The Breakdown - Are Beeple's $6.6M Sale and Christie's Auction a Turning Point for NFTs?

Episode Date: February 27, 2021

This week on the Weekly Recap, NLW discusses: The price dip Tether’s settlement with the NYAG Coinbase’s S1 Filings Beeple’s record-setting NFT sales and what it means for the NFT space as a whole  -- Earn up to 12% APY on Bitcoin, Ethereum, USD, EUR, GBP, Stablecoins & more. Get started at nexo.io -- Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW   The Breakdown is produced and distributed by CoinDesk.com

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexo.io and produced and distributed by CoinDesk. What's going on, guys? It is Saturday, February 27th, and that means it's time for the weekly recap. This has been another insane, read, exhausting week, and I want to recap. a few of the key topics, but then also discuss two things I haven't had a chance to yet. The first review is that I suppose we should make some mention of the price. Given that we were up in the high 50,000s over last weekend, this dip to 46, 47,000 has hit

a lot of people in the scaries. The folks who I've seen be the most stressed out are the people who are brand new who just bought in at $53, $54, $55,000. One comforting thing is, to them might be the fact that Michael Saylor also just bought a billion dollars worth of Bitcoin above $52,000 a coin. I've also seen a lot of people try to pin this on macro factors, with the two I've seen most commonly being one, Yellen's negative comments on Monday where she called Bitcoin inefficient. This didn't really hold water as Bitcoin's dump started before those comments. And for us in this space, it was rendered particularly ironic when the Fedwire real-time settlement system went down in the middle of the week. This is, of course, the third time in the last two years

that Fedwire has gone down, while Bitcoin hasn't been down for more than 2,900 days. The second macro explanation I've seen for this dip is rising interest rates, basically the taperless tantrum I was discussing yesterday, where bond markets are increasingly convinced that the economy will rebound sufficiently that the Fed won't be able to avoid backing off the aggressive monetary policy that has propped up the valuations of all risk assets, including Bitcoin in this argument. Now, I do think that these rising interest rates and this taperless tantrum is something we should pay attention to. I just have a hard time believing that the dip we're witnessing in the short term is being driven by this factor. In fact, most people whose opinions I really respect in this space

are pointing to leverage in the industry as one of the key culprits. Alex Kruger tweeted, if you need a reason for today's Bitcoin crash, the answer is simple, leverage. As price rolled over, levered traders increasingly added to longs instead of folding, making them more vulnerable. Eventually, the price hit 50K and hell broke loose as they all got liquidated. The point here is even if you bought in high, don't worry. We're in the midst of a crazy market that is shifting all around us, and this is the roller coaster that you signed up for. A second recap review thing we should discuss is Tether. I still can't believe that this was just this week, it feels so long ago, but the TLDR is that the New York Attorney General has settled

with Tether. As part of that settlement, Tether has agreed to pay $18.5 million in fines. To stop doing business with anyone in New York, they were allowed to admit no wrongdoing, and they have committed to going forward quarterly reserve attestations to prove that all of their USDT is actually backed. I did a whole show on this, but I will say it again. I think this was an unbelievably huge win and positive outcome for the industry as a whole. It affirms those folks who thought that Tether and BitFinex had had some shady moments and pretty opaque processes, particularly around the loan to keep Bitfinex solvent, but it also affirmed that there was never any accusation of tether printing USDT out of thin air to manipulate the price of Bitcoin, which was not only the

conspiracy, but the FUD that was being used to freak out institutions. It also got us quarterly reserved disclosures which is incredibly healthy for the space going forward, given USD's place in the industry. I mean, it really does feel to me like the best of all possible outcomes. Many investors want to be a part of the next bull run. Others seek to build their dream home, finally launch that startup or fund their education. Try Nexus instant crypto credit lines and borrow against any major cryptocurrency with no minimum or maximum withdrawal amounts, no fees whatsoever, no credit checks, and flexible repayment. Not to mention, the APR starts at just 5.9%. Stay on top of your investment game with nexo.io. And remember, it's your crypto, your credit,

your choice. Get started at nexo.io. With that, let's shift over to something that I didn't actually have time to talk about, which is Coinbase's S1. On Thursday, I did my show about why Bitcoin is ESG investing. But as I was doing that, The SEC was releasing the S1 from Coinbase, which is the document that describes the company in depth before it goes public. The release of this document preps them further to go public via a direct listing on the NASDAQ, with the ticker symbol going to be CoinB. Let's look at a few of the number highlights. Coinbase's revenue in 2019 was $482.9 million, and that grew to $1.1 billion in net revenue for 2020. That net revenue left them with $3.2.2.3 million in profit in 2020, which is absolutely radical for a

