🧘‍♂️ALERT: Worth Over $50 Billion

Market Meditations | March 23, 2022

Dear Meditators

Last week, we explored one of the fastest growing sectors in the NFT market, gaming. This week we are going to dive into an NFT sector that is looking to rival a traditional, luxury market currently worth over $50bn – art.

We will share what they are, their performance, how you can find the best opportunities and how the sector compares to the traditional art market.

Today’s Meditations:

Art NFTs Deep Dive
Latest Hack Attack
Is Grayscale Over Ethereum?

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⏰ Top Headlines

? Breaking down the NFT market: Art NFTs

The definition of art is the expression of human creativity demonstrated in a variety of forms (often visual or audio). NFT art is simply an extension of this definition, applying this expression in a digital format where ownership can be verified on the blockchain. As with traditional art, the value of NFT art is centred around scarcity. Of course, instead of physical scarcity, NFTs rely on digital scarcity.

We can use Nansen to sort art NFTs by market cap identifying key information on the top 20 collections in the sector.

Performance over 30 days

Nansen.ai: 23/03/2022 – NSN-ART20 30 day performance

Art NFTs have fallen 10% in USD terms within the last 30 days.
Whilst the index has climbed by over 20% in the last 5 days, this lagged recovery in the wider NFT market.

Breakdown of Sub-Sectors

Nansen.ai: 23/03/2022 – NSN-ART20 Market Cap By Category

The total market capitalization of the top 20 Art NFT collections is 167k Eth or $500m.
Generative art: This involves programming to create the art piece itself. NFTs have been criticized when all information is not included on the blockchain, creating a reliance on third parties. Because generative art involves programming, the program itself can often be placed on the blockchain – creating a censorship resistance NFT.
Digital art: where art is produced using computers or other digital devices.
Physical art: where art takes a physical form but is associated with an NFT to prove ownership / represent the physical good in a digital format.

Largest Projects

Nansen.ai: 23/03/2022 – NSN-ART20 Index Activity (sorted by Market Cap)

Currently, the largest collection by market cap is Chromie Squiggle, a collection from Art Blocks.
Just as with traditional art, value can be driven by the artist. 2 of the top 5 (The Fungible Open Editions and Lost Poets) are created by top NFT artist Pak with The Currency created by famous traditional artist, Damien Hirst.

Tip: Nansen shows the historic market cap for each sub-sector of art NFTs, so you can understand which sectors are growing the fastest and identify the best opportunities.

Conclusion

Physical art has long been used as a luxury good and is now viewed as its own asset class, categorized as high risk, illiquid, unregulated and at the mercy of short term trends. However, it does not have any significant correlation with other assets, increasing its ability to be used for diversification, and it can generate real returns over a long period.

Art NFTs represent many of the same risks, however as shown by recent volatility and wider correlation with the rest of the NFT market, the sector has a long way to mature before it can fully rival the traditional art market.

⚔️ King Arthur Swore

Even the guys with the big bucks get tricked sometimes. The latest victim of a crypto hack was DeFiance Capital founder and Zhu Su’s mate Arthur 0x. Here’s what happened:

Arthur 0x announced on Twitter yesterday that he’d been maliciously hacked via phishing campaign.
His hot wallet with $1.5 million worth of NFTs was compromised and some of the assets were moved to OpenSea (mainly the Azuki and CloneX collections) along with some ETH.
He soon asked for this address to be blacklisted, claiming that social engineering had deceived him into giving a document access to his device.
What appeared to be a standard email from one of his portfolio companies with industry-relevant content, turned out to be a spear-phishing email with an attachment not flagged by his anti-virus software.
He and other Twitter folk suspect it may be the work of the Lazarus group, black hat hackers purportedly based in North Korea. Active since 2009, they are rumoured to have stolen almost $1 billion in crypto assets.
This group is also suspected of hacks on other crypto personalities as well as financial institutions, casinos, and software developers.

For more tips on keeping your assets safe, check out our 9-step essential security guide.

? Is Grayscale Over Ethereum?

On Tuesday, Grayscale hinted at news, telling their followers to check back in the morning for an important announcement. Many speculated the SEC had finally approved the transition of the bitcoin trust, GBTC, to a spot bitcoin ETF. What transpired was much more surprising; Grayscale announced a new smart-contract platform fund that doesn’t include Ethereum.

Allocations for the new Smart Contract Platform Ex-Ethereum Fund include:

Cardano 24.63%
Solana 24.27%
Avalanche 16.96%
Polkadot 16.16%
Polygon 9.65%
Algo 4.27%
XLM 4.06%

To the dismay of Crypto Twitter, the index fund did not include LUNA, NEAR, FTM, and most especially ETH. Grayscale responded that they already have an exclusive Ethereum trust if investors want exposure to the behemoth of smart-contract platforms. Although ETH is not in the fund, Grayscale must still have conviction in the platform since Polygon is a layer two on Ethereum.

One of the biggest advantages to the Grayscale products is that you can hold them in traditional accounts, like 401K funds, IRA’s, etc. Since many investors credit the last bitcoin rally to the GBTC fund, the most widely known Grayscale product, it stands to reason that this fund, GSCPxE, will also drive higher demand (and therefore prices) of the platforms listed although probably not to the same extent.

The price of RUNE, the native DEX token of THORChain, has appreciated over 40% following its launch of synthetic trading assets on March 9th.

In tomorrow’s newsletter, find out why and how people are interacting with the hot DeFi protocol.

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??‍♂️✍️ Stories in this newsletter were written by D. Beverly, Isambard FA, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Ellen B.

Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.

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