NFT Fans Say 2023 Is Looking Up

They're usually minted on the Etherean blockchain, but are now also available on the Bitcoin chain. NFTs boomed in early twenty twenty two, when the cryptomania was at fever pitch, but a steep decline in sales and prices quickly followed. As twenty twenty two crypto winter set in and digital acid bankruptcy is piled up, culminating with the collapse of

FTX late last year. As we move through twenty twenty three, though some crypto traders are cautiously optimistic, the price of bitcoin has risen more than forty percent, and some investors have even managed to make hefty profits selling their NFT investments. Former bond traders Ovifarouk and Mike Anderson have become well known for recently selling their iconic board apes for around seventy eight eight, which translated to roughly nine point two

five million dollars at the time. That's a whopping seven hundred percent profit. Board Apes are one of the most popular NFT art collections. You may have seen them online before. They are essentially digital pictures of apes and varying outfits and facial expressions. Joining me in the studio today to discuss the ins and outs of trading NFTs or Bloomberg reporter abinav Ramnarayan and Ovifarouk, co founder of Canary Labs.

Abby ov thanks so much for joining me today. It's good to have two people in the flesh inside the studio off and we do these like recorded from all over the world, so it's quite nice. I can't really see your faces properly because of the mics, but probably alright, all right, so we're starting. You're gonna you know, it's gonna be a fun episode because we already have some

humor from the beginning. So let's start over. Do you want to maybe give our listeners an overview of what sort of the board ape collection is, um, and why you bought it and when you first got interested, and then we can take further steps back to what you were doing before. But just to set the scene for people who may not have heard of them. Yeah, that's a you know, and all these things that I've done, and no one's ever asked me what are the board apes?

So um, it's nice to actually figure out how I'm going to answer that question. But um, you know, in this most basic phone that just ten thousand pictures of randomly generated apes with different traits and stuff, and some are rarer than others, some are more valuable than others based on their rarity, And only one of those apes has given you access to all these various things that the Yuga Labs of the creators have done, whether it's access to new drops, whether it's access the parties that

they have, whether it's access to some of the crypto tokens they've dropped, and the original drop they did back in April twenty twenty one that served as the access parcel tokens to everything that they've done since then. So when did you get interested and when did you buy your first board ape. So I actually bought them when they minted. That's when something mint and the n FT world, it's the same thing as like you consider it as an ICO or an IPO or whatever. So it's the

first time they were selling it. I actually was working at Barkleys at the time in New York and I just quit my job, so I was kind of like feeling a bit emotional and stuff when I got home, and I was already trading NFTs at this point, and I basically just saw it on Twitter and thought it looked interesting because the website was the first professionally done the thing that I'd seen, And you know, I went ahead and minted them, and I think they were about

two hundred dollars each at the time to actually buy, and then how much were they when you sold them? So there were two iterations of this. When the first time I actually minted about one hundred and fifty of them, and I sold them all within the space of about a week, and I saw them anywhere between I think there were about two hundred dollars to mint. I saw them anywhere between about two thousand dollars to like up

to thirty thousand dollars each, I would say. So, taking a step further back, you were mentioning your New York days and you'd you'd quit your job. So what were you doing before and why did you quit that job to go into NFTs. Yeah. So I used to be a trader. I used to trade hiled and distress credit at Barclays. I did that for about ten years. I spent six years in London and three years in New York,

and I enjoyed doing it. But look, in twenty twenty one, I had this big every like many people had this big view on inflation and the Fed not increasing interest rates, and I couldn't express that in the book that I was trading. I was like, well, none of this stuff is going to get impacted in year one. So I once to find a way to put that trade on. I was like, oh, I'll just do it myself. I'll

just do it pa. And I've been cryptoskeptic for many, many years, and that was the first year I bought bitcoin in twenty twenty one after pacing it for so long, and myself and my colleague Michael, we were looking at potentially buying art or collectibles. These are very like inflacion proof investments, and we just stumbled on NFTs, which isn't too fair, as Michael that stummled on the first which

are basically collectibles on chain. So we had this like crypt tournament to it, and we had the collectibles element to it. So the way that we used to describe it was its inflaition squared and it was obviously a very risky trade, and but you know, we knew if we took a shot as it and we were right,

the upside would be a lot bigger. So this brings Abby and Abby you cover credit, right, Can you give us an overview of the macro environment, what it was at the time and how it's changed now, right, because because it's a very different situation and a lot of the narrative around bitcoin at the time, as you were saying, is like it's a hedge against inflation, whereas now you know, inflation has shut up and it's not really turned out

to be great for bitcoin or any other risky asset. Really, Yeah, no, absolutely. I mean I think I did a little bit of reporting on bitcoin when I was part of the FS and Rates team in the past, so I had a small flavor of what cryptocurrency was like. I mean I was by no means the Crypto Report or anything. I just did a little bit of work on it. What I found really interesting was looking at all the various

factors that went into it. On the one side, I did see the argument that it was an inflation hedge, that crypto was an inflation hedge. But on the other on the other side of that, there was so much irrational exuberance. I mean today you look at how SPACs have completely collapsed. I mean the last few SPACs are now being flogged for nothing. You look at a lot of the IPOs at the time, they've gone down like

