The increase in non-fungible tokens (NFTs) this year has been nothing short of astonishing. Google searches for “NFT” are up over 600% since mid-February, reaching the first coins to offer mania levels, and the top NFT platforms are turn around Millions of dollars a day.
In a single 24-hour period in early March, the sports collector’s platform NBA Top Shot achieved sales of more than 7.89 million US dollars, the art house OpenSea achieved 4.88 million US dollars and the NFT project “Digital Antique “CryptoPunks had sales of $ 3.28 million.
The mainstream media has shown more interest in NFTs than in crypto for years. Publications from the BBC to the New York Times contain explanations and one or two hit pieces. The prices definitely look foamy: Beeples “Everydays” sells at Christie for almost 70 million US dollars, Jack Dorsey is auctioning the very first tweet for 2.9 million US dollars and an alien crypto punk change hands for $ 7.57 million. Established artists like Banksy and Damien Hirst jumped into the trend together with the musicians Kings of Leon, 3Lau and Aphex Twin.
(Alien Crypto Punk, Larva Labs)
At various points the crypto community thought that either fast, cheap payments; decentralized finance or DeFi; or the appeal of “hard money” might draw the masses – it turns out the big unwashed are more interested in owning a JPG.
Colin Goltra, co-founder of the NFT-based Narra Art Gallery in Decentraland, says this is a very good thing as NFTs bring new demographic data to cryptography outside of the usual types of finance and technology.
“All of a sudden we have this fresh blood from people exploring the space with new eyes,” says Goltra, who also runs Binance Philippines, adding, “It’s refreshing to interact with new community members – they really are from the Art inspires, you have a lot of fun and it’s like a collecting game. “
“Make sure you get a combination of those things out of it too, because if you’re honestly treating this just financial speculation, there are probably other games in town for that.”
How do you get involved? The magazine spoke to some of the leading experts in the field to find out.
A unique opportunity to acquire this JPEG from me via a nifty NFT and blow a kiss. £ 40million seems reasonable, but I’m going to take £ 30million to expedite a quick sale. The JPEG is infinitely reproducible, but proof of purchase, which is not fungible, is yours and yours alone! pic.twitter.com/oM2LJSWa3X
– Stephen Fry (@stephenfry) March 12, 2021
How do you know the value in an NFT?
Unlike DeFi protocols, where you can evaluate a project by comparing its sales and growth potential to the price of its token and its total locked value, the value of most NFTs is very subjective and sentiment can change instantly. Earlier this month were CryptoKitties change hands for an average price of $ 1,263. That had dropped to $ 115 by the end of March.
It is also important to understand what you are actually paying for. For example, with digital art, an NFT gives you ownership of a unique token associated with the art, similar to a certificate of authenticity. However, they do not own the copyright in the art, nor do you receive a physical copy of it, and it does not prevent anyone from copying or viewing it.
The Australian dance music producer Flume sold a music and animation NFT, “Saccade,” for $ 66,000, although the music remains copyrighted and is freely available to anyone to watch on YouTube. Castle Island Ventures founder Nic Carter Likes Buying an NFT to Get a Signed Print:
“What I buy is effectively a digitized version of a signed setlist after a performance or a signed limited edition album cover. As I jokingly put it, the NFT should be understood as an autograph, not an art. “
The blockchain on which the NFT is minted also affects the price. Users pay a premium for Ethereum-based NFTs because the network is secure, decentralized, and is expected to last for a while. However, choosing the blockchain is less of an issue with in-game assets (which may require a faster blockchain) or something like NBA Top Shot (which uses Flow), as this is the only place you can get licensed NBA – Can buy memorabilia.
Different categories of NFTs – including art, music, in-game items, virtual land, and collectibles – have different value drivers, explains Andrew Steinwold, managing partner of NFT mutual fund Sfermion.
He says that in-game assets draw value from their usefulness – a sword with ten times the strength of the average sword, for example, should fetch a higher price – while the price of virtual land is calculated according to “location contents and parameters”. Crypto Art’s value is largely based on an artist’s reputation, while collectibles “derive their value from the narrative surrounding the asset”.
