Investing in NFTs, Digital Real Estate & The Platforms That Power Them

Publisher’s Note: Crypto prices have been all over the place since Thanksgiving. Still, interest in NFTs, digital real estate, and the Metaverse has hardly waned. I had questions about how to get exposure to these trends even if I didn’t know a lot about them. So I sat down with our resident Crypto expert Chris Curl to pick his brain on the matter. It’s the perfect primer ahead of the launch of our new crypto service, Crypto Cycle

Enjoy,
--Nick


Nick Hodge: Nick Hodge with Digest Publishing. I'm sitting down with Chris curl. He's the new editor of the soon to launch Crypto Cycle. You've been hearing from him on a weekly basis on things like why Bitcoin recently crashed, having to do with the leveraged bets that were made... about things like the bitcoin bonds they're using in El Salvador to circumvent traditional mechanisms of finance that countries without their own sovereign currency would have to use to finance themselves to create money to fund projects within their country. Well, I wanted to sit down here as we head into the holidays and talk about a couple of things, NFTs, the recent crypto crash and the full launch of Crypto Cycle, which we expect early in 2022. So Chris, how you doing?

Chris Curl: Doing well. How are you doing?

Nick Hodge: I'm doing very well. I was buying more Ethereum recently, as I told you, because we've had another dip in prices, and so the attention has also gone toward the Ethereum's and the Solana's of the world, and perhaps a bit away from Bitcoin as Bitcoin becomes "mainstream". We've got ETF trading for futures now, and everybody's grandpa uncle owns the Bitcoin. So we've got to talk about what's next, which is, of course, all these altcoins. And specifically in the past week or so I've been hearing a lot more about NFTs, DAOs, decentralized autonomous organisms, digital art, digital real estate. So let's start with digital real estate and NFTs. What's an NFT?

Chris Curl: Well, NFT is just a non-fungible token. Non fungible basically just means that it is unique and it's unlike any other. So it's really just a way of using the blockchain to verify that something is unique and indivisible. So it's a way of differentiating it from anything else. That's what gives all these JPEGs value, is the fact that you know that there's only that one and there are none other.

Nick Hodge: Let's get the joke out of the way. The joke is you can right click and save an image and everyone can have their own copy of that image and so NFTs have no value, but of course that's tongue in cheek, because we see NFTs selling for thousands, tens of thousands, millions, tens of millions of dollars. And so what gives anything value I guess I would say? Let's start with the fun stuff. Let's start with the real digital art, the stuff you could right click and save, the gorilla heads, the Star Wars looking helmets.

Chris Curl: CryptoPunks sold those gorillas.

cryptopunks top sales

Nick Hodge: CryptoPunks. Tell me about those, which you've been buying a couple of recently, the true digital art. And then we'll talk about how NFTs can be used in the rest of the art world and other asset classes for ownership.

Chris Curl: NFT art, that's been the big story this year where you've seen, I think, the CryptoPunks earlier, you had a floor price in the single thousands of dollars. Now, I don't think you can buy a CryptoPunk for less than $300,000, $350,000, even on the floor price. That's exploded, so it has a lot of people looking into that. A lot of people are buying NFTs on the Ethereum blockchain because that was the original blockchain. That's where the most valuable and established sets are right now. The problem with Ethereum is there's so much congestion on the network that the fees for using it, the gas fees, are so high that it prices a lot of people out. For someone like me, I'm not looking to spend a $100,000 on an NFT. In that case, $300 fee wouldn't be a big deal.

But if you're looking to get your feet wet, you're going to want to look at alternate blockchains. And that's what I've been really big on. I've been getting into Solana. I've been going to into Avalanche. I've been getting into Fantom to a lesser extent. And these are all Ethereum competitors that essentially have the same smart contract functionality, while being a lot faster and a lot cheaper. And I've been buying some cheap NFTs on Solana. I think it's really, really easy to use. It's really fast. I just love using it over Ethereum. And the fee, so if I want to buy an NFT on Solana, I could buy an NFT for $200 or $300 bucks and maybe pay pennies in fees, whereas that $200 or $300, that would be only the gas fees I'd be paying if I were to buy an NFT on Ethereum.

