Interviewed for the article in Business Times above, full interview below
10/03/2022 - 18:25
EXACTLY one year ago, a non-fungible token (NFT) artwork sold for US$69 million to a Singapore-based technopreneur. Since then, the NFT space has ballooned from a US$2 million market into a US$25 billion one, showed figures from market tracker DappRadar.
With millions of cartoon apes and pixellated characters to choose from, how do you find the best NFTs to hold or flip? Are there tools to select investment-grade NFTs? Is there even such a thing as investment-grade NFTs when many cultural establishments, such as museums, steer clear of them?
We speak with three experts who have been watching the space from the beginning:
Clara Che Wei Peh is an art curator best known for curating the groundbreaking NFT exhibition at Fine Art Storage Services in Le Freeport in 2021. She is also the founder of the Discord group NFT Asia, a community for Asian NFT artists with over 3,600 members.
Kizu (not his real name) is a Singapore art critic who has written for Wall Street Journal, ArtAsiaPacific, and other titles. While he's well-known in Singapore's art circles, he prefers to use the pseudonym Kizu when he co-hosts the NFT podcast Floor Is Rising.
His fellow co-host, Sabretooth (also not his real name), is a serial technopreneur who calls himself "a professional NFT collector". His publicly accessible NFT wallet contains over 1,000 NFTs.
(The interviews were conducted separately. But in the interest of brevity and clarity, they are merged here and edited to reflect the range of responses.)
Q: How does one pick investment-grade NFTs if one intends to hold them for long or flip them quickly?
Clara: Everyone has different criteria for buying NFTs they wish to hold. Some people would look at the reputation of the creative team and the artwork itself, whether the project has the potential to scale up and deliver value over time. Value can come in different forms - it could be, for example, a game that's really enjoyable; it could be further airdrops or tokens that can bring utility.
I think a lot of people would agree that you should look for projects you genuinely like. But if you're looking to flip something, you probably have to look at the hype that project has built for itself on the various media platforms.
However, what I've just described are the criteria for collectible NFTs. It's also important to state the distinction between collectible NFTs versus fine-art NFTs, because the markets for these look different. For fine-art NFTs, it's really about artists that you believe in and want to invest in over time.
Sabretooth: NFTs are such a new investment category that there is no consensus on what is an investment-grade NFT. There are huge portions of the population who think every NFT is a bubble or scam. And it's tough to call something investment-worthy if it has not been through multiple bull and bear markets, and survived.
And so, I look for things that have shown some kind of longevity in the market, even if the time frame, in the case of NFTs, is much shorter than in the stock market.
The physical artwork of CryptoPunk #7810, available for sale as an NFT, in the premier area at a CoinUnited cryptocurrency exchange in Hong Kong, China. Photo: Bloomberg
The other factor that I look at is historical and cultural significance. For example, there were two projects launched in 2017 - CryptoKitties and CryptoPunks. When CryptoKitties was launched, it was the biggest thing in the NFT world. It actually broke Ethereum with tens of thousands of people rushing to buy them. But fast forward to today, very few people are talking about CryptoKitties.
On the other hand, CryptoPunks had no hype when it was launched. It went through three-plus years of relative obscurity. But if you look at what's happening in the space now, with the multiple PFP (Profile Picture) projects being launched every day, you could say that the majority of the PFP market is a derivative of CryptoPunks. So its cultural significance has grown massively.
Now on to the issue of flipping: A lot of people think that if someone has a big social media following, they should take advantage of the hype and buzz to buy and flip those NFTs very quickly, usually in a matter of days.
In any investment class, there are always investors with all sorts of timeframes. Even for the bluest of blue-chip stocks, you have day traders. So a lot of the people buying NFTs right now are attracted by the potential for short-term profits, and they're not very comfortable holding these NFTs for long, in part because they're not sure about their long-term value.
Right Click + Save was a groundbreaking NFT exhibition curated by Clara Che Wei Peh in 2021 at Le Freeport, Singapore.
Q: Two of you (Clara and Kizu) are art critics who are familiar with the traditional art market. Are there lessons to draw from that market?
Kizu: I think it is a very useful counterpoint. The NFT market does have a lot in common with the art market as well as other financial markets. There are certain things that are perhaps resonant with the art market, such as price fixing, collusion, and pumping and dumping. But it's useful to think about the NFT market not as an extension of the art market, but really as a market that has its own kind of unique mechanisms and momentum.
