CRYPTO MOVERS AND PRICES
Crypto is broadly selling off after a weekend where bitcoin (BTC) rallied to new record highs of about USD 61,800. The exception in the Top 20 is VeChain (VET), which is up 20% over the past 24 hours and at all-time highs.
Crypto Story of the Day
Recent increased interest in non-fungible tokens (NFTs) has come to a head with the sale of digital artist Beeple’s “Everydays” piece for USD 69 million. While NFTs are interesting applications of blockchain, some valuations have overestimated their uptake and buyers appear motivated to increase “marks” on their portfolios.
NFTs are broadly defined as a digital file whose authenticity and ownership is secured via a blockchain. They’re described as “non-fungible” because, unlike cryptocurrencies, they aren’t mutually interchangeable.
Though NFTs have recently seen breakout levels of attention, this type of digital asset has been present in the crypto space for years. For example, CryptoKitties, launched in 2017 on Ethereum, allowed users to purchase, collect, breed, and sell virtual cats, with the most expensive Cryptokitty selling for USD 170,000 in 2017.
At the beginning of the month, Top Shot, an NFT marketplace for official NBA digital collectables, sold a tokenized clip of Lebron James for USD 270,000. Top Shot, which has seen other similarly-priced sales of NFTs, is made possible via a partnership between the NBA and Vancouver-based Dapper Labs, which also launched CryptoKittes.
Dapper Labs says Top Shot has seen more than USD 200 million in transactions since the start of the new year. Dapper Labs, which was reportedly raising USD 250 million at a USD 2 billion valuation in February, operates the Flow blockchain, which secures the NFTs. The Flow blockchain’s native currency is FLOW.
The coin’s market cap has increased from USD 256 million at the beginning of February to a current USD 1.03 billion, while Kraken announced in February that USD 725 million-worth of FLOW had been staked on the exchange.
Beeple’s auction of his “Everydays” piece, facilitated by auction house Christie’s, is now the 3rd most expensive work from a living artist.
The piece was purchased by Metakovan, an anonymous founder of NFT investment fund Metaverse. Metakovan previously purchased 20 separate pieces of Beeple’s artwork on NFT marketplace Nifty Gateway, which were since placed in a new Ethereum smart contract and then fractionalized into tradable tokens.
NFTs have benefited from the current attention being afforded to the cryptocurrency space. However, considering the proliferation of other non-blockchain-based digital collectables, such as unique accessories in video games known as “skins,” which have been sold for over USD 100,000, NFTs aren’t necessarily responding to a new demand.
Having said that, the participation of Metaverse in the purchase of Beeple’s work suggests that some of the NFT valuations seen recently have also been motivated by buyers who are looking to increase the relative value of their portfolios.
Nevertheless, NFTs offer greater security, storage capacity, and transferability, among other advantages, to non-blockchain-based digital collectables. This digital form of ownership may be more intuitive to future, younger collectors who are more technically savvy and comfortable with the notion of NFTs vs. holding physical collectables.
We view NFTs as a notable potential use case of blockchain technology that could develop into a mature market over time. However, in the short term, the novelty of NFTs are pushing valuations to levels detached from real demand trends.