So it's a no brainer for me. I just want to start collecting these things, getting in early on a fairly new blockchain, because I think that if a blockchain like Solana or a Avalanche do anything close to what Ethereum has done, then there's just going to be you massive, massive gains there in the future.

Nick Hodge: So I have a lot of questions. Let's parse it out. If I don't want to buy an NFT, you mentioned a couple of coins there. Ethereum is a coin, Solana is a coin, or ETH is a coin, or ether. So I asked you earlier, let's talk in terms of resources. We have a lot of resource investors. If the price of copper is going up, you don't necessarily have to buy copper, you can buy other assets or stocks that have exposure to copper that tend to go up when copper prices go up. So if NFTs are really popular and this digital art that's created either on Ethereum or Solana blockchain, you can buy those coins to get exposure to that NFT market to the excitement of those blockchains by buying the coins themselves and not having to buy the actual NFTs.

Chris Curl: Well, Absolutely. Yeah. And that goes for more than just NFTs. NFTs are just one form of tokenization on a blockchain. So with Ethereum, the price is going to go up, and you've seen the price go up massively when you had this NFT boom. You saw the price go up massively when you had these meme coin booms, where you saw Ethereum tokens, meme tokens like Shiba Inu take off. All of that's happening on the Ethereum blockchain, and that's causing the price to go up. That's causing volume to go up. It's also causing the fees to go up, because there's so much transaction volume.

So in the same sense with something like Avalanche or with Solana, as you see people getting more into those more NFT sets, more meme coins launching on these smaller, newer blockchains, because it's cheaper and faster, you should be seeing the price... We've seen that happen with both of these blockchains, in fact, all three, but I don't don't think it's done. I think as more interest goes into these NFTs, those blockchains are just going to keep growing. So you can buy just Solana, you can buy just AVEX! and you don't have to invest in all these NFTs and all of these meme coins to generate some of the profits from it.

Nick Hodge: We'll be covering that in Crypto Cycle and we'll be putting reports about how you can do it as well. And we're actually doing it. Not only are you and I doing it with our own capital, but the point of the service, Crypto Cycle, is to be doing it with $50,000 of money that we put into an account that we mirror trades with for the service. So we show people how to do this. So you can buy the coins that are the architecture, let's call it, of the NFTs, whether they're on Ethereum or Solana or Avalanche, as you mentioned, or you could buy the NFTs themselves and you wouldn't do that on exchange like Coinbase, for example. You would do that through one of these platforms you may have read about or seen like OpenSea where you would go to a website. Or you were telling me about how you could buy Solana NFTs on something called Solonart, which would require a Chrome browser extension.

That's not super complex, but to add an extension and to do something that's outside of wallet and to then have to store those things, it's something that people need to be educated about and shown how to do. So we plan to do some of that. Doing screen capture videos, showing you how to open some of these accounts and generally educating you on the different ways you can invest and get exposure to these markets. Let's further that NFT conversation for a second. So you can buy digital art NFTs, gorilla faces, pictures of helmets, whatever it is that you can use as a digital asset or a digital collectible that have to be stored digitally in a wallet. And this is really the broader use case for all of crypto and blockchain... you can use NFTs to prove and keep track of ownership.

So what we've seen in the past couple of months, and even here in the past couple of weeks is major brand companies, high end luxury goods manufacturers. Nike (NYSE: NKE) this week bought, however you want to call it, a crypto or NFT type company, because they're going to want to offer this as part of their offerings. I've recommended even Playboy (NASDAQ: PLBY) stock is getting into this selling.

Chris Curl: Everyone is.

Nick Hodge: Yes. Playbunnies and things like that digitally. So talk to me about that portion of it. That's not anime of a sneaker. That's not why Nike is in this. They're in this to prove ownership of collectible type sneakers or to maybe pair with their sports sponsors. So when you buy a certain pair of sneakers, maybe you get an NFT of a key play that sports player made or something like that. Talk to me about that evolution of it, as opposed to just pictures of things.

