Client Portals

This Article Is A Store Of Value5 min read

NFTs are rapidly gaining in popularity

Feb 24, 2021 - Max Osbon ( 7 mins to read)

If it feels like the world is moving exceptionally fast today, you’re not alone in that feeling. NFTs are the start of a major financial revolution. Over this past weekend, NFTs (Non-Fungible-Tokens), accelerated into the mainstream as well over $100m in NFTs changed hands in just a few days. Since NFTs use a public blockchain, all of the transactions, history, volume and number of participants are fully transparent. To help explain how this all works and why it’s important, we’ve tokenized this very article as an NFT so that it can now live permanently on the blockchain and function as a store of value.

Owning NFTs

Last week, NBA Top Shot sold a Zion Williamson “moment” for $100k. The buyer expects that 1st edition moment to be worth $1m someday, and he may be right. A collection of Beeple’s digital art sold for $3.5m in December and another one of his collections is going on auction at Christie’s from Feb 25 – March 11. You can track the Christie’s Beeple auction here. Nike holds a patent to start selling CryptoKicks which will be some sort of NFT Nike digital shoe. Mathematical music called Euler Beats with unique royalty properties are selling for north of $20,000. Most of these transactions are completed via Etherium.

NFTs and cryptocurrencies were linked at the beginning of 2012, almost by accident, with the issuance of Colored Coins. Nobody made any money but many iterations later CryptoKitties appeared in 2017 and suddenly, somehow, a lot of money was changing hands.

What do you get with NFT art or other collectibles? You’re buying a feeling.

Marc Andreessen said recently, “A lot of people are cynical about this kind of thing…But people don’t buy things like sneakers, art or baseball cards for the value of their materials… They buy them for their aesthetics and design…A $200 pair of sneakers is, like, $5 in plastic. You’re buying a feeling.” 

Stores of Value

Art has long been considered a useful store of value for ultra-wealthy families. That may or may not be accurate. The costs of those art transactions can be huge, with fees as high as 40%. A lot of art collecting is about a feeling or a sense of pride. Many pieces never materially appreciate in value and can be destroyed by heat, humidity or sunlight. Some great historical works have scarcity and importance that contribute to their increase in value over time, but risk management is a challenging endeavor with art investing.

Many futurists consider Bitcoin, crypto, and now NFTs to be the new stores of value precisely because they have inherent scarcity built-in. Wealthy investors may use hard assets like land and art to store value, especially through inflationary periods. Given the large dollars flowing into NFTs, it’s possible that wealthy forward-thinking investors like Mark Cuban, Chamath Palihapitiya or Peter Thiel are intending to use NFTs as their own personal long-term stores of value. At the very least, they own a piece of an emergent trend.

Buy this article

Link to the NFT of this article

We’ve turned this article into an NFT. There is only one original copy available and it exists on the Etherium blockchain. It was purchased yesterday by a friend for .1 Etherium, apx $150. The proceeds of that sale went to Rosie’s Place to help homeless women in Boston. If someone wanted to buy it today, they could make an offer, transfer ownership and the sale would be publicly recorded. Perhaps someday it will be worth more than the original $150 purchase price.

A creative and passionate community

NFTs and crypto may seem like nonsense at surface level, but this is just the beginning of the blockchain revolution. Since the blockchain is mostly software, it can iterate incredibly fast. Passionate software developers who want to play a role in designing the future of our financial system can spin up new tools and applications in a matter of weeks. Due to the complete transparency of the blockchain, there are many amazing tools available to track the activity in each NFT market.

With the rapid innovation in the cryptocurrency space, it’s a matter of time before the blockchain replaces or inspires the replacement of our current financial systems. Blockchain advocates value transparency, fairness, creativity, proof ownership and efficiency. Many of our current financial systems lack many of those attributes, especially transparency, fairness and efficiency.

What do we do now?

Buying NFT art or experimenting with this new technology is best for those who want to be on the leading edge. Unless you are particularly inspired by NFTs or curious about the technology, the risk of losing 100% of your invested NFT capital is high. No one really knows where this is all going or what it will look like in a few years. However, with over $100m flowing into NFTs over the past week with full transparency, it’s worth watching the NFT market closely to see how it evolves. Future opportunities may include the ability to trade music royalties, movie rights, IP rights, royalty streams, branding rights etc. Trading shares of companies through digital means is not all that different than trading NFTs. Either way, large groups of technology focused entrepreneurs seem to really want decentralized and democratized financial systems. It’s still early days, the next few years, and probably even months, will be exciting to watch as the NFT world evolves and emerges.

WEEKLY INSIGHTS
delivered to your inbox

DISCLAIMER

This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”

“Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.

Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.

Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.

This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.

While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.

Adviser does not endorse the statements, services or performance of any third-party vendor.

Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.

Any IPO alerts are purely informational and should not be construed as recommendations to invest.

Adviser is not licensed to provide and does not provide legal, tax or accounting advice to clients. Advice of qualified counsel or accountant should be sought to address any specific situation requiring assistance from such licensed individuals.

Any case studies or hypothetical client profiles are for demonstration purposes only. They illustrate the breadth and depth of the many clients we represent at various life stages. Any similarities to actual Adviser’s clients past or present are strictly coincidental. Individual advice and results will vary based on each client’s circumstances, objectives and prevailing economic conditions.