The Wolf Den #1066 - NFTs… There’s A Problem
The Wolf Den #1066 - NFTs… There’s A Problem
How do we solve it?
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In This Issue:
NFTs… There’s A Problem
Bitcoin Thoughts And Analysis
Legacy Markets
SEC Hacker Finally Arrested
Polymarket Is The Killer App
World Liberty Financial Flops
WLD Token Falls Amid Rebrand
The Ultimate Fight For Bitcoin & Crypto | Vote John Deaton!
NFTs… There’s A Problem
If you were expecting this newsletter to be a bullish take on NFTs, I hate to disappoint, but that’s not the direction we’re headed. Let me be clear: I do believe NFT technology is here to stay. However, 99.99999% of the NFTs that exist today will likely be worthless by the time the next NFT cycle rolls around. Think of today’s NFTs like the altcoins that were popular back in 2017—most of them crashed in value and are irrelevant now, but the concept of altcoins endured. NFTs will follow a similar path.
Today, I want to explore why NFTs are so volatile—a concept I believe many crypto traders, investors, and newcomers are overlooking. By the end, I’ll suggest a potential solution to this problem, though whether it plays out this way is anyone’s guess. Your guess is as good as mine.
The primary issue I see with NFTs today—and one I consider more of a bug than a feature, especially for those who don’t fully grasp the landscape—is that NFTs are indexed to volatile assets like Ethereum, Solana, Bitcoin (for ordinals), Arbitrum, Avalanche, and others. This creates two key challenges: crypto investors are hesitant to part with their assets, and the inherent volatility complicates the value and investment landscape for many.
Allow me to explain:
Imagine I create a collection of Wonderful Wolf NFTs, and everyone loves them. Currently, Wonderful Wolf #1 is valued at 100 ETH, based on its last sale price and the fact that most sales hover around that amount, with Ethereum priced at $2,500. The value of Wonderful Wolf #1 is highly susceptible to fluctuations due to two factors: the price of Ethereum and how much ETH a buyer is willing to pay for the NFT. Now, let’s say Ethereum drops overnight to $2,400. As a result, the dollar value of Wonderful Wolf #1 would decrease from $250,000 to $240,000, even if no other factors change.
Now consider that, as the price of Ethereum drops, demand for Wolf-NFT #01 slows, and the top bid is 96 ETH while the asking price is 98 ETH. If it sells for 97 ETH at the new price of $2,400 per ETH, the NFT’s value would be $232,800. In contrast, if you had simply held spot ETH, your position would still be worth $240,000. In this case, holding ETH would have been the better move.
It gets more interesting though. When buying the Wonderful Wolf NFT, you are selling ETH to purchase the NFT, which triggers a taxable event. If you originally bought your ETH at a lower price and it has appreciated, you’ll owe capital gains tax on the difference between what you paid for the ETH and its value when you used it to buy the NFT.
But the tax burden doesn’t stop there—when you eventually sell the NFT and convert back to ETH, you’ll likely face another taxable event. If the NFT has appreciated, you’ll owe taxes on those gains. In this scenario, you’re being taxed twice: once when converting ETH to the NFT and again when cashing out from the NFT back into ETH. This double taxation can quickly eat into your profits and adds another layer of complexity to an already volatile market. And I didn’t even mention the tax implications if you sell an NFT to buy another—you’ll definitely need an accountant for that.
How many casual NFT buyers are really prepared to consider all these factors? My guess is maybe 1 in 10. Of course, if you reject the idea of measuring value in dollars and focus solely on crypto terms, much of this volatility doesn’t seem as severe. However, since NFTs are bought and sold in crypto, and given the high volatility—especially for those minted on blockchains—I recommend using USD as your reference point to better protect against potential losses.
This isn’t easy to track, nor is it something commonly offered by NFT marketplaces, where all NFTs are priced in crypto. These platforms don’t provide an option to price or view NFTs in USD, leaving buyers and sellers more exposed to the volatility of the underlying cryptocurrency. Also, does it really make sense for the value of these assets to fluctuate just because of how they are indexed? Normal art doesn’t do this, and if NFTs are trying to be art, then maybe it’s not a good idea to pin their value to a volatile asset class. Sure, you could argue that the free market adjusts and sorts this out (efficient market hypothesis), but I’m not convinced NFT markets are efficient right now. Buyers and sellers are at the mercy of variables they simply cannot control.
The solution would be simple: index NFTs against stablecoins. But that’s not the norm, and crypto enthusiasts tend to stick with what’s familiar. I believe a lot more doors would open for NFTs if they didn’t require jumping through all the confusing crypto hoops we’re used to. Art collectors don’t want to deal with this kind of complexity—they just want to collect. Just my two cents, for whatever it’s worth.
Anyway, Bitcoin had a strong week, and I’m optimistic that ‘Uptober’ can turn into something. If not, well, ‘Moonvember’ is right around the corner, and that sounds just as promising. Have a fantastic week—Wolf, out.
Bitcoin Thoughts And Analysis
Yesterday, I was looking for a retest of the $66,550 level as support, which happened. From a TA perspective, that means that price should head to $70,000 resistance next, but we know that charts are just ideas and not prophecy.
Regardless, that’s what I will be watching for.
Legacy Markets
The U.S. bond market took a hit as a strong retail sales report led traders to reduce their expectations for Federal Reserve rate cuts this year. Treasury yields rose amid doubts about how quickly the Fed will ease policy, with swap contracts pricing in 42 basis points of rate reductions for the November and December meetings. Equities initially rallied but later fizzled, with Netflix surging after subscriber numbers beat estimates.
Retail sales in September were stronger than forecast, reflecting resilient consumer spending. This followed a robust jobs report and higher-than-expected inflation data, reinforcing the view that the U.S. economy is far from recession. Analysts believe there’s a narrow chance for the Fed to pause rate hikes in November, but upcoming economic reports will be key.
