Are NFTs Dead?

Field Notes readers have questions. El Jefe has answers.

Thus, some answers to questions Field Notes readers have dropped into my inbox in recent weeks…

Stephen asks:

Your promotion of NFTs a while back seems to be a big fizzle. What’s the current view in that program?

Good question. Frustrating question. But it’s crypto, so frustration is the normal state of affairs.

As with all assets, crypto segments go through their individualistic phases. NFTs were hot while meme coins were nothing. Then meme coins heated up, until investor excitement shifted to real-world asset tokens, etc. etc.

NFTs are generally out-of-cycle at the moment. But that doesn’t mean a lack of opportunity. I mentioned in a dispatch recently that an NFT project I’ve held for the last four years recently dropped a $36,000 payday into my crypto wallet.

And there are clear indications that certain projects are doing quite well. Moonbirds on the Ethereum network, for instance, was recently up 300%. Mad Lads, on Solana, has strong momentum because of developments with the popular Backpack crypto wallet, which sprung out of Mad Lads, and because Mad Lads holders are almost always included in airdrops of tokens from new crypto projects (many are high-dollar drops).

And there’s ongoing chatter about a token of some sort possibly coming to Solana Monkey Business, one of the OG’est of OG projects on Solana. If so, that would likely create substantial value for holders of a Monke (yes, no Y) NFT.

Moreover, the overall NFT market has seen a surge in trading volume this year.

So, there’s a still-quiet renaissance going on in NFTs, particularly among blue-chip projects. I continue to hold my Monke (my online avatar in many social media places); my Portals, which is creating wealth for me every day through the recently launched Portals token; and I’m considering snapping up a Mad Lads because of the wealth that project continues to create.

From Brint:

What do you guys think about this big boo-boo? Jeff recommends PAXOS gold token as “crypto gold.”

Specifically, Brint is talking about a fat-finger episode back in October in which PAXOS, during an internal transfer, accidentally issued $300 trillion of PayPal’s PYSUD stablecoin, which is designed to remain at a constant $1 valuation. (The issue was a misplaced decimal.)

The size of the mistake exceeded all US dollars in existence and dwarfed the entire crypto market. PAXOS caught the error quickly and reversed it before any harm could occur.

Still, the episode shows that even stablecoins have their risks. Primarily, it exposes procedural gaps in stablecoin issuance that could be exploited in scenarios where the stablecoin issue is not as vigilant as PAXOS was. Ultimately, I’m not at all spooked by it, if only because I am so inured to the trials and tribulations of crypto after nearly a decade in this asset class.

If nothing else, though, it shows where a weakness exists when the Federal Reserve and Treasury get around to designing a US-backed dollar stablecoin, which is coming at some point.

And finally… From Karen:  

When buying gold is it better to buy gold bars or is buying gold bullion or ETFs just as good. I’m new to all of this so I appreciate your thoughts.

This answer depends on what you’re seeking personally.

I own gold across a variety of form-factors. Bars and bullion are pretty much the same thing, generally speaking. You can buy bullion bars in sizes ranging from a gram up through a kilo.

Bullion coins are generally in weights from 1/20th of an ounce up through 1 ounce. And they’re typically issued by sovereign states, such as the US, Canada, and others. Not to confuse things, but you can also buy much older gold bullion coins that were minted 100 or more years ago and used in daily commerce.

All of this is physical gold, and you would buy it if you explicitly wanted access to physical gold in your life, just in case the world (or the US specifically) goes pear-shaped, and the dollar is plunging in value for whatever reason.

Conversely, ETFs are “paper gold,” meaning you do not actually own any gold. You own a piece of paper that says you’re part owner of a pile of gold an investment firm holds in a secure vault somewhere in the world. Each share of the ETF that you own is backed by some dollar amount of gold in that vault.

ETFs are a convenient way to own gold if you do not necessarily want to store physical gold in your house or in a bank safe-deposit box, of if your wealth is locked up in brokerage and retirement accounts, where you generally cannot own physical gold (unless you’re operating from an IRA specifically designed to hold physical gold coins).

The primary risk with ETFs is that some of them rely on custodians and a series of sub-custodians that manage the gold holdings, and those arrangements at the sub-custodian level are not always robustly documented through contracts. In a crisis, like say gold prices melting up because of a financial storm, the arrangements are potentially at risk, meaning your ETF might be losing value because of some underlying problem, even as gold prices are rising.

The gold ETFs I like and hold personally—Abrdn Physical Gold Shares (SGOL) and Sprott Physical Gold Trust (PHYS)—don’t have that issue.

Keep those questions coming, because El Jefe is full of answers…