Let’s pretend you wanted to play the Bored Ape Yacht Club game or be part of their community. You like the drawings. You went to their restaurant in Long Beach, California, during Covid. You’re a fan. You go here to get started. But to join the club, you need to buy an ape. The initial collection sold out, so now you are buying from speculators. To buy one, you need to go to Open Sea – the world’s leading NFT
The price: $44,000. I can buy a Mercedes Benz, or this handsome chimp.
By NFT standards, these prices are impressive. Most NFTs today are worthless.
A report by dappGambl based on data provided by NFT Scan and CoinMarketCap showed that out of 73,257 NFT collections the researchers looked at, 69,795 of them, or slightly over 95%, had a market cap of zero, Business Insider reported on Sept. 20. Almost 23 million people hold NFTs in their crypto wallets.
That Bored Ape-themed restaurant in Long Beach, called Just Bored & Hungry, made their money off NFTs and put some of it into the food business. I don’t think Bored & Hungry is in business. I tried ordering a burger online on Mozilla and Google Chrome: “This site cannot be reached.” No one picks up the phone over there and their last Facebook post was in August 2022.
Just Bored & Hungry designed the restaurant to look like the Yuga Labs -Miami created Bored Ape Yacht Club. They were going to accept the APE
Yuga Labs is feeling the pain. They announced last week that they are restructuring.
It is not easy getting information from Yuga Labs. I reached out, to no avail. It is unclear if Yacht Club is bleeding users, or still doing fine. Those apes were everywhere in 2021-22.
NFTs were always a speculative crypto trade. As that trade dies, should investors consider getting in on the destruction? What are the NFTs worth looking at, and why?
“First you have to recognize that NFTs transcend the simple images many are accustomed to buying and selling on platforms like OpenSea. NFTs have versatile functionalities; they can function as dynamic logbooks within various programs, recording on-chain activities involving individuals and can be used as storage for assets, particularly those associated with the gamefi world,” says Pavel Salas, Chief Growth Officer at Gear Foundation in Turkey. Gear Foundation is committed to promoting blockchain solutions and networks built on Gear Protocol, a smart – contract platform built on Substrate.
Over 80 million different types of NFTs are available for trade on OpenSea, with the U.S. accounting for 23% of the site’s user base. Billions of dollars worth of NFT exchanges are made on this platform, and has made its founding CEO Devin Finzer a Forbes billionaire. This is an NFT piece of art. You can frame it…
As an Enjin Coin investor, I have also lost money in the NFT play for crypto. It’s fine. Cryptocurrency investors should be putting money to work that can go up in flames and not cause financial problems or profound lifestyle changes should that happen. I bought into the FOMO – “fear of missing out” — and paid the price. I won’t sell Enjin Coin. Maybe it will recover.
“Initial hype always drives prices due to limited supply and growing demand. But as the market grows and supply increases, commercial principles take over,” says Gennady Volchek, CEO of Shping in Melbourne. Shping is an online shopping rewards app not available in the U.S. “Sustainable value (for NFTs) hinges on natural demand, not just FOMO-driven excitement. NFTs with genuine scarcity and real-world applicable use might endure. We have seen the partnership between Walmart and Pudgy Penguins (started as NFTs) announced in September. If you are invested in a project that relies on hype and ‘digital flexing’, like the longtail of those profile picture NFTs, then they probably cannot maintain their price point as supply outpaces demand.”
Speaking from his offices in the Turkish resort town of Antalya, Salas said that NFTs are best when attached to a game, not as a digital art collection. “You have to consider the future potential for customizable avatars. This is the essence of what we are exploring. The most compelling applications of NFTs lie within fields like these. Virtually anything within the digital realm can become a valuable asset to possess.”
NFTs, Their One Big Chance
Let’s keep this simple for the retail investor with a Coinbase account: horse racing.
