NFTs, Exploits, and Defi Drama
What’s On My Mind by Lark
Illiquid JPEG Madness!!!
NFTs are all the rage right now. The Bored Ape Yacht Club continues to add top tier celebs with Justin Bieber getting an ape this week. The floor price is now over 100 ETH. Other top collections are performing very well too. Remember when we talked about World of Women when they were like 0.2 ETH a piece? Yeah, the floor price is almost 10 ETH now!!! The rankings on Open Sea show that many collections have seen triple digit gains in the last 7 days. While the broader crypto market has been correcting, the NFT market has been pumping. Which just underlines my general thesis that there is ALWAYS opportunity in this market. While top Ethereum collections as usual get the most attention, as we frequently highlight in this newsletter NFTs on Polygon, Solana, Cardano and other chains are definitely an area to watch. Let’s keep it real that the prices for key Ethereum based NFTs are becoming absurd. 5 to 25 thousand dollars is pretty common for Ethereum based NFT floors, with top collections frequently being valued at hundreds of thousands. Whereas NFTs based on other chains frequently have much lower floors.
All of that being said, the reality is that right now NFTs are going through their own bull market phase. Over the last year or so we have had about 3 or 4 very bullish NFT periods like this. Often followed by decent corrections to floor prices. So if there is a hot NFT that you really want to get your hands on, you may be able to get it a bit cheaper in the coming weeks. And unless you are playing the aggressive flipping game then remember that you should be buying NFTs that you actually like. This makes holding them through corrections easier, and even if the thing goes to 0 at some point then at least you have something that you like!
High Stake Defi Drama
It was learned this week that one of the inner circle of Avalanche’s Olympus Dao fork called Wonderland was none other than serial fraudster and former QuadrigaCX team member Michael Patryn. In case you don’t know about Quadriga it was a Canadian exchange that went under after its founder disappeared in fishy circumstances taking 170 million of customer funds down with him. Unbelievably this guy was in charge of the 800 million dollar Wonderland treasury. He had been hiding behind an anon account 0xSifu which was recently exposed underlining the dangers behind anon accounts as it allows serial scammers to keep coming back. This time Patryn probably got to cash out tens of millions. Sadly Frog Nation leader Daniele Sestagalli knew who he was and what he did and let him in anyway calling in serious questions about his personal judgement and trustworthiness. Wonderland’s time asset has cratered into oblivion, and Daniele’s other projects Abracadabra (SPELL token) and Popsicle (ICE token) have seen their tokens drop dramatically in value. Personally after these revelations I sold my TIME for a big loss, I exited my MIM denominated pool, and will refrain from using Abracadabra Finance in the future. Sure Maker Dao costs more to use, but trust is important in an industry with so much shady business. And this is some shady business. To be clear Patryn was not involved with Abcadabra nor Popsicle that we know of, but the fact that Dani knew who he was and hid that and let him be in charge of 800 million should make us all question Dani’s character and what if any skeletons are hanging in the closets over at Abracadabra and Popsicle.
Bridges Are Dangerous
Last week we had yet ANOTHER bridge exploit. This time an Ethereum BSC bridge called Qubit which was simply the latest in a long line of bridge exploits. Cross chain bridges are proving devilishy hard to code well without having a back door somewhere somehow to allow for some kind of exploit to drain away user funds. This serves as a reminder that so much of the technology we are using in crypto is very new and still experimental. Bridges are a frequent feature of the defi landscape, and you will probably need to use them from time to time, but just beware that we are pioneers and that comes with risks. To mitigate these risks try to withdraw coins directly from exchanges when possible, IE Binance allows for withdrawals to many networks and often allows for stablecoin transfers as well.
As I was about to send out the newsletter I just learned of another massive bridge exploit. This time the very popular Solana wormhole has been exploited with over 300 million worth of Ethereum being stolen. Unbelievable!!! When possible avoid using cross chain assets. Use native tokens on the networks. Those are not vulnerable to bridge hack attacks. But things like wrapped Ethereum are potential attack vectors that hackers are exploiting. Does this latest hack mean that Solana is a bad blockchain? No. It means that bridges are new and dangerous tech, regardless of which blockchain they operate on. User beware. Personally I am staying away from bridges unless it is absolutely necessary to use. When and where possible I will bring in coins from centralized exchanges and just use native assets for that chain.
Ape NFTs by Sam
When bitcoin dumps, the whole of crypto goes with it, but it seems like JPEGs are opting out of this general rule, as NFTs have been on a roll in January. While everything else tanked and crypto holders wondered where the bottom was, NFTs have been sitting back, vibing, and watching prices climb.