Chris Curl: Well, sure. I think that adds a lot of functionality to NFTs. When you start bridging the gap between real life products and digital products, this is already happening with collectibles and things like baseball cards, you're going to see more companies using NFTs to essentially verify the authenticity of real life products and also to verify the scarcity of real life products. And I think you're going to see a lot more of that in the future.

Nick Hodge: Is there any examples of companies that are doing that now that you can think of or anything that you've seen recently that speaks to that? You were writing about the bonds recently, and that'll be good a transition into real estate. So think about an expensive Honus Wagner card or an expensive Picasso painting that you could sell. And it doesn't have to be bought by one person at a Sotheby's auction or something like that, it can be fractionalized, tokenized, and you can buy individual pieces of that piece of art or collectible or whatever it was, the same way that El Salvador is selling pieces of things on the blockchain to issue bonds, as opposed to have to go to a traditional institution to get financing. And so let's talk about the real estate for one second. That's been in the news a lot here lately. People are buying a digital real estate. Can you explain that concept and maybe a couple of the platforms that have emerged to do that?

Chris Curl: Well, sure. Yeah, it's all tied in with the metaverse. And the metaverse has been in the news a lot lately because Mark Zuckerberg recently announced that Facebook was going to change their name to Meta and essentially they were going to focus less on being a traditional social media company and more on being a virtual world, online world, metaverse where people can interact and have their own digital lives.

Nick Hodge: An internet within an internet?

Chris Curl: Well, essentially, yeah. So there are a number of projects that are already underway and have been around for a while. Two of them that I think are probably poised for a lot of growth in 2022 are Sandbox and Decentraland. And essentially what you can do is, it's just like the real world, you can buy land, you can buy a pot of land in this metaverse, you can put a house on it, you can put a church on it, a skate park, whatever you want.

Nick Hodge: What constitutes a plot of land?

Chris Curl: Well, it's just a digital... It depends, the parameters differ based on the blockchain you're using and the service you're using. Both of those run on the Ethereum blockchain, by the way, both MANA and Sandbox. But I think in MANA it's a virtual 10 meter by 10 meter plot. So as far as your little avatar guy is in relation to whatever 10 meters would be, that's the plot. Obviously you can buy as much land as you want, depending on how much money you want to spend. So you can create and buy and sell NFTs that you can use in your virtual world. It's just like the real world, except everything is in NFT. Everything is virtual. And that's essentially it. And I think, I might be wrong, but we saw NFT art as the really big thing in 2021, I wouldn't be shocked if digital real estate didn't become the more prominent thing in 2022.

Nick Hodge: Well, you see all these collectibles hitting record prices, you see these cards selling for record prices, antiques, paintings, and it's really a spillover of asset prices.

Chris Curl: Just asset that price inflation all around.

Nick Hodge: Exactly. In a low yield environment, which is one of the things that has driven the interest in crypto. And so, like you, I'm not sure I want to go out there and spend a lot of my hard earned capital on digital real estate, but I do want to participate in the upside of that trend if there are ways to do that. And so that's going to be one of the tenets of Crypto Cycle as well, because like we were explaining with the NFTs and the digital art, you don't have to buy an NFT to participate in that, you can buy the coin that's the token of the blockchain on which those NFTs are created.

Chris Curl: Absolutely.

Nick Hodge: And just like with the digital real estate, if you want to buy Decentraland, for example, and I'm still learning, so this is why I have these questions, but they have their own token, is that right?

Chris Curl: They have their own token. That's right. So their native token is MANA and it's an ERC-20 token. So it's an Ethereum token that you can buy. And of course, as has always been the case, you can always just buy more Ethereum because all of these projects that are built on Ethereum are going to drive the price up in the long term. But if you want to get more specific and have higher potential gains, then you can buy the Sandbox token or you can buy the Decentraland MANA token to invest in those directly without spending half a million dollars on some virtual real estate that you don't really understand or not that interested in.