You can gamble on horses in the Kentucky Derby, but unless you are rich, you can’t own the horse. And if you were rich, ownership costs millions. Now let’s play Kentucky Derby in some Web3 blockchain game. We design our horse. It’s a winner. It has robotic shields on its legs or something that someone in Tokyo made. We win some money. Five years from now, virtual horse racing is on the big screen at MGM in Vegas. We can buy a horse, designed by someone somewhere, and we apparently let her rip and maybe win some money. I think this is the most basic understanding of what a useful NFT looks like. The art-collector version of the NFT does not seem to hold water. There are more gamblers in this world than there are art collectors.
Yosuke Utsumi, CEO of Neobred in Tokyo, is preparing for this exact moment. They’re all about horse racing and NFTs.
“The use case for our token is towards a horse breeding system. The NFTs serve as assets towards our gameplay and give users a unique experience and a verifiable character they can use in our race and store their race stats,” Utsumi says. “We are hoping gamers buy them to help provide supply of additional horses to our market as well as participate in the overall game economy. Speculators are not our target audience.”
Neobred is planning to launch NFTs for free within a few months to get the game going and then will sell their virtual horses in the form of NFTs in later offerings.
NFTs need to have a use case or forget it, says Ian Bentley, CEO and Co-founder of WAGMI Games in Los Angeles.
“Utility. Utility. Utility. I know there is a place for digital artists, but to me,” Bentley says. “There are many great real-world cases that use NFT as a gate to their walled garden, and those are valuable to me. Is the Wild West over? There may be some random moonshots out there, but liquidity is pretty dried up.”
The NFT business is new. It is arguably no more than four years old in investors’ eyes, though developers have been at it for around eight years, with Crypto Kitties being the pioneers back in 2017.
“I think for NFTs you needed the hype, then the crash, then the ‘ok, what went right, what went wrong’ phase, which is where we are at now,” says Bentley. “After that, the true builders enter the space.”
Yuga Labs’ executive Daniel Alegre noted in a Bloomberg article on Friday that the firm had overseen “a few rocky rollouts” of its various ventures into video-game development (ie Bored Ape, other metaverse games). He also noted a lack of sufficient progress in its planned metaverse platform Otherside, launched in 2022.
Beyond the Bear Market
The bear market in crypto began in 2021 after a massive bull run in the early months of the pandemic. NFTs were hit hard as investors sold.
“I think you need to differentiate between investors and genuine players who use NFTs in games, for example. The latter group remains committed and passionate about their holdings,” says Alexander Casassovici, co-founder and CEO of Azarus, a web3 platform for streams in San Francisco.
“Look at the new games out there like Wreck League are pushing the boundaries of digital ownership, emphasizing the intrinsic value of these assets beyond mere speculative trading,” he says about a fighting game that utilizes Yuga Labs’ Bored Apes and Mutant Apes characters. “I’ve observed that genuine engagement and utility drive the long-term value of digital assets. The market may currently appear dormant, but the underlying infrastructure and community engagement is growing. After every downturn in the digital assets market, the market has rebounded with even greater vigor. The projects that have been in development during this bear phase will likely propel the NFT space to unprecedented heights once the market revives.”
The good news is that Bored Ape art is unique and you cannot replicate it with AI artist platforms. I asked Dall-E to make me some bored ape yacht club dudes and got this.
As an NFT, this would have no utility as is. But what if I decorated my virtual apartment with it and sold the art off my virtual apartment wall to others with virtual apartments? This is actually a market. The New York Times
“We will witness a new era of NFTs that extends beyond their current boundaries and unlocks new possibilities,” says Salas.
Investors must think a good five to ten years out for NFT growth. Speculators can follow the hype and hopefully sell in time. Developers are going to be focused on utility. Gaming is where it’s at.
“NFTs will be tried and tested, but it will likely be revitalized in different ways,” says Utsumi. “In Japan, we feel that it still has a very strong community with a lot of artists still looking towards it as a medium to get their designs in front of an international audience. Even recently, the Prime Minister of Japan said that NFTs can be used to diversify the income of creators and maintain highly loyal fans.”
Japanese Prime Minister Fumio Kishida said that about NFTs in Feb. 2023.
“We think that NFTs will still be used, but its purpose might not be for investor speculation and more about utility going forward,” Utsumi says.