Disclaimer: This is not financial advice and I may own or have exposure to some of the assets discussed.
When the great NFT bull run of 2020 occurred during a four week period in Sept-Oct, I kept on seeing the same question on Twitter.
“What is the best way to get exposure to the NFT markets?”
It was interesting to see this question repeatedly being tweeted and commented under NFT-related posts. I knew someone needed to make a solution to this problem.
This is still an issue today because most people do not spend several hours every day researching the NFT ecosystem. If they could, then they would have no problem buying NFTs and would not be asking how to get exposure in the first place.
The problem with NFTs is that they are not like publicly traded liquid tokens that you can just buy when the hype train arrives. NFTs are extremely diverse, have different value drivers, and are thinly traded. Someone who is new to the market can't simply jump in and start buying stuff. Well, actually they could, but they would probably get rekt, as most NFTs have very little value.
So what is someone to do if they want NFT exposure but are not in the ecosystem 24/7? Let’s explore the options.
Today’s blog is sponsored by Async Art. Async Art is a new blockchain art movement where people can create, collect, and trade programmable art. Programmable art is made with "Layers", which you can use to affect the overall image. Art that can evolve over time, react to its owners, follow a stock price, change with the weather, it is now all possible with programmable art.
This month Async Art has two big events. Micah Johnson's art piece "ˈsä-v(ə-)rən-tē" (pronounced sovereignty) will be changed to allow BTC donations that go directly to the children in the art piece. Then there is an amazing collab between Trevor Jones and Alotta money's for their upcoming piece titled “ETH Boy.”
Check out all the incredible art at - https://async.art/
Option #1 - ETH
Now, this is a pretty terrible option, but an option nonetheless! The reason I suggest ETH as a method to get exposure to the NFT markets is that 99% of the market is priced in ETH. Stablecoins and other cryptocurrencies are gaining traction as payment options, but ETH is still dominant. Many users will look at the ETH price of something and base their buying and selling decisions on that instead of its USD equivalent.
For example, consider that someone buys an NFT for 1 ETH while ETH is at $200. They now have the opportunity to sell that NFT for 1.2 ETH, but if the value of ETH dropped to $150, then it would only be worth $180 USD equivalent. Currently, the majority of market participants would likely take the ETH gain since they are long-term bullish about ETH and will reinvest that ETH into more NFTs. This is not the case every time, but I find most market participants are working to acquire more ETH.
This is a simple example of why buying ETH gives holders slight exposure to the NFT markets: everyone uses ETH and most users reinvest their ETH into more NFTs.
Option #2 - $WHALE
$WHALE has a much more direct connection to NFTs compared to buying ETH. $WHALE is a social token created by the massive NFT collector WhaleShark. The $WHALE token is backed by the value of the NFTs that are held in something called “The Vault” - a massive collection of ~3,500 NFTs that have been acquired by WhaleShark. $WHALE holders can use $WHALE to purchase assets from the vault, which includes things like art, virtual land, game assets, and more.
Also, NFT data provider nonfungible.com provides monthly vault audits. Here is the October audit, which shows a 35% increase in the value of the NFTs within the vault. Currently, WhaleShark is in control of the vault and which NFTs are purchased, but the entire $WHALE ecosystem is now moving to a DAO structure as a vehicle to make decisions.
Disclaimer: I have exposure to $WHALE.
Option #3 - $RARI
The $RARI token is an interesting method to get exposure to NFTs because users receive it for trading NFTs. Rarible is an NFT exchange that went from being a smaller player to one of the most dominant in the space after releasing their governance token.
The token immediately incentivized people to start trading NFTs because they would earn $RARI for doing so. In this case, users not only earn a token from NFT trading, but also gain the ability to govern the Rarible platform. As a governance token, $RARI can be used to suggest and vote on new proposals for the Rarible platform. Having a token that can influence decisions on a major NFT exchange seems like an effective means to get NFT exposure.
Option #4 - Flamingo DAO
Flamingo is an interesting project launched by the people behind the successful DAO venture fund LAO. Flamingo is another for-profit DAO, but is focused specifically on the NFT ecosystem. Flamingo invests directly into NFTs, fractionalizes NFTs, and uses them as collateral for lending - basically going deep into the entire NFT ecosystem.
The only reason why Flamingo is not an amazing method for most people to gain NFT exposure is that their minimum membership cost is a pricey 60 ETH and they require US investors to be accredited.
Option #5 - GrowYourBase NFT Bundles
The best method for most people (keyword most) to gain exposure to NFTs is through the ONEz NFT bundles that were constructed by GrowYourBase.
These bundles are exciting because they are curated by GrowYourBase, which means they are filled with great NFTs. GrowYourBase knows which NFTs to put into these bundles because they are deeply involved in the space. As an “earn and learn” platform, users can sign up to get information on various NFTs and can even earn NFTs through the platform.
These ONEz bundles contain a multitude of NFTs, which are then fractionalized on NIFTEX, an NFT fractionalization platform. These fractions are called “shards” and allow people to buy pieces of an NFT.
For example, not many people can afford to buy a Banksy for $1,000,000. Instead, the owner could fractionalize the Banksy on NIFTEX and users could purchase shards of it, thus allowing them to have some % ownership!
There are currently two ONEz bundles tradable on NIFTEX today: The Nifty ONEz bundle and The MetaONEz bundle. The Nifty ONEz is an art-focused bundle and contains pieces from twenty leading crypto artists, like Josie, Goldweard, Pr1mal Cypher, Lucho Poletti, Osinachi, and even Pranksy.
The other bundle is called The Meta ONEz, and it is focused on virtual land instead of art. It contains 2 Somnium Space lands, 2 Decentraland lands, 5 Cryptovoxel parcels, and 21 Sandbox lands.
You can see these two bundles on Dapp Radar’s shardmarketcap.io website.
These two options seem like the ideal method for people to get easy exposure to specific sectors in the NFT space. Not sure which artists are hot? Just buy a few Nifty ONEz shards. Not sure which virtual land platforms are the best? Just buy some Meta ONEz shards. As long as the curators designing these bundles know what they are doing (in this case, they do), then it is an effective way for most people to get exposure without spending an insane amount of time in the ecosystem. With that being said, let's look at the final option.
Disclaimer: I have exposure to Meta ONEz.
Final Option - Buy NFTs Directly
This is obvious, but directly buying NFTs is the safest and most difficult option to get NFT exposure. Just like traditional crypto (and even the broader finance world), most things that are available to buy are not great investments and can lose significant value. If you do not spend an inordinate amount of time in the ecosystem, then it will be quite difficult to figure out which NFTs are valuable. I suggest research, research, research!
I hope the bundled options like the ones on NIFTEX continue to expand because I feel they provide the easiest and most direct exposure to a basket of different NFTs. The key to the bundles seems to be curation, so you must make sure the curator knows what they are doing.
I would also watch out for more platform and community tokens, like $RARI and $WHALE. If a major NFT art platform or NFT exchange launches a token, it would definitely be something to look out for.