Nick Hodge: In that respect, it's what I'm trying to communicate to retail investors. If I go back to the copper example, I guess, you don't have to buy copper to participate in copper. You don't have to own a copper mine to participate in the upside of copper miners, just the way you don't have to own an NFT or digital real estate to participate in that upside. And I guess the other point I'm trying to get across is that what's emerged here is a broad investment and speculative landscape where you can buy the meme coins, if we're talking about... It would be the NYSE, for example, if we're talking about stocks like your Bitcoin and your ether, and then there's your altcoins, which might be like your penny stocks or OTC plays, and then there's other ways to invest in assets, by owning an actual business or owning an actual NFT or piece of real estate.

And so the goal of Crypto Cycle, the publication we're putting together, is to obviously deploy our own capital into this market and watch it grow, but to learn and to educate and to build a community of people who are interested in this stuff as we go. And so some of the stuff that we're talking about in this video has been around for a year, less than a year, and in some cases we have to learn by doing, and if we can pay ourselves to do that, just like I pay myself to speculate in other sectors of the market, then certainly we're going to do that. And that I guess would bring me to the last thing I wanted to hit on today, and that's the recent pullback in crypto prices.

So starting around Thanksgiving, Black Friday, we had a stock sell off, we had a pull back in crypto prices. And that continued, really metastasized, in early December with Bitcoin pulling down below, or at least to around $45,000. And then Ethereum...

Chris Curl: $43,000.

Bitcoin chart 2021

Nick Hodge: There you go, to $43,000. So don't let me put words in your mouth, but I view it as volatility in the stock market. You deal with that as it comes, you use that to trade around positions, you rotate into other sectors, which is why I'd laid out the conversations today the way I did. Because like you were telling me, you recently sold some Bitcoin and we'll be doing the same thing in the letter, if one asset class, one coin, one token isn't working, there's always a bull market somewhere that's the saying.

Chris Curl: That's true.

Nick Hodge: It applies to crypto as well. So just give me a couple thoughts headed into the end of the year about the recent pullback in price and then we'll wrap it up.

Chris Curl: Sure. Well, that was a confluence of events. You had really a pretty large black swan event with the Omicron COVID variant, and that was spooking the markets big time. And then you had Jerome Powell coming out talking about how he was going to announce tapering in the near future, that spooked the hell out of markets. And then you also had essentially an environment where most people invested in the cryptocurrency market and especially in Bitcoin were extremely bullish towards the end of year. Q4 is almost always bullish for equities and cryptocurrencies included. So people were really bullish. A lot of people were calling six figure Bitcoin by the end of the year. So essentially people got greedy and opened up a lot of very highly leveraged positions, basically. So people were trading with outrageous leverage.

That's the problem with crypto. It's so easy for it to be manipulated by whales and by institutional investors. So they spotted that massive leverage, they saw what the stock market was doing, and they drove the price down and all those leverage traders got liquidated and it triggered this cascading liquidation overnight, which just really hit the crypto market hard. So that spooked a lot of people, for sure. But I think that most of the fear, uncertainty and doubt is behind us. I can't speak to what this Omicron variant is going to do to the markets, I don't know, but as long as things generally remain bullish and in an up trend, then I don't see anything stopping Bitcoin from continuing forward and hitting new all-time highs again in 2022.

Nick Hodge: It's a brand new market. It's still being adopted across industries, as we were talking about earlier. Trees don't grow to the sky, as I like to say. Things pull back. And so I think a healthy consolidation underway and advantageous opportunity for us to start deploying money into this space headed into 2022. And that's where I want to leave it. We have a wait list that is ongoing for the launch of the Crypto Cycle. We'll have buttons up if you'd like to get on that wait list. As soon as it launches, we'll send out ways that you can join to start following us in how we're deploying that $50,000 across these different opportunities, different coins, perhaps NFTs. And certainly making videos, reports and other tools to help you learn more about this quickly growing space and understand it better as we use our real dollars to help us understand it better.

So, Chris, I'm really looking forward to getting started. I expect in January, the first month of the new year, we'll have this new premium service launched in earnest. I know you've got your first issue written and ready to go. So stay tuned for more from Chris Curl and his Crypto Cycle.