Why did I spend $3,658 on a bear?
7th February 2022 |
I may have just done the dumbest thing in my entire existence in the crypto markets.
Or…
I may have just started a journey that will take me deeper down a rabbit hole much in the same way bitcoin lured me in a decade ago…
So, what is it I’ve done?
Well I bought a non-fungible token (NFT).
Uhh, so what, you might be thinking.
Who hasn’t bought an NFT before? I’d argue loads of people haven’t bought an NFT before. And to be honest, this isn’t my first NFT purchase by a long shot.
Actually, my first NFT purchase was 30 November 2017 at 4:16pm when I bought the first of my Cryptokitties to breed.
But all my NFT buys until now have been under a simple premise: I buy stuff that I like to look at. I also buy stuff that is fun to play with. That was the original idea behind my Cryptokitties: to buy a couple, breed a couple and see if something crazy and unique came out.
If the truth be told, I’ll probably gift my NFTs in the main to my kids one day in order to explain to them how bonkers the 2020s were.
And on the balance of things my NFT journey is something like this…
- Find a cool project I like, try to get in on the initial mint.
- Miss the initial mint and decide that buying on the secondary market is far too silly and expensive based on the mint price
- Look at the secondary market a few weeks later and realise I should have just bought one anyway as they’re like 10-times more valuable now.
Or it goes like this…
- Find a cool project I like, get in on the first mint.
- The NFTs never trade higher than their mint price.
This is why I’ve always applied the “just buy ones you like to look at,” rule. Ultimately, I expect that every one of my NFTs will never be sellable – which effectively renders them 100% worthless.
But…
… that all went out the window last week.
Last week I decided to take a concerted approach to NFT “flipping” my way up to something ultra-rare and expensive.
This journey is going to end up one of two ways.
- I successfully flip my way up to something like a Bored Ape Yacht Club or CryptoPunk NFT.
- My initial play is going to fail at the first hurdle and I’ll be stuck with an NFT that I can’t sell…
Hype up those bears!
I decided that I was going to buy one of the most hyped NFT drops this year, the “Hypebears”. We’re talking about a NFT project with 224,000 Twitter followers, 264,432 Discord channel members and (at the time of writing) a sold-out mint with 10,000 Hypebears and 7,400 owners.
Furthermore, since the mint started and up to the time that I write this, 8,700 ETH in volume has been bought/sold of Hypebears (about $22.6 million) and the current “floor price” sits at 1.5 ETH (about $3,900).
Now I actually didn’t get to mint the Hypebear I now own. By way of further explanation, to “mint” an NFT is to be the first owner of it from the initial “minting” process.
In other words, think of minting a gold coin – it is created in its first instance, much the same with NFTs, except you get the ultimate ownership of it.
Also, when I say “floor price”, that’s the lowest current “for sale” price listed for one of a particular collection of NFTs.
As I say, I wasn’t on the initial mint. To do that you have to be a part of its Discord channel and have to fulfil a number of tasks – relating to community participation – to get a whitelist spot.
Then if you did enough in the Discord channel and with the community, AND got a whitelist spot, you had to be ready when the mint started to actually mint a Hypebear.
In short, you had to really grind to get anywhere near the mint. And even then, if you did, the mint price was still 0.4 ETH so you still had to outlay a fair whack to mint one.
Personally, I despise having to grind in Discord channels to get in on NFT drops. That’s probably why I miss 99% of them. I’ve got a lot of other stuff on my plate instead of the Discord NFT grind.
So, I made the decision that I was going to just buy one straight away on the OpenSea secondary market. At this point, you need to understand that while minting of Hypebears is taking place, none of the actual artwork has been released.
That means I have no idea what my Hypebear even looks like. It might be unique, it might be generic, it might be butt-ugly, or it may be wonderfully beautiful. I have no idea and won’t know until the artwork is unlocked.
In other words, I’ve paid $3,658 (1.4 ETH) for what is really an expensive lucky dip. Or an expensive lottery ticket. There’s a number of ways you and many people can and will and maybe should look at it.
But for me, it’s something fun to try.
And therein lies the crux of why I’m telling you all this today.
I love this NFT phenomenon. It has brought the idea of crypto to the masses in a way that might not have happened otherwise.
