How big before she bursts?

NFT artwork by the supremely talented Mr. Bingo

It wasn’t all that long ago that if I mentioned crypto investing to friends and family, I was quickly bombarded with words like “reckless” and “unsafe,” and they’d make bold and dismissive statements like “it won’t take off!” and (my own personal favorite) “It’s not real. How can anyone invest in something that’s not real?”

Of course, trying to counter the last argument by explaining that their assets are all in the form of hyper-inflated fiat currency backed by absolutely nothing just wasn’t an option. That said, it certainly does beg the question: how on earth might I explain Non-fungible Tokens (NFTs)?

Well, as it turns out, there’s no explanation needed because pretty much every person on the planet has already heard of them. Thanks to the likes of Beeple upending the art world and Kevin Smith selling his movie’s distribution rights as an NFT, the lamestream media’s subsequent flapping has put NFTs well & truly in the spotlight. In fact, the average transaction value in 2021 from 50 tracked NFT art transactions was $2.2m.* Even my neighbor’s cat is creating his first NFT (it’s a litter tray installation — yery Emin). But are the emperor’s new assets here to stay? In my humble opinion, yes, they are. However, that statement comes with a big caveat.

Choo-choo

There’s no doubt about it, the NFT train has already left the station, and every Tom, Dick, and Harry is clambering up the carriage sides like a group of determined Indian commuters. But when Jack Dorsey’s selling the NFT of his first tweet for $2.9m, celebrities are diving headlong into the NFT pool with remedial scribblings, and even a toilet paper brand weighs into this space (I’d love to see the marketing agency pitch for that shit), one has to wonder… How will this end?

If, like me, you’re old enough to have owned a pager, then you‘ll likely remember the dot-com bubble. Back in the late 1990s (95–01), there was massive investment speculation for all things web, followed by a catastrophic crash thanks to a combination of over-speculation, greed, and the more standard desperation to be involved in ‘the next big thing.’

Gordon Gecko, also a blast from my past, once famously said: “Greed, in all of its forms — greed for life, for money, for love, knowledge — has marked the upward surge of mankind.” The moral debate sparked by this historical piece of screenwriting is as important now as it ever was, especially since the crypto market is now flooding with retail investors who perhaps ought to pause to consider the argument that greed is, in fact, bad; that it’s destructive and quite possibly rather short-sighted.

The reality with bubbles is that it doesn’t even matter that these companies might never turn a profit. The fear of missing out is — and remains to this day — enough reason to drive massive investment into questionable opportunities. FOMO isn’t a new culprit, though. PR, the right personalities, and a load of online hype can literally change the fortune of a business or industry overnight. You only have to look at the WeWork story as a relatively recent example of this. Actually, as an aside, WeWork has just begun accepting rental payments in crypto. Smart move for a business operating at a loss of that scale.

Inevitability

So let’s talk about inevitability. For me, impermanence is inevitable, as it’s the one universal constant. Thus, like all economic cycles, bubbles are destined to burst. Bubbles burst when investors finally realize that they’re tied into overvalued market opportunities. From there, the fear spreads like a rebranded flu strain, and POP goes the weasel.

So how do we avoid it? If I had the secret formula to that one, I’d be semi-retired and living island life in Bali. Suffice to say; there are opportunities aplenty in the NFTfi space right now, some with depth and some that don’t even require Wellington boots. Like all markets, there are short-term blaggers and those in it for the long game.

To me, there is an inevitability to NFTs. After all, what’s counter-culture now could well be the mainstream down the line, and lest we forget, NFTs aren’t just about art. There are myriad options available now and in the future in this space. NFTs are here for the long haul. Just like everything else in the blockchain revolution, they redefine the concept of digital ownership and control. This is why this space can only ultimately thrive.

So if NFTs are inevitable, what questions do we need to be asking ourselves? Simple. What to collect? What to invest in?

97% of All NFT Art Right Now Is a Bad Investment.

— GaryVee

In all likelihood, a whopping number of the upcoming NFT projects might well fail, leaving a boatload of associated NFTs in the doldrums.

GaryVee recently interviewed for Eric Rhodes’ Outer Realm podcast, where the two did a cracking job echoing my perspective on this subject. Gary touched on my key point: the true value in these assets has to be closely linked to building a long-term community. Ergo, the project is the most important thing — not the NFT. Does the project have longevity and scalability? Does it have ‘legs’? Is it investable? Gary and many other experts predict that the next 24 months have the potential to be “uncomfortably volatile,” and I would tend to agree. That said, if the market thinks it’s a fad and we know it’s not, then all we have to do is focus on longevity. Ask ourselves which of these NFTs or platforms will matter in five to ten years? That’s the investment opportunity. Anything else stands a good chance of popping along with that dirty great bubble.

Written by Martin O'Toole

*Source: NonFungible; L’Atelier BNP Paribas

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