That’s how super-investor Warren Buffett described bitcoin (BTC) back in 2018.
He was speaking at the annual shareholder meeting of his $620 billion conglomerate, Berkshire Hathaway (BRK.A).
And it’s not just bitcoin he doesn’t like… The 91-year-old claims the entire crypto market will “come to a bad ending.”
But not everyone in the Buffett family is a crypto crank.
Warren’s 45-year-old granddaughter, Nicole Buffett, is a painter. During the pandemic, she started turning her paintings into a type of crypto asset called a non-fungible token (NFT) and selling them online.
And she’s bullish on their future. Here’s how she put it in a recent interview with Institutional Investor magazine…
NFTs are really art as money, art as currency, which means there’s more accessibility for artists and for people who want to buy art.
Colleagues Teeka Tiwari and Jeff Brown are crypto bulls.
And right now, they’re both banging the drum on why now is the time to pick up exposure to the NFT trend.
As they’ve been showing their readers, NFTs are not only changing the way artists sell their work. They also have applications in everything from gaming… to finance… to how we invest in collectibles… to how we show ownership of our house or our car.
That’s why, this week, I (Chris Lowe) want to shine the spotlight on this still widely misunderstood market.
Today, I’ll take you through a basic “NFT 101.” Then later this week, we’ll look at where the market is headed… and how you can profit.
Legacy Research is the publisher behind Teeka, Jeff, Dave Forest, Jason Bodner, and Greg Wilson.
Their mission is to help their paid-up subscribers really move the needle on their wealth.
They do that by unearthing market megatrends in their early stages. This allows their readers to get exposure before the mainstream catches on.
That’s what allowed Teeka’s readers to get in on bitcoin in April 2016, when it was trading for $428. (One bitcoin will set you back 115x that amount today.)
It also allowed Jeff to give his readers the chance to make 252%… 386%… and 494% on gene-editing, cloud-computing, and semiconductor companies.
And it’s why they’re so excited about the opportunity in NFTs right now.
NFTs are still in the earliest stage of adoption. That means they still offer the potential for the most life-changing gains. (Think bitcoin in 2016.)
And their impact on the economy will be huge. You may not believe it yet, but in five to ten years, many of the assets you own will be in the form of NFTs.
Let’s stick with their applications in the art world for now. Because that’s where most of the buzz is today.
NFTs allow you to “tokenize” art. You can timestamp the creation of a piece of art on a blockchain, along with information about who owns it.
The result is a crypto coin you can use to transfer ownership in the same way you transfer ownership of any other cryptocurrency – through a digital wallet.
When you boil it down, a blockchain is just an ultra-safe way to store information online.
The bitcoin blockchain tells you who owns every bitcoin. It also tells you the chain of ownership for each bitcoin since its creation.
NFT blockchains do something similar. They tell you not only who created each NFT and when… but also who owns it now.
The difference is bitcoins are “fungible” – they’re interchangeable with each other. Each bitcoin is worth the same as any other bitcoin.
NFTs, by contrast, are non-fungible. That’s just a fancy way of saying each one is unique.
An easier-to-understand example is dollars are fungible, but cars are not…
If you and a buddy each put a $10 bill on the table, it doesn’t matter which bill you pick up. But if you and a buddy park at a party, it matters which car you drive home at the end of the evening.
Artworks are non-fungible – no two are the same. So tokens that are also non-fungible allow you track their provenance.
And ultimately, it’s an artwork’s provenance that gives it value.
Take the Mona Lisa, the world’s best-known painting. You could search for an image of it online and print a copy for free.
The copy would still be beautiful to look at. But it wouldn’t have the same value as the original.
Here’s Teeka with more…
The Mona Lisa is worth so much because you can trace it to its source. A copy doesn’t have the same history or social context.
It’s the same with an artwork minted as an NFT. Because you hold a copy of the original doesn’t mean you have something of value. The NFT proves the artwork’s authenticity. That’s what gives it value. And since blockchain technology is tamperproof, you can’t forge an NFT.
Traditional art is hard to display and ship… especially during a pandemic.
So she takes high-resolution digital images of her paintings and turns them into NFTs.
That way, she can sell them online without showing them in an in-person gallery first.
Even better, NFTs are programmable. So every time an NFT Buffett sells is relisted and sold on the secondary market, she gets a 10% royalty.
She can also do creative things with NFTs that she can’t do with paintings.
For instance, she’s working on an NFT series that combines painting with music.
She’s also created the first NFT made to display as a hologram. It’s of dolphins swimming in the ocean.
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The first NFT hologram. Source: PORTL
Holographic paintings like the one above may never take off.
And I wouldn’t be surprised if the prices collectors are paying for NFT art right now drop dramatically.
The most expensive NFT so far is Everydays: The First 5000 Days by Mike Winkelmann, aka Beeple.
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Everydays: The First 5000 Days by Beeple. Source: Christie’s
In March, it sold for the same price – $69 million – as a Pablo Picasso painting from 1937, Femme au Béret et à la Robe Quadrillée, did in 2018.
I’m not an art buff. But Picasso is one of the world’s most celebrated artists. He’s also dead and not making any more paintings.
Beeple doesn’t have Picasso’s standing among collectors. He’s also still alive. So he can still put out new art.
That shows there’s a lot of froth in the market.
But there was also plenty of froth around valuations of internet stocks during the dot-com bubble in the late 1990s. And the biggest companies in the world today – think Google (GOOG), Facebook (FB), Netflix (NFLX), and Amazon (AMZN) – are all internet companies.
Most NFTs are minted on the Ethereum blockchain. It’s the world’s second-most valuable blockchain after bitcoin’s.
And as you can see from this chart Jeff showed his readers, NFT sales on Ethereum are skyrocketing.
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Last year, the value of all NFT sales was about $67 million. So far in 2021, NFT sales have surpassed $3.8 billion.
That’s a head-spinning growth rate of 5,572%… and we still have three months left in 2021.
And Jeff says NFT sales will eventually hit more than $100 billion a year.
That’s because the NFT phenomenon is about a lot more than just art. Jeff…
NFTs have use cases for assets in our everyday lives. It’s not hard to imagine that the title to our car or house could one day be represented as an NFT. Even our driver’s license could be tokenized.
This is part of the larger trend of “tokenization,” where we represent ownership of real-world assets with digital tokens.
Imagine investing a few hundred dollars in an NFT that gave you fractional ownership in a vintage Ferrari. Or investing a small amount into an NFT that gave you a slice of a new commercial office building. Or having an ownership stake – via an NFT – of the winning horse at the Kentucky Derby.
That’s why the NFT trend needs to be front and center on your radar.
I’ll have more for you on this important topic later this week in The Daily Cut.
We’ll look at other parts of the economy that will get tokenized this way.
And I’ll show you some concrete ways you can profit.
In the meantime, if you’re interested, you can check out Nicole Buffett’s art on NFT marketplace OpenSea.
Regards,
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Chris Lowe
October 4, 2021
Barcelona, Spain