company that's going public, although Coinbase is anticipating spending more money than it makes for a while to continue its growth. We also learned that Coinbase had 43 million retail users, 7,000 institutional users, and this was all split across 100 countries. They said that there 2.8 million transacting customers at the end of 2020 compared to 1 million at the end of 2019. Q4 of last year saw volume of 89 billion, of which the retail segment was actually only 35.96%, showing just how important and growing the institutional buyer is. Finally, Coinbase projects revenue of over 2.4 billion for quarter one of this year. It was also interesting to see what Coinbase identified as concerns and threats to their business. One that was pretty obvious was a negative opinion of Bitcoin and

Ethereum. Makes sense if everyone hates these things, it's unlikely that Coinbase is going to do well. Another was Defy and the idea that decentralized finance protocols and particularly Dex's could be a threat to their business model. A final note was the idea that Satoshi being unmasked or Satoshi's coins moving could also create a threat. Now, part of why Coinbase is a big deal is that many are anticipating some spillover into other parts of the industry. Effectively, you're seeing public markets price a leading crypto asset company for the first time, and assuming those valuations are high, it could allow other companies in the space to command comparatively high valuations as well. Given that, it is perhaps not surprising that Bloomberg News reported that Cracken is apparently out

in talks with Fidelity, Tribe Capital, and General Atlantic, trying to raise a valuation north of 10 billion that could go as high as $20 billion. I expect to see a hell of a lot of fundraising this year to take advantage of these frothy, excited markets while the getting is good. Fourth and finally, let's talk about NFTs. I haven't talked about them too much on this show. I'm anticipating doing a few more. It's actually a space that I've been watching with at least kind of one side eye since 2018. Digital collectibles make an implicit amount of of sense to me, given my own predilections. And if you need to understand that, just go on Twitter and look at NLWMTG. The biggest question I've always had is how much NFTs require a place to show

off what you own to really transcend into the mainstream. What I mean by that is that part of the equation for collectibles for art is the very real inner satisfaction of knowing that you own a unique thing and can enjoy it, but also the ability to then go show that off. It's why rich people who buy art loan it to museums. I wasn't sure if NFTs could really become a thing until even something like VR took hold, where they had their own native digital medium. But it seems to me that I was underestimating what this trend would look like. There is obviously a huge amount of movement around NFTs right now, and there's certainly a lot of rampant financial speculation. Regardless of all that, there were some pretty big events that happened this week that I wonder if we'll look back on

as key transitional moments in the history of this space. First, on Monday, a work by Mike Winkleman who goes by Beeple sold for $6.6 million via Nifty Gateway. Nifty is a marketplace for digital art that was acquired by the Winklevoss led Gemini in 2019. The piece that Beeple sold for this record was called Crossroads and actually would have been one of two different pieces of art based on the outcome of the election and whether Trump won. The size of the sale made news outside of the crypto world. I was reading about it on artnews.com, for example. Beeple was a known commodity already. In December, he made $3.5 million in a weekend, where within minutes of his show opening on Nifty, it broke all records for digital art sales.

Overall, last year, there were reportedly more than $250 million in sales of digital art NFTs. Now, interestingly, Nifty announced this record-setting sale of Crossroads just before another piece of Beeple's called Every Days, the first 5,000 days, went up for auctions on Christie's. Every Days was an aggregate of work created from May 1, 2007, when Beeple started posting a piece of art online every day for now 13-plus years. The NFT on sale is an aggregation of 5,000 pieces and this is the first purely digital art Christy's has ever offered. As of the time of this recording, the auction has seen 121 bids, the current leading bid is 2.4 million, and the auction stays open until March 11th.

While I do think NFTs, particularly digital art NFTs, are kind of a crypto phenomenon unto themselves. I think one thing they share with other cryptocurrencies and crypto assets is the fact that number go up is the best advertising. I expect even more attention in this space as these types of big sales become more common and more well-known outside our little crypto corner of the world. With that, guys, I hope you're having an awesome weekend. I appreciate you listening. Until tomorrow, be safe and take care of each other. Peace.