The Digital Assets Newsletter: Week 6
Too Long Didn’t Read Summary
The Market Update:
- Recovering from the crash and entering a bull market? We are seeing some bullish trends in the market. This may be due to what is called market psychology.
- Also, breaking news as Russia is following suit after India’s announcement to legalize and tax (rather than ban) cryptos, 300 millions dollar hacks and more. Read more below!
Concept of the Week: The Compelling Use-Cases of NFTs
- NFTs have been on the forefront of headlines in recent weeks as we’ve seen a surge in capital and investors entering the space. Currently a common misconception of NFTs is that they only use case revolves around digital art. This is of course a very exciting application, allowing greater for autonomy and income streams for artists. However, there are a variety of exciting use-cases of NFTs that outside of the digital art space. Read more below to find out more!
Investor Joe Updates:
- Joe dives into the inner workings of algorithmically backed decentralized stablecoins with Terra’s LUNA. Read below!
The Market Update:
The Micro Perspective:
We are seeing some bullish trends in the market. BTC is now sitting around 44K, a 31% increase from the low we saw at the end of January. BTC prices aren’t the only thing that have pumped, market sentiment has changed drastically looking at the fear & greed index; it has nearly doubled from last week. This example of low market sentiment can be better understood by reading into Market Psychology which counters other more conventional financial theory where it is assumed that prices were always based on rational considerations and failed to account for the potentially irrational impact of market psychology.
The Fear and Greed Index Data:
The Macro Perspective:
[BREAKING] Russia is following India’s lead on the path to regulating crypto assets rather than ban them. The tweet is from Russian news outlet Kommersant.
Note: For those new to the space, twitter is often a source of alpha as it has become the industry standard for Companies and CEOs to make announcements from billion dollar hacks to new updates or partnerships.
It’s not all good news however, this week has seen some of the largest hacks in crypto history. A 300 Million USD exploit on a wormhole network. To put this into perspective the wormhole exploit sitting at #2 on the leader board for biggest hacks in defi.
- Deep Dive: The hack was reversed engineered on this twitter thread
Concept of the Week: The Use-Cases of NFTs
NFTs have been on the forefront of headlines in recent weeks as we’ve seen a surge of capital and investors entering the space. Currently, a common misconception of NFTs is that their only use case revolves around digital art. This is of course a very exciting application, allowing greater for autonomy and financial opportunities for artists. However, there are a variety of other exciting use-cases for NFTs in our increasingly digital world, including real estate and gaming.
First of all, an interesting perspective of NFTs surrounds it’s potential in solving problems that are inherent in today’s internet. Given the digitalisation of our world, there is an increasing need to assign properties of physical items to digital ones; namely scarcity, proof of ownership and uniqueness. This is where NFTs step in. NFTs would allow you to purchase and truly own various digital items, such as video game character skins and iTunes mp3 which you can then exchange and trade in online marketplaces. Giving you, as a consumer, significantly more utility.
The applications of NFTs in gaming is a great area to look at in order to show the potential scale of this. As of 2021 the gaming market was valued at $173.70 billion dollars and projected to almost double by 2027. In which approximately 69% of the 2.7 billion global players, have confirmed to have spent money on in-game cosmetics such as emotes, skins, etc.. Despite this, these cosmetic items are currently ‘stuck’ in the game it was purchased in and not resalable. However, in the near future these items can be minted into NFTs. This would make them transferable to various gaming ecosystems and foster a thriving economy within the gaming industry in which players can transact these in-game products for real-world money. In addition to this, the video game developers can also program in a fee structure within the smart contract behind the NFT minted item which allows them to take 5% (for example) of the selling price every time a transaction occurs between players. Creating a win-win situation where players gain greater utility from in-game purchases due to the inherent scarcity, uniqueness and transactability of these items whilst developers are able to generate new incomes.
Another exciting application surrounding NFTs can be found in the real-world; specifically, real estate. This is ultimately possible because NFTs allow for significantly greater efficiency within the property-buying process. Currently real estate is filled with seas of red tape involving various intermediaries such as solicitors, banks and real estate agents which simply add expenses and time to a transaction which should be relatively straightforward and between two parties. NFTs can cut this red tape significantly through essentially replacing these intermediaries with through smart contracts which enables an extremely safe, effortless transfer of ownership. In addition to this all ownership and rights history can be almost immediately verifiable as it is recorded onto the blockchain.
These are just some examples of the potential use cases of NFTs. I hope you’ve learned something interesting and come to find that this technology is more than a simple jpeg image of digital art with extra steps. See you next week!
/Alexander Ekberg
Investor Joe Updates
Who is Joe? We explain everything here.
Previous positions remain unchanged. This week Joe continues his DCA strategy with 100$ split as:
50$ into BTC — why
40$ into ETH — why
10$ into LUNA — Read an in depth explanation to why here
A Quick Look at Terra (LUNA)
Terra is programmable money that rivals fiat backed stable coins (cryptocurrencies that are collateralized 1:1 with a specific fiat currency). With Terra’s algorithmically backed stable coins it has become a rival to leading fiat-backed stable coins due to its native transparency and decentralization. With the growing demand of Defi, the qualities of transparency and decentralization are likely to persist where stable coins are needed. Luna is Terra’s native token which is used to stabilize the pegged on the stable coins, a process of seigniorage (the video linked below explains this well).
Links to Learn More:
- Investor Thesis (dated but great overview):
- Easy to follow video:
Here are Investor Joe’s Current Holdings:
REMEMBER this is not financial advice, and is purely for educational purposes only, always DYOR!
/Erik Gunnarsson
DISCLOSURE: SOME DIGITAL ASSETS SOCIETY MEMBERS ARE INVESTED IN CERTAIN TOKENS AND COINS WHICH MAY HAVE BEEN SPOKEN ABOUT ABOVE. THESE STATEMENTS ARE INTENDED TO DISCLOSE ANY CONFLICT OF INTEREST AND SHOULD NOT BE MISCONSTRUED AS A RECOMMENDATION TO PURCHASE ANY COIN OR TOKEN. THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND YOU SHOULD NOT MAKE DECISIONS BASED SOLELY ON IT. THIS IS NOT INVESTMENT ADVICE.
