Profiting From the Blockchain's Growing Pains
Having fun with overpriced art... Profiting from the blockchain's growing pains... What's fungible and what's not... Finding the best use for the blockchain... Tokenization of NFTs... The most critical crypto event of the year...
Let's have some fun with overpriced art...
Which of these transactions makes the most sense to you?
Option 1: Iconic Mexican painter Frida Kahlo's 1949 self-portrait "Diego and I"... sold at a Sotheby's auction earlier this week for $34.9 million.
You can buy an unframed canvas reproduction online for $49.45.
Option 2: An officially licensed highlight clip of a November 2019 professional basketball game in which Los Angeles Lakers star LeBron James dunks the ball over a hapless player from the opposing Sacramento Kings. The brief clip – something like a digital trading card and certified as authentic and "unique" on the blockchain – sold for $208,000.
You can watch the clip, for free, on YouTube.
Option 3: "CryptoPunk #3970," a pixel art drawing of a female avatar with green and blue hair, sold yesterday for 89 Ethereum... which is around $380,000.
You can pull up #3970 online... print it out... make a screenshot… and view it at your leisure.
The market for original artwork by world-renowned painters like Frida Kahlo is niche – but it's well established and long-standing. Whether it's a Picasso or a Monet or a Van Gogh, rare art is no doubt an investment asset class.
But videos of basketball dunks – free to anyone with an Internet connection – and pixelated cartoonish images that are simple to copy and paste to duplicate... you might ask, why would those be worth buying?
Let's find out why so many people think they're valuable... In the third quarter of 2021, sales of non-fungible tokens ("NFTs") – crypto collectibles of music clips, videos, as well as virtual assets in virtual cities – jumped to $10.7 billion. That was more than four times the total sales volume in the first half of 2021.
Earlier this year, auction house Christie's sold an NFT by a digital artist Beeple for $69.3 million. It was, by far, the highest price ever paid for artwork that exists only digitally. Christie's reported that it was the third-highest auction price in history for a piece of artwork created by a living artist.
In today's Digest, I (Kim Iskyan) am not arguing that buying a "Desperate ApeWife #4269" (latest price is 0.23 Ethereum ‒ around $960), or a plot of virtual real estate in Decentraland (Parcel -55,49 has an offer for the equivalent of about $5,000) is a sound investment – or even a remotely sane speculation... not at all.
But as I will explain here, far more enduring – and which could unlock trillions of dollars of value – is the technology that underpins the NFT market. It could allow the "tokenization" of real-world assets. And that could change how we think of assets, and value... how we invest... and how we interact with money.
It's critical to know that something that's 'fungible' – the 'F' in NFT – is interchangeable, and not unique...
For example, a $100 bill that I hold in my hand is no different from one that you might hold in your hand. They're equivalent assets, and worth the same in the market.
But if I snatched a $100 bill from your fingers, you'd have no way of proving that it's yours... ownership is a function of whose pocket it's in.
With bitcoin, though, ownership is registered on the blockchain ‒ a big digital ledger that's operated by a network rather than any centralized entity. Your unique address – which only you know – determines your ownership. No one can take that, or your bitcoin, away from you.
Ownership of NFTs is similarly recorded on the blockchain. And that means that each NFT – each digital object, whether it's a few bars of music or a virtual taxi in a virtual universe – is unique in a way that's impossible to fake or replicate... and its ownership is indisputable.
NFTs can be created from anything. If I was so inclined, I could make a Kim Iskyan NFT that would be irrevocable proof of who I am. Then I could create a limited number of variations of the Kim Iskyan NFT, which would be akin to making, say, digital baseball cards.
And I could post these for sale or auction them on OpenSea, one of the most popular NFT marketplaces... and you could buy one. Maybe you'd appreciate the artwork, or the fact that your NFT is unique...
NFTs are one way that the blockchain is finding its best-use application...
But it can take a while for any technology ‒ especially one this complex ‒ to find its ultimate function, says Crypto Capital editor Eric Wade, who says blockchain is an extraordinary technology that will change the world, and we're only just beginning to see how. Eric made an apt comparison in a recent e-mail to me...
The technology of digital cameras went from clunky and low-resolution to small and powerful. They can be embedded virtually everywhere – and their utility has expanded far beyond taking a selfie in front of the Eiffel Tower. We "sign in" to our phones with facial recognition... We look at a restaurant menu with our camera by reading a QR code... We even present evidence in court based on passive "dash cams" for insurance claims.