One of the main things that may be familiar to art collectors would be the fact that the NFT market is also dominated by a very elite coterie of tastemakers and gatekeepers. Just as the art market can be swayed by individual collectors or a very small group of influential, say, New York collectors, the same thing can be said of the NFT market. People look out for the tastemakers who they know are going to move the needle and shift the market by what they buy and hold.
The twist here, however, is that we all know what's in the NFT wallets of these collectors, because all the wallets have a public address that can be looked up. So you can draw this whole network of correlations and adjacent purchases that will give you a lot of insight into what the whales (or the very influential collectors) are holding. You don't find that level of transparency in the art market.
Sabretooth: And there are tools out there that can aggregate this kind of wallet data so you don't have to go through them one by one. One of the best tools is Nansen. Other tools that are popular are icy.tools and moby.gg.
Clara: I think that having a good sense of the kind of cyclical pattern and market logic of the art market can help - for example, when we are thinking about how artists price their one of one (or unique) art NFTs, how they manage their price floor and strategy, or the option mechanisms on different NFT platforms (for example, Foundation uses 24-hour auction mechanisms). So if you are familiar with these different auction techniques, you may understand how the pricing may go, as well as how to, say, protect an artist's particular price floor.
When you have had experience with the contemporary art market, perhaps that would also help you decipher what is just trending and what can potentially last, based on market behaviour.
Kizu: I think in contemporary art, we have the so-called legitimised art media which plays a very important role in generating a discourse around the art. In crypto, you don't have that legitimised media, be it websites or magazines. What you have are things like, well, our podcast. In crypto, it is much more informal . . . Information and intel are disseminated almost entirely online, on Twitter, Discord and other socials.
The other thing that's missing is the institutional endorsement. You don't find NFTs in established museums, which is partly why NFT collectors such as Metakovan set up their own virtual museums.
Q: Some people have criticised NFT art for being rather basic. For instance, CryptoPunks are simple pixellated images of characters. What do you think of their criticism?
Sabretooth: To judge an NFT by its image is like judging a movie by a screenshot. The image is just one part of the NFT. The visual representation of CryptoPunks may be these pixellated 8-bit images that appear like a screenshot. And that screenshot alone is worth nothing.
What you have to understand is that a CryptoPunks NFT is a smart contract embedded in a marketplace that has permission-less bidding, buying and selling. So if you look at the project, all these cute little 8-bit pictures are manifestations of an ownership of that smart contract with an internalised marketplace built into it. And so I'd say if you want to evaluate the artistic merits of CryptoPunks, you can't do that unless you actually look at the code and understand the technical underpinnings of this project.
KIzu: I personally think that when the dust settles, it will be things like CryptoPunks that will hold their value. While CryptoPunks does not seem visually innovative - they're basically avatars with different traits - it is culturally significant. It came at a moment where these more medium-native projects were not really on the radar. But in hindsight - and we're only five years out - it was an epoch-defining project.
The BIOS: Living NFTs project (above) by Ernest Wu and Jake Tan. PHOTO: Hatch Art Project.
Q: Are there particular artists, collectives or projects that you recommend?
Clara: I'm wary of recommending specific projects because of my position as founder of NFT Asia. But if it can be framed in the light of projects I'm personally interested in or recently acquired, one of them would be the BIOS: Living NFTs project (above) by Ernest Wu and Jake Tan. It's something they've been researching for quite a long time. But also because I am friends with Ernest, I have a good understanding of how much work they've put in to game its smart contract capabilities and "on chain-ness" appeal.
Kizu: If I may plug something I'm involved in, together with a New York-based team, we recently launched Project Bullies: NFT, a fitness-themed project that professional boxer Jake Paul has endorsed. One key selling point is that we pay a lot of attention to the long-term community building for the people who buy into the project - for instance, offering a token that returns some other value to them, and creating a community offline.
Sabretooth: Framergence is an innovative project in the generative art space. I see it as similar to the CryptoPunks versus CryptoKitties situation where this project basically came out in the shadows of Art Blocks, which was very hyped, with people paying all sorts of money for those generative art pieces.
But if you look at the mechanics and the code of these two projects, I find Framergence much more innovative. And if I were to do a bit of crystal-gazing. I think that time-generative projects will look more like Framergence than Art Blocks in future.