It’s been a wild year in the crypto world. In the first half of 2021, the NFT industry exploded with record-breaking sales, and then fell dramatically over the summer. The popular cryptocurrency Bitcoin rose to unprecedented heights in the spring and in June, President Nayib Bukele led El Salvador to become the first country to adopt Bitcoin as legal tender and use a national crypto wallet.
The dramatic changes have left many investors holding their breath and unsure of what to expect next. While there is no surefire way to predict the future, one of the best ways to assess an industry is to watch what venture capital is doing. And in the first half of this year, Venture Capitalists (VCs) invested $17 billion in the crypto space, which is almost equal to the total amount raised in all previous years combined. That’s a number that’s definitely worth paying attention to.
Much of the VC investment has been in the crypto and NFT ecosystem. For example, the NFT marketplace OpenSea raised $100 million this summer in a Series B round led by Andreesen Horowitz and is now valued at $1.5 billion. Katie Haun, who co-leads Andreessen Horowitz’s new crypto investing platform that raised $2.2 billion said recently, “There’s a mainstream recognition now that crypto is more of an architecture and operating system, and that all kinds of products and services can be built on top of cryptosystems.”
What is a blockchain ecosystem?
Much of the public attention on blockchain has been on specific NFT purchases or the value of cryptocurrencies like Bitcoin. That has led people to perceive blockchain as a product when it is actually more of an architecture and operating system upon which all types of products and systems can be built.
Think about it this way. In the beginning, Amazon sold books. The books were the product, and Amazon was the ecosystem. Buying an art NFT today is like buying a book on Amazon in the early stages, and investing in blockchain infrastructure is like investing in Amazon itself, an ecosystem that may soon expand far beyond the products for which it was originally conceived.
Amazon isn’t an anomaly. Many companies that exploded in the past two decades are infrastructure and ecosystems, from eBay and Alibaba, to PayPal, Shopify, and many more. VCs now see the same type of potential in the ecosystems and infrastructure surrounding NFTs and other blockchain products, and that’s where many of them are investing. Many analysts believe that the NFT revolution is only a matter of time and that it has the potential to drive growth in almost every sector.
With all this in mind, how might an investor looking for a way into this disruptive arena, approach the question of the best blockchain and NFT stocks (as they are referred to in mainstream media) to buy? Below are some ideas.
1. Defiance’s NFTZ (NFTZ)
Defiance’s NFTZ launched in October 2021, joining a suite of first-mover ETFs that include the first 5G ETF with over £1.2bn in AUM.
As an Exchange-Traded Fund (“ETF”) rather than a simple stock, NFTZ effectively enables you to invest in several different companies in the blockchain ecosystem (or metaverse) rather than focusing on a single company. This means that you can buy and sell it like a stock, but its net asset value is linked to the value of its composite stocks, which in this case, is an index of publicly listed companies with relevant thematic exposure to the NFT, blockchain, and cryptocurrency ecosystems.
While it’s not a pure NFT ETF -it taps not only into companies that produce NFTs directly, but also those that compose and affect the NFT markets as a whole; you could call it a meta ETF or metaverse stock, because of its reach across the whole blockchain universe – it is positioned to capture potential growth in an industry that is showing extreme promise. It promotes an investment strategy that seeks exposure to this sector while mitigating the risk of buying an individual stock.
2. Robinhood Markets Ltd. (HOOD)
Robinhood was in the news this year primarily due to the GameStop saga, drawing attention away from the fact that the popular trading company is doubling down on cryptocurrency. In fact, over half of Robinhood’s transaction-based revenue came from cryptocurrency trading in the second quarter of 2021. The company is now rolling out a new feature that will allow users to use a crypto wallet, a digital storage area where people can safely keep digital coins, and make cryptocurrency transfers on its app. The crypto wallets can be used to buy and sell NFTs on marketplaces like OpenSea. Given Robinhood’s popularity for stock trading, the company is well-positioned to do well in the crypto space as well.
3. Mattel Inc. (MAT)
Most of us know Mattel as a company that makes and sells popular toys like Barbie, but this eternally nimble company is now jumping into the world of NFTs and putting its first digital art featuring its Hot Wheels vehicles up for sale. Mattel is one of the first major toy companies to enter the NFT space, and the company has announced that it is planning NFT auctions for its other toy brands. “Mattel is creating a new way for innovation and artistry to converge in the toy space and will continue to express its brands in the NFT format,” the company said in a statement. Mattel’s popular brands are still going strong, and the company recently beat market expectations on earnings per share and revenue, making it a good bet for investors.
4. Shopify (SHOP)
One of the key barriers to entry into the NFT market is the ease of access—minting an NFT requires some skill and knowhow. Shopify, the popular e-commerce platform, is knocking down that barrier and making it possible for merchants to sell NFTs directly through their Shopify storefronts. Currently, Shopify NFTs are only available with Flow and Ethereum blockchain, but the company plans to support multiple blockchains in the future.
Shopify has already benefited from the pandemic boost to e-commerce, seeing revenues and stock prices rise. In addition to adding the NFT capabilities, the company is also adding a fulfillment network and expanding internationally, creating significant potential for growth in the future.
5. Sega Sammy Holding (6460)
The Japanese gaming company Sega Sammy entered the NFT market this summer, launching NFTs related to the Iintellectual property from its iconic games. Sega Sammy partnered with the Canadian start up Double Jump, which develops NFTs and blockchain games, to create the digital collectibles. No details are available yet, but experts believe that in the future the company plans to use NFTs in popular games, where the NFTs will be owned by the users. NFTs have enormous potential in gaming, making this stock one worth watching.
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