The future of crypto and high end NFTs
2024-07-14 17:22:00 +07:00 by Mark Smith
Raoul Pal makes the case in his latest podcast Surfing the crypto wave, that now is the time for investing in crypto and high end NFTs. It’s an interesting conversation with Chris Burniske and worth listening to if you are wondering what the future of the digital assets industry will look like.
First, Raoul considers the size of the opportunity:
So when I look at it, I just look at the growth of the space, and it grows at a hundred and something percent a year, which is twice the speed of the internet, because obviously it’s built on internet rails, so it should go quickly. And I just extrapolate that trend out and I look at it and it's like it’s a $2.5 trillion dollar space today, if we carry on, by 2032 it’s $100 trillion. That’s the largest accumulation of wealth in all of human history in the shortest period of time. Even if I’m wrong by 50% because I’m a total moron, it’s the same as 100 years of value acrual of the S&P500 in 8 years. It’s banannas. [00:38:32]
So there’s potentially a lot of money on the table. That’s clear, but what is all this tokenisation all about in the first place?
How do you get capital into the hands of people that don’t have it, and then help them grow it?
This is why I’m really passionate about the future of social tokens, digital network states and tokenised smaller economies, because they create community and capital. In the past they tended to be different, but it’s the same thing. And so I’m seeing this blending of community and capital everywhere, whether it’s GameStop in the last cycle or even a bit this cycle or whether it’s crypto overall.
But I do think that social tokens in whatever format they end up being, we are still testing them, between NFTs and memes and all this stuff, it’s all around the same idea. That somehow we are going to tokenise small economies better, that you can participate in, and now you’ve got capital in them. Before you just couldn’t do that. [01:20:35]
Seems like it’s a new, more efficient, more flexible way of allocating capital to projects. Even if you forget about the financial upside altogether, there is something very fascinating about all this, a way to coordinate activity around particular topics and communities, a way to enable people to build cool things together.
The money is a big part of it though. In the past, that has typically ended up in the same places:
If you’re going to generate a lot of wealth, I've seen this before, because a lot of my ex-collegues were hedge fund managers who owned big hedge fund businesses, they became obscenely rich. What did they buy? Property and art. All of them. Many of them have multi-billion dollar art collections.
Then I remember the russians coming in after the Berlin wall came down. They started getting really rich in early 2000. They bought everything in the art market, and everything property market. Then we saw it with the chinese, with the indians, we saw it with the silicon valley guys. They’ve all done the same trade, and we are going to do that all over again.
What’s so interesting is humans like to take a snapshot of culture from when the magic was happening. And we all know that the magic is happening now. It has been for a few of years. [...]
So anyone that makes a lot of money is likely to celebrate this with high end NFTs, particularly the culturally relevant ones. [01:27:37]
It certainly is a pretty good sales pitch.
This new generation, with their new norms around digital assets, if they made their money in digital assets, they are going to be much more comfortable investing in that space too. In a lot of ways digital assets are much more convenient than real physical assets anyway.
So the logic is I suppose, invest now in digital assets at low prices, and reap the benefits when the winners innevitably need to park their hard won cash, and the prices of those digital assets, which you bought on the cheap, go up.
Of course, it’s risky, after all why wouldn’t the winners of this generation of entrepreneurs just buy real property and real art?
If I’m honest, that’s where I’m stuck on all this. Probably the winners will buy both real and digital assets. They won’t want to see what they’ve built crumble to the ground, so they will have to re-invest a certain amount back in, but it seems to me that they are going to try and maximise their physical asset purchases.
Overall I’m not completely convinced by Raoul’s thesis, though I do think there’s something interesting happening here. What that is exactly will get more obvious over time.
We want to spend our time building cool things, but we also want to make money doing it. How that plays out is still very much undecided, so I’m paying attention to the space, but I think you have to be somewhat cautious.