Commentary
A new shorthand has developed in the financial world.
WGMI. NGMI. Vibing. Ape in. Mint. Burn. Airdrop. Gas fees. WenMoon? Whitelist. Degen.
Got it?
If not, I highly recommend you do because this is the language of what I expect will be one of the hottest alternative markets for 2022.
Non-fungible tokens (NFTs for short).
Maybe you’ve come across that acronym somewhere. NFTs have been around for a number of years, but only recently have they started to get the exposure they really deserve.
That’s because, while they’re very closely connected to the cryptocurrency market, they’re actually a whole lot more.
Let me get you up to speed real quick.
A Million Bucks for a Digital Ape?
So what is an NFT?NFTs are cryptographic digital assets that reside on a blockchain and have identifiers that make them unique.
And as these things go, the first applications of this technology were, well, a bit silly.
The niche took off by trading original digital art. The Bored Ape Yacht Club and CryptoPunks were two of the first tokens to gain popularity. As popularity of NFT art grew among early adopters, exchange sites like OpenSea, Rarible, and Mintable sprung up enabling the buying and selling of them.
Now you might be wondering, if I wanted a JPG of a bored ape, why would I buy it? Why not just right-click and save it to my computer?
Because the key behind NFTs is their non-fungibility. Their technology implies unique ownership, something that has been impossible in the digital world since the dawn of computing.
Back in the filesharing days of Napster, if I downloaded a music file from a server, I didn’t actually download it. I copied it. So I wound up with a copy while the server still had a copy. Suddenly copies of songs were multiplying like rabbits (and causing a nuclear meltdown in the recording industry).
Non-fungible tokens use blockchain technology to establish ownership. So if, for example, I sent you my copy of Dark Side of the Moon, ownership would actually transfer. You’d have the digital album and I wouldn’t.
This was a major breakthrough in the digital world.
And that uniqueness factor led to some incredible prices early on in trading. NFT images sold for $1,000, $100,000, $1,000,000 and more. And it’s only possible because of NFT technology.
And while the market has cooled somewhat, many NFTs still hold incredible value because of their ability to brand and create loyal, almost cult-like communities. Some brands have grown so dramatically they’ve attracted more traditional corporations to get involved. Adidas has entered the space partnering with both the Bored Ape Yacht Club and Cryptopunks.
Non-fungible tokens have proved themselves to be more than just a Beanie Babies fad.
The Next Wave
Perhaps the most amazing aspect of the NFT world is the speed at which it evolves and innovates. For every hundred projects that rhyme with an existing one, there is a new outlier, an evolution of what a project can offer.Some may think NFTs peaked in 2021. I believe they are just getting started, and 2022 will experience a significant evolution in application and acceptance.
As we move into 2022, the market will shift away from JPEGs of cute and cuddly animals into more of a digital economy usage of NFTs.
The likelihood is many of the avatar projects we see out there today will fade as we give rise to projects that tie IRL (in real life) aspects to their projects. That’s the big picture for 2022 and it’s coming.
NFTs aren’t going to go away. They are going to evolve into a securities function, a hedge fund and private placement competitor, and the new wave for even small investors to get involved in diverse projects that offer exposure to real-life assets and decision-making.
Over the years, Wall Street has been slow to get on board in the crypto sphere. And acknowledging that fact means acknowledging that it has likely cost hundreds of millions in missed opportunities.
They won’t be making that mistake again.
That means in 2022, it’s time to expand your horizons and start considering more alternative vehicles related to the crypto space.
