After a brief period of running the Alpha Alarm newsletter as an exclusively email-native publication through Forbes, we now have a dedicated page that allows us to create and curate a library of our content that will all live in one place.
We hope this makes it easier and more enjoyable to read and peruse our stories in the future.
To kick off our first edition to be published on our new page, I want to take a further dive into the NFT mania sweeping the cryptocurrency market over the past few months.
My colleague Nick has written about it a few times, but the breadth and depth of this trend certainly warrants further coverage. I specifically want to highlight a few trends I’ve been noticing in terms of where this hype is being directed, and share a few personal anecdotes when it comes to my experience playing with extremely valuable jpegs.
The crypto market sees mania that comes in waves every so often, especially during bullish market conditions.
Summer of 2020, while Bitcoin and Ethereum’s prices stagnated, a small group of self-proclaimed “apes” began a degeneracy-fueled investing spree that helped give rise to arguably one of the most exciting sectors within the cryptocurrency market today: DeFi.
People were adding liquidity to blatant Ponzi schemes yielding 1,000,000%+ APR en masse, essentially creating one massive, high-stakes game of musical chairs.
Through the craze and the mania, however, a serious and potentially world-altering subset of technological innovation grew, which profits from these less than scrupulous projects eventually spilling into more legitimate ones.
The following year, we saw a similar trend spark with dog and animal-themed projects on Binance Smart Chain, which was likely fueled by the hype surrounding Dogecoin and a flood of neophyte players into the space. While this didn’t lead to any positive changes for the market or industry, lots of players did amass notable profits from it.
NFTs — short for non-fungible tokens — are the current craze, with billions of dollars flooding into the sector as artists, art enthusiasts, and traders all reap the rewards.
New retail participants are undoubtedly contributing to this NFT craze, but there are now some larger players entering the game: funds.
When the so-called “jpeg mania” caught a second wind a few weeks ago, some on-chain sleuths discovered that Three Arrows Capital — a multi-billion dollar crypto investment fund based in Singapore — was accumulating a massive amount of CryptoPunks. This caused the OG profile pic flex item to surge in price.
The fund then began accumulating positions in other popular NFT projects as well, often leading retail investors to follow suit and jump in as well.
While Three Arrows might be one of the largest funds to be accumulating NFTs as investment-grade assets, they aren’t the only ones.
I co-manage a relatively small 503(b) fund here in California, with 8-figures under management. We made the decision several weeks ago to allocate a single percentage of the fund’s AUM into high-quality NFTs, acquiring several high-tier CryptoPunks, as well as some other exciting pieces like Gyres, the recent tokenized Fortune Magazine cover “aspiring chad” from Pplpleasr, and more.
We’re working on creating a virtual gallery to display the pieces we own. We’ll include that in a future NFT-focused issue of Alpha Alarm for fun.
Yesterday, it seems that another crypto-native fund began acquiring NFTs as investment-grade assets.
Paradigm, another multi-billion dollar investment fund, began building a large position in NFTs from a project called Parallel yesterday, which is an unreleased card game.
One crypto sleuth spoke about this in a recent tweet, tracking the wallets connected to the wallet buying a massive amount of Parallel cards back to one that has exclusively been funded by Paradigm.
It’s clear that NFTs are now investment-grade assets.
To me, it seems like there are two main NFT categories where the most attention and capital are being directed: gamified NFTs and generative art.
Gamified NFTs would encompass collections like the aforementioned Parallel cards, which are NFTs that will have utility within a gaming ecosystem. Axies from the Axie Infinity Game are another example of a collection that falls into this category.
As Web3 develops and more users begin participating in taking ownership in digital economies, there’s a strong possibility that these types of NFTs will continue seeing a large base of buyers.
Generative NFTs are those that are generated based on parameters given to an algorithm, capturing the beauty of mathematics and machinery. How fitting for crypto, right?
A prominent example of this would be Tyler Hobb’s Fidenza collection, which is a collection of 999 algorithmically generated images composed of various line permutations.
One Fidenza just sold for roughly $2,000,000 USD yesterday evening, marking a record sale for the collection.
Another example, and one of my personal favorites aside from Fidenza, is Gyre by Latvian artist Shvembldr. I recently acquired 2 Gyres (one example seen below) for my personal collection at an average price of 5 Ethereum each (~$15,000). They’re collectively worth roughly $100,000 at the moment, highlighting the massive rise in price that this type of art is seeing.
I’m generally very excited about the NFT space and feel there’s a lot of room for growth in the months and years ahead.
This doesn’t mean that it’s going to be up only for this market, however. Just like all other crypto-related markets, cycles are to be expected and embraced. There’s no saying how long the ongoing up-cycle will last, but the long-term outlook is certainly bright.