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NFTs permeate our lives
After the big breakout year of 2021, non-alternative tokens (NFTs) are part of our daily lives when consuming content and interacting with apps such as digital photos, images, games, music and videos. It is clear that it will be. real estate.
NFT use cases are expanding. for example, Reported block “The popular music festival Coachella recently launched the NFT collection in partnership with the crypto exchange FTX US. The NFT, called the Coachella Collectible, is a festival pass, art print, photobook, digital collectible, and unique real-life rock. Provides consumers with the opportunity to unlock their experience at festivals and physical products. “
Similarly, NFL announces This will provide fans participating in the Super Bowl LVI with an “NFT-style virtual commemorative ticket.”
Therefore, you can learn about NFTs and find ways to invest in this subclass of digital assets.
What is an NFT?
Coingecko NFTs are defined as “a form of digital ownership that represents something unique, such as photos, images, game artifacts, music, videos, etc.” NFT leverages innovative smart contract technology to store and record unique information on the blockchain. With NFTs, you can digitally prove that your assets are genuine. NFTs can be traded in specialized markets. “
Source: OpenSea.io NFT Marketplace
Growing use cases
So far, the four major NFT categories represent most of the activity. Visual arts, profile photography projects (PFP: Cryptopunks, Bored Ape Yacht Club, CrypToadz), cultural assets (sports, music, photography, video), games.
NFTs provide digital artists with new ways to monetize their work and talent. With the simple certification of original works by blockchain technology, digital artists were able to sell more than 2.BT artwork on Ethereum in 2021. Cryptoart.io..
In games, companies like Activision Blizzard (NASDAQ:ATVI).Epic Games and Electronic Arts (NASDAQ:EA). Generate billions of dollars from players who buy or acquire in-game items, but players cannot sell them. With NFTs, players can exchange NFTs, turning in-game achievements into money. Axie Infinity (AXS-USD) Is an example of a major Play-to-Earn gaming platform where players can also earn and trade NFTs.
Expect NFTs to be integrated into the game. Ubisoft ((((OTCPK: UBSFY). Already integrated into Ghost Recon Breakpoint, others will follow suit. This has the potential to stimulate further growth for gaming companies.
There were more than 6,000 NFT collections traded on OpenSea at the end of 2021, 20 times more than the previous year, but most of the volume is concentrated on some of the most popular collections (see graph below). .. About 250 collections accounted for 80% of secondary NFT sales.
CryptoPunks was a consistently major collection, founded in 2017 and overtaken by the Bored Ape Yacht Club, even before the NFT epidemic.
NFT is a global phenomenon
Like Bitcoin (BTC-USD) And other cryptocurrencies, NFTs, are traded by investors around the world.
2021 was the year of the NFT flag
NFT activity increased explosively in 2021 with signs of mainstream adoption. If 2020 was the year of DeFi, 2021 was the year of NFT.
Total NFT trading volume reached $ 19.6 billion in 2021, up from just $ 86 million in 2020. In 2021, about 2 million NFT traders were active.
Since the summer of 2021, hype has ended, the market has become saturated with NFT collections, and activity has peaked at $ 325 million per day in September to just a few per day by November 2021. It seems that it has dropped sharply to $ 50 million.
However, the NFT received a second wind at the end of 2021 and the beginning of 2022, and sales increased again.
OpenSea’s volume has a market share of over 90% of the NFT marketplace, so we will use it as an indicator of the NFT marketplace.
Competitive landscape
OpenSea is Looks rare (Look-USD). Released on January 10thth In “Vampire Attack”.
The largest NFT marketplaces include:
- OpenSea – Raised $ 300 million in Series C rounds in January 2022 with a valuation of $ 13.3 billion
- LookingRare – Direct competitor to OpenSea
- Super rare (Rare-USD) – Focuses on high-end visual arts
- Foundation – Many Cultural Properties Category
- Realable (RARI-USD) – Collectibles and artwork
Looks Rare’s “Vampire Attack” is a market development strategy that seeks to keep traders and sellers away from OpenSea. Basically, LooksRare gives great incentives to NFT traders and sellers who list and trade NFTs on the market.These traders can earn LOOKS and Weth ((((WETH-USD). Currently, coins that generate 400-600% APR. Obviously, it is not sustainable and is expected to decline.
LookRare charges a 2% commission (0.5% less than OpenSea) on all transactions, but 100% of those commissions are sent to those staking LOOK tokens, which is more attractive than OpenSea (commission sharing). none).
The “Vampire Attack” seems to work as long as the LooksRare marketplace is busy with trading volume, but there are also some clothes trading.
LookRare’s long-term success depends on how successful it is to gain market share from OpenSea after current traders’ incentives have diminished.
Looks rare vs. OpenSea daily volume
Source: Dune Analytics
What is the future of NFT in 2022?
NFT sales volume got off to a good start in 2022, and January sales volume reached a record high.
Such a volume will attract more players. Cryptocurrency exchange fits naturally: Binance (seekalpha.com/symbol/BNB-USDBNB-USD), ByBit and Coinbase (coin) We are announcing whether we have already launched a plan to launch the NFT Marketplace.
With 80 million users as of 4Q-2021, Coinbase could be a huge player. In fact, their market waiting list reached 1.5 million in just two days, which is higher than OpenSea.Active user.
The exchange also offers fiat on-ramp. This makes it easier for people outside the crypto ecosystem to buy NFTs. For example, Coinbase allows users to purchase NFTs with fiat through Mastercard. (NYSE:MA).This should also help new users onboarding.
Also, as already mentioned, gaming companies could integrate NFTs into their games, exposing tens of millions of players to NFTs. GameStop (GME) Is planning to launch an NFT marketplace for in-game NFTs by the end of this year.
With more consumer brands Celebrity Launch an NFT project and this category will get mainstream attention.
The use of NFTs goes beyond visual arts to music, virtual real estate, in-game artifacts and dramatically expands the category.
How can investors participate in the growth of NFTs?
Investors who are still outside the crypto ecosystem can join through proxies such as Coinbase, GameStop, or wait for the OpenSea IPO, which has recently suggested an IPO.
Another possible way to play NFT is to use meta (NASDAQ:FB). And Twitter (NYSE:TWTR).Announced plans to allow users to select NFTs for their profile pictures.
This could be just the tip of the iceberg for these Web 2.0 social media giants when it comes to leveraging NFTs. This is also a natural extension of Meta’s Metaverse Initiative. This is a world full of avatars where the company invests $ 10 billion each year.
Cryptocurrency native investors can 1) trade NFT collections in one of the major markets, 2) invest in tokens in such markets: Looks rareSuperRare, Rarible, or 3) Immutable X (IMX-USD), Wordwide Asset eXchange (WAX-USD), And loop ring (LRC-USD).
Investment risk
Being in the early stages of a brand new asset subclass is exciting. Great profits can be made early on, but investors are at high risk. Investors should consider expanding their bets across the basket of NFT-related investment ideas to minimize unsystematic corporate-specific risks while capturing overall trends.
1) Legal and copyright issues. There is debate as to whether an artist should receive a license or copyright fee from a secondary market sale. It’s also easy to create a new NFT collection that looks very similar to the original.
2) Competition may intensify. Barriers to entry into the new NFT marketplace are relatively low, as shown by LookRare and OpenSea. Many launches are planned for this year, which could put pressure on payment rates.
3) Decentralized NFT marketplaces may or may not be audited, but even if they are audited, they run on smart contracts (program code bases) that can run the risk of being hacked. ..
4) There was “Insider Trading Claims”, Even in the major markets (OpenSea) by their own executives.