In all categories, scarcity and uniqueness add value – provided, of course, there is demand. “Collectibles are often available in different editions, which vary depending on the size and have rarity levels. The first expenses in a project series usually come with a bonus, ”explains Alex Gedevani, Research Analyst at Delphi Digital. “Even better if there is historical significance and / or a strong narrative behind it like CryptoPunks, the first NFTs.”
Alien and Ape Punks are the most valued CryptoPunks. For the blockchain-based game Axie Infinity, in which users raise and fight fantasy creatures called Axies, it is said: “The rarest and most valuable Axies are Mystic Axies,” says Jiho Zirlin, co-founder of Axie inventor Sky Mavis. “They rarely have limited skin, and that skin will have a deeper evolutionary tract than other Axie body parts.”
At NBA Top Shot, sports moments with low serial numbers fetch higher prices, as do those where the serial number matches the player’s jersey number. A collector recently turned down a $ 1 million offer for a moment with a serial number # 1 that matched the # 1 jersey number of player Zion Williamson.
We have news on the first $ 1 million offer for an @nba_topshot moment!
It was for the # 1 and Jersey Match S1 Holo Zion Williamson.
And @ JerLevine declined. pic.twitter.com/j0Ct0EH7wI
– OwnTheMoment (@OwnTheMomentNFT) March 11, 2021
The NFT arts scene is perhaps the easiest to understand for newbies. As in the real world, well-known artists with greater social interest fetch higher prices than newcomers. Make sure to look at an artist’s total volume: someone who pumps out 10 NFTs a day may soon saturate the market. Contrary to intuition, however, well-known artists can start a lot more work than others.
NFTs can be published in editions of 10, 50, or even hundreds of copies – much like a real artist making 500 prints and hand-signing them – or they can be published as unique, stand-alone, single editions.
As would be expected, the individual editions are the most highly valued, and therefore Goltra focuses almost entirely on them. “I like the idea that I can be the unique owner of a beautiful painting or a beautiful work of art,” he says.
What should investors avoid?
A big red flag comes for projects that are only for the money, and Gedevani warns of “Carbon Copy Clones of Successful Projects like CryptoPunks and Hashmarks” together with “Celebrity NFTs” that seems like quick buck that makes the audience stand out. ”He doesn’t mention Lindsay Lohan or Paris Hilton by name, but probably doesn’t have to.
Another Cases buy stolen art. Russian artist WeirdUndead was outraged that her stolen work was put up for sale on OpenSea after someone automatically tokenized it with tokenized tweets. She tweeted:
I tried to ignore all of the #NFT hysteria, but what the hell
I’m not giving permission (ESPECIALLY to random idiots) to make tokens out of my content and I’m so mad pic.twitter.com/E9UKF1AXug
– Don’t give up, Skeleton (@WeirdUndead) March 9, 2021
Given how easy it is to mint NFTs now, this is an ongoing problem. The visual artist Rosa Menkman as well discovered that four of their works of art were tokened on another website called MarbleCards and auctioned on OpenSea. Ethical issues aside, it’s hard to see that stolen NFT art retains its value if its creator rejects it.
Even if the art is authentic, Steinwold says it is important to evaluate the background and motivation of the person exhibiting an NFT:
“Are you a famous athlete who learned about NFTs last month? Or are you someone who has been in the NFT ecosystem for years and carefully created assets with a compelling narrative? “
Steinwold could think of NFL star Rob Gronkowski, who sold NFT memorabilia valued at $ 1.8 million on OpenSea.
In the blockchain gaming world, Zirlin recommends staying away from hyped but insubstantial new projects, or as he puts it, “Chase the new hot thing and try to get on a bad project early instead of a more established one Project to join potential. “
In the art scene, Goltra avoids NFT platforms like OpenSea and Rarible, which are not very selective for the art they carry. While he says large open platforms like this are great for new artists and investors, they pose logistical problems.