The whole NFT market is up and mainstream interest continues to grow, with Google searches for ‘NFT’ outstripping searches for ‘crypto’ for the first time ever, and increased interest from Asia.
According to The Block’s data, NFT marketplace monthly volume reached $6.67 billion by the end of January, more than double the previous all time high of $3.16 billion last August, and massively up from $2.67 billion in December.
There’s no slow down in new projects dropping and lots of activity across the board, but it’s the bluer chip projects that have been the safest bet, almost acting as a kind of hedge during this choppy period, with prices going up in crypto terms, while crypto itself dropped in fiat terms.
Top performing projects have included Bored Ape Yacht Club, CryptoPunks, The Sandbox, Doodles, Cool Cats and Art Blocks. Basically, it appears that the big names will see you through tougher times.
Simian Safe Havens
Something you can’t miss in NFTs is that there’s no shortage of monkey projects. You might rue the lack of originality, or maybe you’re inclined to scoop them all up, but whatever your feelings about the wildlife, the reality is that across the main chains, ape projects have held up particularly well during the dip.
Apes on Ethereum
Bored Ape Yacht Club is now the top NFT project, having flipped CryptoPunks, established (at the time of writing) a 116 ETH floor, and become king of the jungle. Neymar swiped one, Justin Bieber paid $1.3 million for his, and everyone (whether they’re into crypto or not) now associates NFTs with monkey pictures. If bitcoin is digital gold, then BAYC are diamonds.
If you wanted, while ETH is on discount, to swipe a monkey project that isn’t in BAYC’s Hollywood price bracket, but is desirable and has utility, then now would be the time to dive into CyberKongz. Within the collections available, CyberKongz VX are metaverse-ready playable avatars.
Apes on Solana
On the Solana network, the two big-name monkey projects are Solana Monkey Business and Degen Ape Academy. Both have been gaining in price over the past seven days, and have very active communities.
Again, this is a chance to get in on well-established projects that are showing themselves to be very resilient, while the price of SOL is low.
Apes on Cardano
Over on Cardano, you might want to take a look at Chilled Kongs. No, it won’t score marks for originality, but it’s holding up very well, looks likely to stick around, and is still affordable by comparison with projects on Ethereum.
Not Just PFPs
As the NFT space expands and attracts more attention, there’ll be a move towards projects that actually do something, rather than just endless PFP drops. Blockchain gaming looks set to boom, and DAOs and DeFi will increasingly overlap with NFTs.
The Dice Casino
If you’re interested in gambling, or just projects with clearly defined uses, then you might like The Dice Casino, in construction now on Solana.
It’s intended to be a decentralized, peer-to-peer gambling experience in which you compete against other players. The visuals look slick, NFT holders receive a share of revenue, and it’s partnered with Desolates, an in-development metaverse, and The Suites, a virtual environment focused on sports and esports.
The ADApes Society
Yes, it’s another monkey-themed drop, but it looks like The ADApes Society might be taking an ambitious direction. Freshly minted on Cardano, the developers have plans to develop a DAO structure with proceeds from secondary sales, along with producing physical merchandise.
There are no clear details about how the DAO will be oriented, but still, it’s good to see projects going beyond just dropping some PFPs and hoping for the best, and there’s potential for some interesting developments.
NFTs as Collateral
Some NFTs have changed hands for millions of dollars, so how seriously should we take them as an asset, and how can we go about unlocking liquidity?
It was reported last weekend that Genesis, a digital asset trading group, is now accepting blue chip NFTs as collateral for loans and other financial products, in much the same way that traditional finance would accept standard, non-digital assets.
You can already lend and borrow against NFTs over at NFTfi, a decentralized, peer-to-peer platform. While it’s a simple protocol at the moment, NFTfi has stated that it plans to expand to a more advanced version in Q1 of this year, will airdrop a token, and will incorporate multiple chains.
Also worth keeping an eye on is Paribus, which is building on Cardano. Paribus aims to operate cross-chain, allowing people to unlock liquidity in unconventional assets, including NFTs and virtual land. A core focus seems to be in allowing NFT holders to utilize digital assets as collateral for loans.
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Lark and the Wealth Mastery Team
TCL Publishing ltd (director Lark Davis, owner of Wealth Mastery) is not providing you individually tailored investment advice. Nor is TCL Publishing registered to provide investment advice, is not a financial adviser, and is not a broker-dealer. The material provided is for educational purposes only. TCL Publishing is not responsible for any gains or losses that result from your cryptocurrency investments. Investing in cryptocurrency involves a high degree of risk and should be considered only by persons who can afford to sustain a loss of their entire investment. Investors should consult their financial adviser before investing in cryptocurrency.