Is there a lot of hype around it? Yes. Is there a lot of FOMO (fear of missing out) about it? Yes. But it’s also a lot of fun and if you’ve got some risk capital, money you should almost guarantee you’ll lose, then maybe it’s something worth playing around with.
That’s my approach to this. At least with the idea that I might be able to flip my Hypebear for a profit, pay my taxes on it, then buy something else, flip it, pay my taxes on it, and work my way up the “NFT ladder” so to speak.
Whilst traditional investors might think of something like the “property ladder” as something to aspire to with investing, weirdly the idea of an “NFT ladder” as strange as the concept might be is actually something that is a real thing these days.
In fact, if you were in doubt about just how important this all might be, you might note that The Walt Disney Company (NYSE:DIS), the $258 billion entertainment giant, is currently seeking a “Manager, Business Development”.
This particular role (which you can see here) is based in California and will, “… help lead Disney’s efforts in the NFT space including monitoring the evolving marketplace, setting category strategy, and managing key partners.”
Maybe working up the NFT ladder isn’t such a bad idea after all…
Squatters and garbage tips by your garden
Anyway, if you are thinking about getting on to and up the NFT ladder, there are also some key things you should know about the risk. These are all things I considered and accepted before I bought my Hypebear.
- This might be a rug pull. That means it may be a cunningly hyped-up NFT mint where the founders, developers, creators receive all this ETH for minting the NFTs and then just cash out what equates to around 4,000 ETH ($10.4 million). That would leave the NFT project with no future other than the NFTs originally minted.
- There is a risk the NFT smart contracts themselves are compromised in a way that means the NFT could be changed or stolen with an exploit in the smart contracts. Yeah, that’s wild I know. But unless you’re technically able to read and understand every line of a smart contract, you are putting some faith in the developers.
- The developers are “anons”. I have no idea who they are: they could be outright scammers. I simply don’t know. So the project could be a massive NFT scam.
- The NFTs may very well trade below price I bought and even below the mint price. This would mean losing around 1 ETH in value (and more) if it plays out that way.
Number four would be akin to buying a property and hearing a week later that the council decides to build a rubbish tip at the foot of the garden.
Number two would be like buying a property then squatters move in and claim legal rights to the title… and get it.
Nonetheless, this is (probably) gambling at its finest. But I’m personally prepared to risk 1.4 ETH to have a crack at it. Why? Well that’s how I learn in crypto. That’s how I’ve always learned in crypto. That’s why I’ve been around for a decade and am still here, I go into these experiments and test with the right mindset, the right knowledge base and the right approach to it.
NFTs aren’t new, but they are booming, and they do have a place in the future of crypto and markets. Further more it’s an area that I think deserves more focused attention and I’ll be looking at ways in which I can deliver more to subscribers in the future around the exciting, hyped-up, risky but fun, NFT space.
Until then…
Crypto to Know
Below is our “Crypto to Know” list where you’ll find several cryptos that we think you should be taking the time to learn and understand.
They each form an important part of the burgeoning crypto ecosystem.
Several of these cryptos are doing very different things to others.
What’s key is to learn that every crypto has its own use cases, its own guiding principles, and its own particular potential.
Each crypto is to be judged and assessed on its own merits.
Our aim here is to help you understand these cryptos and the wider crypto world.
These aren’t specific recommendations but a guide to help you learn and build your confidence in operating in this space.
We will add more names to this list over time. However, if you’re new to the world of crypto, these are the names where we think you should start your education and learning.
We’ve also added links to each one.
The links are to what we believe, in each case, is the best resource for learning about that crypto.
“Crypto to Know” watchlist
- Bitcoin –it/wiki/Main_Page
- Ethereum – ethereum.org/en/what-is-ethereum
- IOTA – docs.iota.org
- Tezos – https://tezos.com/learn/getting-started/
- Filecoin – docs.filecoin.io
- Cosmos – v1.cosmos.network/intro
- Binance – binance.com/en/about & research.binance.com/en/projects/bnb
- FTX – ftx.com & help.ftx.com/hc/en-us
- Solana – https://docs.solana.com/introduction
- Secret Network – https://scrt.network/about/about-secret-network
Sam Volkering
Editor, Sam Volkering’s Crypto Network