NOT FUNGIBLE ELONS pic.twitter.com/KZDpYGVWvz
– Beeple (@beeple) March 16, 2021
“There’s just so much work to do that you have to go through it to find something of quality,” he says. He prefers platforms with “filters” including SuperRare – which only offers a single issue – Nifty Gateway and Foundation.
Miko Matsumura, general partner at Gumi Cryptos Capital, recommends avoiding pretty much anything. “Almost everything in NFT is going to be worthless in the future,” he says, with limited exceptions to those that can be classified as historically significant, such as CryptoKittes or NBA Top Shot collectibles. “Don’t buy things that have no historical value from sources that have no authority,” he warns.
Is Potential Financial Return the Best Way to Approach NFTs?
In a word, no. Those the magazine spoke to agreed that collectors with a real interest in a category are the most likely to be successful in this emerging industry. “If someone makes their way to a collectors’ market to make a profit but doesn’t understand the nuances of the project, chances are it won’t turn out well,” says Gedevani, adding:
“We’re still largely in the experimental phase with collectibles in many categories such as sports, avatars, in-game items, and more. It’s better to focus on 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 so early on in the NFT game that it’s very difficult to gauge potential financial returns. A better strategy is to “buy something first that you would like to own for the next five years,” with an eye on factors that could add value, such as “scarcity, desirability, aesthetics, and usefulness.”
That way, even when the market is arming, you have an NFT that you like. For Goltra, “the financial stuff is secondary,” adding, “There are pieces that I could buy as speculative pieces, but I can’t because it’s not the purpose for me. I’m just trying to buy art that I like or that speaks to me somehow. “
I’m going to burn over $ 4 million art tonight. pic.twitter.com/B0gks8c4ni
– Mad Dog Jones (@Mad_Dog_Jones) March 16, 2021
Are some NFTs currently undervalued / overrated?
Mike Winkelmann, the artist known as Beeple, certainly thinks the prices are currently too high. tell Fox News: “I absolutely think it’s a bubble, to be completely honest. I’ll go back to the analogy from the beginning of the internet. There was a bubble. And the bubble burst.”
Believing that “all types of NFTs are overrated right now”, Matsumura likened the space to a lottery where winners win really big and get all of the advertising while “the vast majority of people will be losers economically”.
Goltra is also well aware that the NFT mania could break out with these high prices. “I know we are not immune to market cycles like the rest of the crypto space,” he says. “And so I know that there is a version of it where all the media we’re doing right now, we’ll all look stupid by the time this next cycle is over.”
But Yat Siu, CEO of Animoca Brands, believes that at least one NFT sector isn’t getting enough love right now, and that is gaming. “We believe that game assets are undervalued because NFTs derive their value not only from origins, scarcity and general demand, but also from their usefulness,” he says.
As an example of a smart investment, he notes that boxes of NFTs for the Formula 1 licensed game F1 Delta Time were released in 2019 for $ 500, some of which contained coveted Ferraris valued at up to $ 60,000 Dollar has gone up.
How important is it to understand the secondary sales market?
Steinwold calls secondary sales “perhaps the most important indicator of an NFT’s longevity,” and Dizon cites them as the true test of whether an NFT was worth its initial purchase price.
To better understand secondary markets, Gedevani recommends using third-party or community-created analytics tools such as MomentRanks, Intangible.market, and Evaluate.market, which investors can use to gauge the value of NBA Top Shot collections.
“Missing secondary sales is an easy way to make a mistake buying an overvalued asset that has risen significantly in a short period of time,” he says.
How can you maximize the chances of winning an auction?
While you could “learn how to code and use bots,” as Steinwold suggests – or take a brief course in auction game theory – the best way to win is not to play the game, Goltra says.
“Sometimes you can anticipate the auction completely,” he says and suggests slipping into an artist’s DMs on Twitter or Instagram and negotiating directly.