And consider that Global Positioning System ("GPS") started life as a military precision instrument – before it became a byword of finding your way anywhere.
And let's not forget about the Internet, which in its toddler days was a way for government researchers to share information. Touted as the "information superhighway," over time it has become an integral part of how we communicate, do business, learn, and consume content.
In other words, using NFT technology to sell pixelated kitties is just the beginning...
NFT technology allows for the tokenization of real-world assets – like real estate, art, non-digital collectibles, land... and almost anything else.
What that means is this... With the actual item safely stored, ownership could be fractionalized – want to own 1/5,000th of a Rembrandt? – and traded as a token on the blockchain.
Creating liquidity for an asset makes it possible to get a better sense of its value and allow an entirely new investor base to buy ‒ for example ‒ a piece of a 1962 Ferrari 250 GTO (sold for $48 million)... or a little bit of a trophy penthouse on 432 Park Ave. in New York City (listed in July for $169 million)... And it creates an entirely new asset class for investors.
This might sound like buying shares in a public company... because, well, it is. When you buy shares of Hershey (HSY), you're becoming a small owner of the company... and if the market value of HSY increases, your little slice of the company is worth more.
Eventually, fractionalized ownership could be applied to everything. And ownership would be secure... and easily transferable.
NFT technology could also be applied royalty rights. Musicians can sell song rights using NFTs – similar to the way that a record label can sell the rights to certain albums or songs. In that way, a listener could pay the musician – or the owner of the composition – for listening to a song.
And the same thing could be applied to, say, books... TV... movies... or any other intellectual property or content that others consume.
Finally... NFTs can be used for digital identity, to store identification and ownership data on the blockchain. This would improve data integrity, while allowing for trustless transactions ‒ that is, participants involved don't need to know or trust each other... As Eric explained to me recently...
You'd upload a copy of your driver's license once and be done with it. Getting a mortgage, going through airport security, applying to college, accessing secure areas – would not only be simple and straightforward, but you'd share only what the other party needed. That's the improvement this technology promises.
Knowing all that, what's the best way to invest in the future of NFT technology?
As I wrote on Monday, investing in the early Internet was filled with a lot of dead ends... and terrible companies. For every Amazon (AMZN) that made millions out of small investments, there were dozens of Webvans and theGlobe.coms that were portfolio wreckers.
But some of the biggest beneficiaries of the Internet boom weren't the Internet companies themselves... but rather, those that delivered the "picks and shovels" that enabled the entire ecosystem. An example would be the chipmakers and switch producers providing the vital "plumbing" of the infrastructure.
The term is from the gold rush days. The people who really made money weren't the speculators digging and panning the rivers, but rather those who provided the essentials – picks, shovels, and boots. Every miner needed these, regardless of whether they found gold.
In other words ‒ buying a hot NFT might make you rich, but it might not...
But like the wreckage of the dot-com boom... the NFT universe is going to result in many disappointed speculators holding unique but still worthless images. My colleague Dan Ferris has written about this numerous times, most recently in the Digest earlier this month...
It started back in December 2019 with the $120,000 banana duct-taped to a wall...
And more recently, I've covered a pair of "invisible" pieces of artwork... In June, an Italian artist got paid $18,000 for a 25-square-foot box of nothingness. And finally, a month ago, I told you all about a Danish artist who took $84,000 in cash and ran in exchange for a piece called, well... "Take the Money and Run"...
I've offered all these stories as evidence that the financial markets and other arenas today are driven by speculation that often borders on – and frequently crosses into – the realm of pure gambling.
So these are amusing... and probably wise to avoid as any serious investment. But to profit from the future of NFT technology, the path of least resistance is focusing on the "picks and shovels" providers... the critical ingredients that make it all run. The service providers of NFT technology are the ones that will deliver the greatest gains in the NFT revolution.
Tonight, Crypto Capital editor Eric Wade is hosting 'The 10 Million Bitcoin Boom'...
He's going to share the biggest prediction of his career. It involves a set of tiny crypto coins, most of which he's never revealed before...
According to Eric, this event could unleash 10 million bitcoin worth of wealth in a little-known corner of the crypto market.
And it is happening tonight... at 8 p.m. Eastern time. Eric will share all the details about this specific opportunity... And more importantly, he'll reveal how this event could give you a rare chance to make decades' worth of gains in as little as three months.