Major stock indices like the S&P 500 and Nasdaq 100 were relatively flat, while the Dow Jones gained 0.4%. Nvidia saw a boost from Taiwan Semiconductor’s positive outlook, while Travelers surged 9% after strong profits. However, Elevance Health tumbled 11% after cutting its annual outlook.
Treasury 10-year yields rose seven basis points to 4.09%, and the euro fell as traders bet on a large European Central Bank rate cut in December. The yen weakened to a critical level, raising the possibility of intervention by Japan.
Economists and analysts like Ellen Zentner and Jeff Roach highlighted the strength of consumer spending and its implications for monetary policy, with some noting that continued economic strength could limit the scope of future Fed rate cuts. Despite the market volatility, strong corporate earnings and economic performance are expected to keep equities supported. However, systematic funds have reduced equity exposure amid rising price volatility, which could reverse after the U.S. Presidential Election.
Key corporate highlights include Allstate’s $630 million in catastrophe losses, Amazon Web Services' delay in deploying Nvidia’s Blackwell chips, and Boeing’s filing to sell up to $25 billion in equity and bonds. Meanwhile, the FTC is investigating Deere & Co. over antitrust concerns, and Blackstone’s credit arm saw a profit increase, becoming its largest business by assets.
Key events this week:
China GDP, Friday
US housing starts, Friday
Fed’s Christopher Waller, Neel Kashkari speak, Friday
Some of the main moves in markets:
Stocks
The S&P 500 was little changed as of 4 p.m. New York time
The Nasdaq 100 was little changed
The Dow Jones Industrial Average rose 0.4%
The MSCI World Index was little changed
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro fell 0.3% to $1.0828
The British pound rose 0.2% to $1.3013
The Japanese yen fell 0.4% to 150.21 per dollar
Cryptocurrencies
Bitcoin fell 1.2% to $66,821.87
Ether fell 0.9% to $2,595.23
Bonds
The yield on 10-year Treasuries advanced seven basis points to 4.09%
Germany’s 10-year yield advanced two basis points to 2.21%
Britain’s 10-year yield advanced two basis points to 4.09%
Commodities
West Texas Intermediate crude rose 0.5% to $70.76 a barrel
Spot gold rose 0.7% to $2,692.07 an ounce
SEC Hacker Finally Arrested
Do you remember back in January when news broke that the SEC had approved a Bitcoin ETF, only for us to later find out that the official Twitter account had been hacked and the ETF wasn’t in fact approved yet? That fake post caused enough excitement for Bitcoin’s price to spike $1,000 before the truth came out shortly after and the entire move retraced and then some. It has been revealed that the hacker gained access to the account via a SIM swap, causing even more pandemonium than there already was in regard to ETF anticpiation. Anyways, that individual has since been caught, arrested, and charged with conspiracy, aggravated identity theft, and access device fraud—justice has been served. I’m not sure we’ll ever see crypto Twitter in a frenzy like that again.
This is the best part of the story, “He later conducted internet searches for ‘SECGOV hack,’ ‘telegram sim swap,’ ‘how can I know for sure if I am being investigated by the FBI,’ and ‘What are the signs that you are under investigation by law enforcement or the FBI even if you have not been contacted by them.’”
Polymarket Is The Killer App
This election cycle could lead to several outcomes for Polymarket:
A) Polymarket’s bold Trump prediction proves accurate, catapulting the platform into the mainstream spotlight.
B) Its prediction is revealed to be biased and misaligned with the actual results, damaging its credibility.
C) Regardless of the election outcome, people simply overlook Polymarket’s forecast, and life continues as usual.
I’m leaning toward option C, but I wouldn’t be surprised if any of these outcomes materialize. What’s particularly interesting about Polymarket, though, is that Trump is pulling ahead by a wider margin there than in any major poll. This raises a key question: Does Polymarket have insights we’re not accounting for, or are the odds being manipulated?
On that note, I came across an in-depth thread suggesting that one individual might be responsible for a significant portion of the swing in Trump’s favor, which adds another layer of intrigue to the situation.
Other polls:
If you're interested in reading the thread that explores the possibility of a single individual boosting Trump’s odds on Polymarket, click on the image below.
World Liberty Financial Flops
Things aren’t looking too good for World Liberty Financial. The native token presale raised only 4% of its $300 million goal, bringing in just $12 million. That shortfall resulted in a 20% price drop when WLFI hit the open market. Max Keiser criticized Trump’s effort, saying he failed the “Bitcoin IQ test,” and Nic Carter summarized it succinctly: “He said nice things about crypto but he immediately wants to extract value. None of this is liberalizing or democratizing access to finance.”
Hopefully, this doesn’t leave a bad taste in his mouth but instead serves as a wake-up call: the world doesn’t need another token. What it needs is for regulators to step back and allow the industry to grow organically, fostering the potential of what already exists rather than stifling innovation with excessive oversight.
WLD Token Falls Amid Rebrand
During a media event in San Francisco, Sam Altman’s Worldcoin revealed its new branding as “World,” signaling the company’s shift in focus from digital asset ownership to identity verification in an AI-centric future. Altman and Alex Blania also introduced the Orb 2.0, a more advanced iris-recognition device with five times the AI capability of its predecessor, while using fewer components. The Orb 2.0 aims to expand access through self-service kiosks and an app-based feature.
Sometimes, despite positive developments, speculator expectations simply can’t be met.
The Ultimate Fight For Bitcoin & Crypto | Vote John Deaton!
John Deaton, Candidate for United States Senate in Massachusetts and , joins me today to discuss his epic debate with Elizabeth Warren and share his thoughts about the upcoming elections.
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.