“I think artists want to know that the collector of art values it, and they want to know who their collector is. Being able to actually start a conversation and befriend the artist is actually a tried and true way of trying to win something super rare. “
What kind of budget do you need?
A few hundred dollars is a reasonable budget to begin with in most categories, although given the current interest in NFT art, it may take a few thousand to get a single copy from someone in good standing.
To get into an art business on a budget, you may have to work a little harder. “I specialize in buying NFTs from emerging artists who are still undiscovered and whose NFT artwork sells at much lower prices than more established artists,” explains Dizon. Such gems are more likely to be found on open platforms like OpenSea and Rarible – although you will have to spend a bit of time combing the haystack.
The best NFT purchases come from undiscovered talent with little sales history.
Many of the top artists today started selling pieces for less than one ETH.
Curation creates new market opportunities – dig deeper.
– Coopahtroopa @ (@Cooopahtroopa) March 22, 2021
Alex Atallah, co-founder of OpenSea, says you can discover hidden gems by searching for artists who have had few buyers yet but have strong, one-of-a-kind social media accounts. “These are often the ones that will soon be” discovered “by the NFT community,” he says.
Goltra adds that keeping an eye on the emerging artists that better-known artists interact with on social media is also educational. “You can tell when there is a new artist who is very prominent because all the other artists are excited,” he says.
Game and collector platforms often have very affordable entry points: NBA’s Top Shot platform sells “popular” packages for as little as $ 9, and collector Pranksy claims to have them $ 600 turned into nearly $ 7 million Value of memorabilia in a few months on the platform.
Siu explains that newer projects sometimes reward early adopters in the community with drops of air and gifts: “An early, intensive involvement in an NFT project is usually a sensible strategy, as there are often early adopters drops or gifts for committed community members” he says, adding, “We have been giving out rewards in games like F1 Delta Time to encourage players to play more often and some of those rewards have become very valuable.”
And for those on no budget at all, you can actually play to earn by raising Axies – a pastime that has helped numerous Filipino players are making it through the pandemicSome even get relatively rich locally.
“There are people who make a living with Axie,” says Zirlin. “From collectors to playful mills in developing countries.”
The most impressive @nbatopshot metrics don’t have dollar signs:
– 84% (!) 12 weeks storage with all collectors
– Over 80% of eligible users participate in LE Pack Drops
– 300k + in line this morning for Cool Cats Drop
– 98% (!!!) 12 weeks retention with activated * users
– Roham (@rohamg) March 22, 2021
How do I research the market?
Some of the better known NFT news sources are Steinwolds 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.
Additionally, you can follow as many NFT accounts as you can on Twitter – including WhaleShark, DCL Blogger, Loopify, Linda Xie, and others – and engage with NFT communities like OpenSea and Token Smart on Discord. According to Zirlin, the Axie Infinity community on Discord is the best way to learn how to raise Axies. “I suggest becoming a community member by joining the Discord and meeting the other Axie trainers. Talk to other players who have successfully traveled and try to imitate their ways, ”he says.
According to Gedevani, your time is well spent surfing social media, listening to podcasts, and experimenting with projects. “It’s the fastest way to learn,” he explains. “Follow the builders / investors in the NFT community who have gone through all the ups and downs and are best positioned to navigate this market.”
We are still in the early stages for NFTs and no one really knows how the market will develop. Therefore, caution is required everywhere. Matsumura notes that in the current bull market everyone seems to be winning and making big paper profits, but sentiment can suddenly turn. “Some of these things will go to zero and stay at zero forever,” he says.
Dizon encourages buyers to do as much research as possible: “Do your homework, make sure you love what you buy and can afford it, then you can pull the trigger. The best time to sell an NFT is when everyone else is calling. The worst time to sell an NFT is when you need the money. “
Steinwold says that long-term thinking is probably the key to success. “We are currently in a frenzied phase. So be thoughtful when buying. Ask yourself: will this NFT exist in two to three years? “He concludes:
“The NFT zeitgeist has only reached a wider audience in the last few months, and this revolution will last for many years. So always play long-term games with long-term people.”