Eric will also discuss several changes to his model portfolio, which includes five coins he has never revealed before... Each of them has the potential to "10X" your money.
Eric's event is free to attend. We only ask that you register in advance. Reserve your spot now.
Turkey Prices Are Going Up... But So Are Stocks
In the inaugural episode of the Making Money With Matt McCall podcast, Stansberry Research's Matt McCall unpacks what investors need to know about high inflation and what the Federal Reserve looks to do next.
He also digs deeper into the latest corporate earnings and what the market is telling us as we move into 2022. Plus, he shares the huge story in small caps that nobody is talking about... and discusses why he believes bitcoin is on the verge of a breakout.
Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.
Can You Answer These Five Questions?
Right now, we have an incredible opportunity for you or someone you know...
DailyWealth Trader is one of the world's most popular trading services. It offers one of the industry's most valuable collections of educational resources. We create useful videos... We conduct regular Q&As... And we send "extra value" to our subscribers every weekend with Training Center Saturday.
But we'd like to do a lot more. And we'd like to pay you or someone you know to help us do it. We're looking for a brilliant, hardworking person who loves trading and investing to join our team.
We need someone who can write and think clearly, stick to deadlines, and pitch in wherever required. We prefer someone who already has financial knowledge... and is smart, curious, and eager to learn how we do things at DailyWealth Trader.
This is a full-time position, and it will require some in-person training at our headquarters in Baltimore, Maryland. Otherwise, you'll have the flexibility to work at our office or remotely – as long as you're in a similar time zone, willing to start work early, have good communication skills, and willing to travel to the office on occasion.
If you're hardworking and curious, you'll fit right in. If you love the subjects of trading, finance, and investment, please apply. If you're interested, send us an e-mail at dwt@stansberryresearch.com.
The subject line should read, "I'd like to join the DWT team." In the e-mail, please include five pieces of information...
- Your full name.
- The total per-share dividends McDonald's has paid out over the past 12 months.
- The percentage change in the TSX Composite Index in 2020.
- The price of platinum in euros in the London AM fix on January 23, 2020.
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If you think someone you know would be a great addition to DailyWealth Trader, please feel free to forward this posting. Thank you in advance for the interest.
New 52-week highs (as of 11/16/21): Analog Devices (ADI), Automatic Data Processing (ADP), Applied Materials (AMAT), Atkore (ATKR), Costco Wholesale (COST), Cintas (CTAS), Comfort Systems USA (FIX), Formula One Group (FWONA), W.W. Grainger (GWW), Home Depot (HD), Intuit (INTU), IQVIA (IQV), Ingersoll Rand (IR), iShares U.S. Home Construction Fund (ITB), Knowles (KN), Microsoft (MSFT), Motorola Solutions (MSI), MYR Group (MYRG), Cloudflare (NET), Palo Alto Networks (PANW), PLDT (PHI), ProShares Ultra Technology Fund (ROM), Rayonier (RYN), The Shyft Group (SHYF), First Trust Cloud Computing Fund (SKYY), ProShares Ultra S&P 500 Fund (SSO), Teradyne (TER), The Trade Desk (TTD), Tata Motors (TTM), ProShares Ultra Semiconductors Fund (USD), Vanguard S&P 500 Fund (VOO), Verisk Analytics (VRSK), and Waste Management (WM).
In today's mailbag, one subscriber responds to Eric's Digest from yesterday about fighting wine fraud with the blockchain... while another tells us about his biggest crypto winner so far. What's on your mind? Tell us at feedback@stansberryresearch.com.
"This is an enormous problem in the wine industry – from the cult Napa cabs to Burgundy and Bordeaux.
"If you ever want to watch a great movie on the topic, take in Sour Grapes about a fellow who fooled some very experienced wine collectors until his undoing at an auction at Acker Merrall & Condit in 2008. The bottle in question was a Domaine Ponsot Clos de la Roche Vieilles Vignes from a vintage that the producer never made.
"This will be a very good use of blockchain technology to thwart counterfeit wines!" – Paid-up subscriber Mike O.
"Hey guys, let Eric Wade know that my biggest crypto winner to date has been up as high as 29,000+% recently until the latest drawdown. I expect it to move back up and go higher, and it is completely verifiable. I need to be added to the Stansberry Hall of Fame when I sell! Regards." – Stansberry Alliance member T.D.
Happy investing,
Kim Iskyan
Ashton, Maryland
November 17, 2021