The Fed’s ultra-loose monetary policy has initiated some crazy trends over the past few years, like absurd pumps and dumps in meme stocks, tens of billions of dollars in market capitalizations for canine projects like dogecoin, several companies reaching multi-trillion dollar valuations, etc.
Similarly, metaverses and NFTs have gained notoriety over the past two years, with many irrelevant metaverse-related projects attracting large investments. Suppose you are building a metaverse for dogs, where dogs hang out in a virtual environment. In what financially normalized world would this project even make a bit of sense? However, if such a project is announced today, it would receive millions of dollars in seed funding, thanks to Jerome Powell and the financial nonsense the Fed was forced to create during COVID-19.
Best NFT project by valuation
Bored Ape Yacht Club (BAYC) on Ethereum is the most valuable NFT project right now, with a floor price of over 90 ETH for each NFT. The use case for these NFTs? They’re used in a metaverse game that’s not even worth one of its NFTs; a few freelancers can design a better game for $200. Also, calling the reserveApes() function of the BAYC NFT contract allows the BAYC team to create unlimited NFTs because they haven’t put any limit on their so-called “reserve” function, but at this point who cares ? It’s about buying an NFT and hoping someone will offer you more than your cost. It’s not really about its use in a metaverse or any value behind it; it is unfortunately a matter of greed fueled by pure stupidity.
It’s not even a JPEG on the blockchain!
Uploading a JPEG to the Ethereum blockchain requires a lot of gas. This is why most NFT coiners on Ethereum choose a cheaper non-Ethereum option. They simply upload an image to an IPFS and store its URL on the Ethereum chain. With the exception of very few NFT projects, this is the case with almost all of the NFTs on the Ethereum chain. Even though there are blockchains available that allow on-chain image downloads relatively cheaper than Ethereum, this mania seems far too focused on Ethereum, with almost all of the mega-selling taking place on Ethereum.
Facebook’s decision to create a metaverse seems like game over for most metaverse-related projects. Suppose you have decided to invest in the land of a metaverse. Would you invest in the virtual country of Decentraland or any other digital currency based metaverse with a shitty GUI that also requires gas/user fees, or a centralized Facebook metaverse that everyone knows thanks to the WhatsApp / Instagram promotion and that everyone is looking forward to, including your neighbors?
Chances are that all those projects that are building their own e-worlds or metaverses will soon run out of funds. Their visual games remain idle and turn into e-Goblin cities instead of metaverses. We had already seen this happen with CryptoKitties and other projects in 2018-2019. Although they are once again getting a lot of attention due to NFT mania, it’s worth bearing in mind that they were all pretty much ghost projects throughout 2018-2020 bear market, and there chances are they’ll be a ghost town again as soon as this NFT craze takes hold.
End of quantitative easing
As the Fed nears the end of tapering and policy normalization, we should all brace for the next interest rate hike and balance sheet reduction. The past two months have remained quite challenging for Wall Street, and due to the correlation between equities and the digital currency industry. Digital currencies have also lost around 40% of their market capitalization. However, it should be noted that only the taper caused all this; one can only imagine the damage that will be done to equities and its correlated assets (including digital currencies) once the Fed raises rates and moves towards balance sheet reduction. The recent Extremely High Inflation report indicates that the Fed needs to raise interest rates and raise them big, hard and fast. Metaverse and NFT? There is virtually no chance that they will be able to maintain their liquidity and high valuations once the actual bear market hits.
Watch: CoinGeek New York Panel, The New World of NFTs
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