Investment manias: from crypto art to trading cards

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Investment manias: from crypto art to trading cards

Stocks and bonds are quickly becoming the Boomers of the investment world. The evolution of blockchain technology (and speculatively, the sheer boredom and resulting creativity brought by the pandemic and rolling global lockdowns) means there are now far better, far crazier, and far riskier places to put your investment funds.

Pre-pandemic, ‘meme stocks’ were few and far between. NFTs (non-fungible tokens) existed but were little known and less traded. But proof of authenticity enabled by digital tokens means non-fungible items can now command huge value.

Examples include 3LAU’s limited edition Ultraviolet Vinyls, where top bidders were able to collaborate with the artist on a personalised track, and the famous Beeple JPG file, which commanded USD 69 million at auction.

JPG file made by digital artist Beeple sold for $69 million by Christie's auction house.

Although it might seem crazy to some, it’s the exclusivity of these items that draws investors looking for an offbeat and brag-worthy purchase. Not to mention the potential for big value increases. The phenomenon is new, but the desire for ownership of unique, beautiful, and collectible items is not.

What is an NFT?

A non-fungible token is something that can’t be replaced or exchanged with something else. Unlike currency, which is fungible - a dollar can be swapped for a dollar, a bitcoin for a bitcoin, and you’ll have exactly the same thing, an NFT like a video or piece of digital art can’t be swapped for a similar item. It’s entirely unique.

Digital NFTs are supported by blockchain technology. The blocks in blockchains store data (the asset), while the chains in blockchains act as a digital ledger for that data. Blockchains provide a neutral, decentralised, public record of digital transactions.

Digital NFTs - let’s use digital baseball cards as an example - will have a unique ‘hash’ that makes them verifiable and identifiable to their creator. The unique hash means they cannot be replicated. This means a digital baseball card can now hold just as much value as a physical one.

Top 5 NFT examples of the past year

Grimes’ 10-piece art series went up for sale on Nifty Gateway (‘the premier marketplace for digital items you can truly own’) in February this year. The collection, centred around celestial and fantasy imagery, earned USD 5.18 million across several hundred copies made available.

An official GIF of Nyan Cat remastered by the original artist Chris Torres sold for 300 Ethereum ETH - equivalent to AUD 925,406.26. Torres somewhat self-aggrandisingly said of the sale, ‘I've basically opened the door to a whole new meme economy in the crypto world’.

Although NFTs are flying in the arts, they also go hand-in-hand with the gaming industry. Rare items, owned weapons, quest rewards, in-game currency, and achievements make perfect examples of non-fungible tokens. The blockchain system provides a natural transactional framework for the already all-digital world.

If you still think the world of NFTs is a silly, time-wasting mania, this one probably won’t change your mind. The ‘Rarest Pepe’ - an illustration of Homer Simpson merged with the meme hero Pepe the Frog - was bought by its first owner Peter Kell for $39,000 in 2018. At the time, it was the highest price paid for an NFT. But Kell had the last laugh when he sold it for 205 ETH - USD 320,000 - this March.

Memes are a key part of our online universe. They’re relatable and fun to share. But becoming a meme might be every internet user's worst nightmare. Zoë Roth was only 4 when her photo became the infamous 2005 ‘Disaster Girl’ meme. She made the most of it when she sold the original photo through NFT entrepreneur Ben Lashes for $473,000 USD this April: “The internet is big. Whether you’re having a good experience or a bad experience, you kind of just have to make the most of it”. Roth, who is now 21, said she plans to use the proceeds to pay off her student loans and donate money to charity.

Each market frenzy seems crazier than the last. But they all have the same roots. According to Scott Cutler, the CEO of StockX under whom sneaker sales have doubled since January 2020, ‘younger generations want to invest in things that are culturally relevant [as well as] financially sound.

Upcoming generations are shrugging off traditional investing methods and passive income streams and embracing the weird and wacky. Perhaps the craziest thing is, although the assets aren’t necessarily tangible, the potential for profit absolutely is.

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James Brannan

Director of Operations at STAX

Sam Henderson

Director of Marketing at STAX

Natalia Forato

Social Media Manager at STAX

All views, investment or financial opinions expressed are those of the author and do not necessarily reflect the official policy or position of STAX. The information contained in this post is not investment advice or a recommendation to buy or sell any specific security.
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