Narra Gallery, says we’re still so early in the NFT game that it’s very difficult to estimate potential financial returns. The best strategy is to first buy something you would like to own in the next five years, paying attention to factors that can increase value, such as rarity, desirability, aesthetics and usability.
That way you will always have the NFT you want, even if the market is a tank. For Goltra, the financial aspects are of secondary importance, he added: There are pieces I could buy as speculative pieces, but I don’t because it’s not for me. I try to only buy works that I like or that appeal to me in some way.
I’m going to burn over $4 million worth of art tonight pic.twitter.com/B0gks8c4ni
– Mad Dog Jones (@Mad_Dog_Jones) March 16, 2021
Are some NFTs currently undervalued or overvalued?
Mike Winkelmann, the artist known as Bipple, certainly thinks prices are too high right now, reports Fox News : I’m pretty sure it’s a bubble, to be honest. I go back to the analogy of the early days of the internet. There was a bubble. And the bubble burst.
Matsumura believes that all types of NTFs are overvalued today and compares this space to the lottery, where the winners really win a lot and get all the publicity, while the vast, vast majority of people will be the losers, economically speaking.
Goltra is also aware that the NFT craze could get out of hand and lead to high prices. I know we’re not immune to market cycles like the rest of the crypto industry, he says. And so I know there’s a version where all the media that we’re doing now, you know, when the next cycle ends, we all look stupid.
But Yat Xu, CEO of Animoca Brands, believes that at least one area of NFT isn’t getting enough attention right now, and that’s games. We believe that gaming assets are undervalued because NMTs derive their value not only from their origin, scarcity and aggregate demand, but also from their utility, he says.
If you really want to acquire NFTs primarily as an investment, the goal is to acquire assets that have an underlying utility in a scarcity-based game or platform that is likely to grow significantly from a user perspective – your NFTs are more likely to increase in value through supply and demand alone.
As an example of a wise investment, he points out that NFT boxes of the limited edition Formula 1 F1 Delta Time game were released in 2019 for $500, and some contained coveted Ferraris that ran up to $60,000.
How important is it to understand the secondary market?
For Steinwold, the secondary sale is perhaps the most important indicator of NFT’s longevity, and for Dizon, it is a true test of whether NFT was worth the original purchase price.
To better understand the secondary markets, Gedevani recommends using third-party analysis tools or communities such as MomentRanks, Intangible.market and Evaluate.market to help investors assess the value of NBA top-slot collections.
When predicting secondary sales, it’s easy to make the mistake of buying an overvalued property that has already grown significantly in a short period of time, he says.
How can I increase my chances of winning an auction?
You can learn to program and use bots, as Steinwold suggests, or take a short course in auction game theory, but the best way to win is not to play the game, Goltra says.
Sometimes it’s possible to get ahead of an auction, he says, and suggests going to the artist’s DM on Twitter or Instagram and negotiating directly.
I think artists want to know that the art collector appreciates them, and they want to know who their collector is. If you can strike up a conversation with an artist and become friends with them, that’s actually the best way if you want to win something really rare.
What budget do you need?
A few hundred dollars is a reasonable budget to start with in most categories, although given the interest in NFT art these days, you may need a few thousand dollars to make a one-time expenditure with someone reputable.
To get a low-budget art contract, you may have to work a little harder. I specialize in buying emerging, undiscovered NFT artists whose NFT work sells for much lower prices than that of more established artists, says Dizon. Such gems are more likely to be found on open platforms such as OpenSea and Rarible, but you’ll have to spend some time digging through the haystack.
The best bargains in NMT come from undiscovered talent with little sales history.
Many leading artists have started to sell work for less than 1 ETH.
Curation creates new market opportunities – Dig deeper.
– Coopahtroopa ᴗ (@Cooopahtroopa) March 22, 2021
According to Alex Atallah, co-founder of OpenSea, hidden gems can be found by searching for artists who have had few buyers, but have strong and unique social media accounts. These are often the ones who will quickly open up to the NFT community, he says.
Goltra adds that it is also instructive to follow the emerging artists that more established artists interact with on social media. You can tell that a new artist is getting a lot of attention because all the other artists are excited, he says.
Gaming and collectibles platforms often have highly accessible access points: The NBA Top Shot platform sells regular packs for just $9, and collector Pranksy says $600 has turned into nearly $7 million worth of memorabilia on the platform in a few months.
Xu explains that new projects sometimes reward early adopters in the community with bird drops and gifts: Early participation in an NMT project is usually a smart strategy, as there are often adoption bonuses or gifts for involved community members, he says, adding: We have awarded these types of prizes in games like F1 Delta Time to encourage players to play more often, and some of these prizes have proven to be very valuable.
And those without a budget can play for money by collecting axes – an activity that has helped many Filipino players survive the pandemic, and some have even become relatively wealthy locally.
There are people who play Axie for a living, Zirlin says. From collector to grinder in the third world.
@nbatopshot’s most impressive stats have no dollar signs:
– 84% (!!!) retention over 12 weeks for all collectors
– 80%+ eligible users for LE
– 300k+ pending for Cool Cats Drop this morning
– 98% (!!!) retention over 12 weeks for all activated users*.
– Roham (@rohamg) 22. March 2021
How do you study the market?
Some of the better known sources of information on NFT include Steinwold’s Zima Red podcast and newsletter, Delphi Digital’s Delphi Daily, Bankless and The Defiant. Art platforms like SuperRare also offer interviews with artists and other content.
You can also follow as many NFT Twitter accounts as possible – including WhaleShark, DCL Blogger, Loopify, Linda Xie, and others – and participate in NFT communities on Discord like OpenSea and Token Smart. According to Zirlin, the Axie Infinity community on Discord is the best way to learn how to raise Axie. I suggest you join the community by joining Discord and meeting other Exxie coaches. Talk to other players who have had success and try to imitate their methods, he says.
Gedevani says you’ll have a great time surfing social media, listening to podcasts and experimenting with projects. It’s the fastest way to learn, he says. Follow the builders/investors in the NMT community who have been through all the ups and downs and are best positioned to navigate this market.
Final words from the board
The NMT is still in its infancy and no one knows how the market will develop, so people are very cautious. Matsumura notes that in the current bull market, everyone seems to be winning and making big gains on paper, but emotions can suddenly turn. Some of these things will drop to zero and stay at zero forever, he says.
Dizon encourages customers to do as much research as possible: Do your homework, make sure you like what you’re buying and that you can afford it, then you can pull the trigger. The best time to sell NFT is when everyone is participating in FOMOing. The worst time to sell NFTs is when you need the money.
Steinwold says long-term thinking is probably the key to success. We’re in an uproar right now, so be careful what you buy. Ask yourself: Will this NMT still exist in two or three years? He concludes:
The NFT zeitgeist has only spread to a wider audience in recent months, and this revolution will take many years, so always play the long game with the long term people.
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