The next big investment idea is here.
It’s become a popular way to monetize digital media.
I’m not talking small potatoes. Back in March, one piece of original digital artwork sold for $69 million at a Christie’s auction.
This purchase happened without an in-person art exhibit. And the new owner didn’t even get a canvas that he could hang in his home.
But he can still see his artwork. That’s because it “hangs” on the blockchain.
How was this possible?
Thanks to unique digital assets known as non-fungible tokens (NFTs).
NFTs became part of the zeitgeist earlier this year when Mike “Beeple” Winkelmann — a popular new media artist — created “Everydays: The First 5,000 Days.” The sale marked a new era of verification and scarcity.
Scarcity has always been around. It’s the verification part that’s really important.
For centuries, fine art has been the collectible of choice for the wealthy. Van Gogh, Picasso and other artists’ paintings were passed down through generations because they were one of a kind.
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Their value is non-fungible … that is, they’re unique and there was no substitute within the same asset class.
• That scarcity makes physical artwork an extremely good longer-term investment.
One major problem with this type of investment was the lack of ability to verify if the work was authentic.
• Now, the authentication problem has been solved and a new revolution has begun.
This is all thanks to the cryptocurrency mania and the blockchain … the bedrock of what makes crypto possible.
The foundation of cryptocurrency is unquestionably the blockchain, a secure distributed digital ledger that can’t be corrupted or hacked because there is no central authority.
Every record is public and permanent. The math behind blockchain is next-level genius. It’s also an extremely useful tool for verifying any item that can be entered into the ledger.
Think about it: Digital media is plentiful in the internet era. We consume it daily without any thought about the intellectual property owners. This was certainly true in the case of Mike Winkelmann, the digital artist also known as Beeple.
See, 14 years ago, he set a goal to create a digital art piece every day. These images have been continuously gifted to his followers on Instagram and other social media platforms, according to a report from the Verge.
These files also became the source material for the collage that was put up for auction at Christie’s.
• The difference was, “Everydays: The First 5,000 Days,” as it was named, had been tokenized on a blockchain. It was verified. There will be no duplicates and no counterfeits, ever.
The piece also memorializes the daily exploits of the most prolific digital artist at the start of a movement.
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Beeple’s “Everydays: The First 5,000 Days” NFT Source: Arshake |
• The backstory is perfect and uniquely collectible. Its place in the history of NFTs, plus scarcity, was reflected at auction where the file fetched a staggering $69,346,250.
You could buy individual NFTs, but I think a far more practical way for savvy investors to consider playing this trend and to get broad exposure is with Coinbase (Nasdaq: COIN).
At first glance, Coinbase might not seem like the obvious way to play the rise of NFTs, but when you take a closer look, a lot more meets the eye.
The San Francisco-based company is the most trusted exchange for cryptocurrency assets.
This includes Ethereum (ETH), the preferred currency for NFT transactions. Coinbase collects a fee to help crypto investors exchange fiat currencies like U.S. dollars for Ethereum.
• A Coinbase blog post in October noted that the company was readying the launch of an NFT marketplace by the end of 2021. The goal is to bring NFTs into the mainstream by making verification, purchasing, showcasing and discovery easier.
It will not be for free, though.
Coinbase operates a pure transaction-based platform, where customers must pay to play.
Related Post: Coinbase Is a Great Way to Bet on Crypto
NFTs are the future of collectible digital media. The likelihood of a fantastic increase in transactions is huge:
• Professional sports organizations have begun to tokenize memorable video clips — a famous snippet of a Lebron James’ dunk sold for a whopping $230,000.
• Topps, the trading card company, plans to release major league baseball NFTs in April 2022.
• Gaming companies want to sell avatars and other virtual trinkets.
• And real-world assets, like designer sneakers, purses and dresses, are natural fits seeking verification.
Coinbase has the scale and industry credibility to win these large corporate offerings.
• If the current Coinbase business is any indication, this is likely to be extremely lucrative.
In August, executives reported that second-quarter revenues surged to $2.2 billion. Profits were $1.6 billion, up 4,900% versus a year ago. Cash on hand jumped to $4.4 billion.
It’s a brand-new era for digital assets, and Coinbase is in the middle of it all with the best platform.
The cryptocurrency exchange debuted in April on the New York Stock Exchange (NYSE).
Shares zoomed from the reference price of $250 all the way to $430, before settling back into the low $200s until early October.
Shares seemed like a bust … but they’re already roaring back with a vengeance. Shares are up around 24% over the past month already.
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My next target is $500, which would be a gain of around 88% from current prices.
Savvy investors should strongly consider buying shares using any near-term weakness.
Best,
Jon D. Markman