eighty percent, ninety percent. Did look at Peloton as a stock, you know, I mean, there was a lot of the rational exuberance, and um, there's no doubt in my mind that crypto was very much a part of that. I've

pulled up a few correlations today. I had to look at how HIGEL European high Eel bonds UM compared to ETHA, which is I guess the closest comparable to NFTs that we can get on the terminal, And there is a little bit of a correlation UM, not a super strong correlation, but the correlation to Tesla is quite striking as a stock, and the correlation to Peloton is unbelievably striking. I mean, it's almost taking the same trajectory that I'm talking about

et versus um um versus Peloton. So if you take credit markets as I would say that cryptocurrency is a souped up version of credit markets, and I would say NFTs are sort of I mean, you call it inflation squad. I would call it exuberance as well. Yeah, so, but there is a code and that I find that interesting and it actually makes me more hopeful for the future

of NFTs. Then then and then anything else I've seen actually in terms of anything else you've seen, like crypto wiser, Well, what I mean is there seems to be a method to the madness. There seems to be some some logic to why it's training. The Waird is O. I see you're nodding there. Yeah, I mean, I think the big thing that we touched upon was inflation. And it's actually a common misconception that bitcoin is a good hedge for inflation.

That's incorrect in my view anyway. Bitcoin is a hedge for inflation when you have a low interest rate environment, and that was the environment Trains twenty one. The FED refused to increase interest rates inflatition starts to go higher. And that means like in this in this environment where like money is cheap, if you like, everyone wants to take the highest ris possible. And that's the environment that we had. So twine Pains, We're all broke down because

we still had inflation. But the fab is like, we're like, oh damn, like we have to increase interest rates now finally. And then that hits NASDAK as you said, and all the tech docs, and that has the highest correction to scrypt, which then in turn has correlation to NFTs. But I think NFT is an interesting hybrid asset class, Like on the one hand, you have traditional market correlation, you have cryptic correlation. But on the other hand, they are collectibles.

Like people go out there and buy things that they want to own from an art perspective or from a from a collecting standpoint, and you know, it's the same thing when you see you might see a crazy auction at Christie's for like a banana stuck to the wall that goes for millions of dollars and people are like, you know why, Like, I don't get understand where that

prices come from. NFTs definitely have that element of it where you have institutions that are collecting, you have maybe galleries that are collect and you have large collectors who are collecting and their mindsets like I just want to own the most expensive cryptopunk because I have the bragging rights for it, and that's where some of these crazy exuberant prices come from, if you like. But you know, sometimes it just takes two people to tango in an

auction and that's where that's where you get it. And that's where I think people have a misunderstanding of what NFTs actually are versus when trying to compare them to traditional assets. After the break, we'll hear more from Bloomberg's Abena from Narayan an NFT investor Orvi Farouk on what makes a good trader and the intersection of NFTs and AI. So, you know a lot of people lost money on crypto

this year and NFTs. How much has your experience as a trader helps, Like would you suggest that someone who doesn't have finance experience, dosn't have trading experience, quit their job and start trading NFTs. I would say two things. The first thing I would say is that we had a massive, massive advantage having been institutional traders for seven

or eight years. Should retail traders be investing in this market? Well, I have to say a lot of people who have probably I'm sure they've lost a lot of money doing it. But I've come across and met so many people who have zero experience in trading, zero work experience at a bank. A lot of them haven't even gone to university. Some of them are probably seventeen to eighteen years old, and they would make like three times more money than anyone else on bulls on the City of London. Because trading

you don't need the education for it. You haven't. You have to have a natural aptitude for knowing where the momentum is going, understanding how to manage a risk, understand how to have discipline. And that is a natural thing that you can't um, you can't teach, you can't train that. It's it's it really is a natural skill set. And honestly, I've met so many people are like, wow, like you should be if you went and spent a year trade

in high your bonds. You have made more money than anyone else because you understand how to take risks, you understand when to take profits. And those are two things you don't need to go to university for. You don't need a career in finance for. And so I would say yes, like maybe retail investors should have more protection and there should be you know, more regulation to to help that. But should retail investors not trade NFTs, not

trade crypto? Absolutely not. You should give it a go, and you never know you might be good at it because it's a skill that you don't practice or learn it in any other or many other facets of your life. And I think you need to try it to know

if you're good or not. Basically, what are the biggest things that are like things that you watch out for right Like this last year you could have lost money on FTX, Block five, Gemini, like a number of places that you know where your money could have been locked up. So you know, how do you how do you manage all these risks? It's not just a question of like, you know, a trade downside, it's like you could lose all your money, all your collateral, everything from one day

to the next. Yeah. Number one rule of any trading investing, if you're doing it personally, is only invest or gamble gamble with then I will use about gamble because there is an element of that with money. I wanted to say it before and you were describing the situation, but I was like, oh, let's be nice, but you said it. So go on with money that you can afford to lose.

So if you have your net worth and crypto, then take nine percent of it out because or fifty percent of it out because there is huge how risk in crypto, and like FTX and block finding, all this stuff was a big example of that where I know people who were some of the best traders in crypto who lost millions of dollars in the whole net worth and FTX because of just like some blacks one event. And so the number one rules, don't invest more than you can

afford to lose. Number two rule, which would have staged you for FTX, And the golden rule of crypto is not your keys, not your crypto. So and if you're not self customing something, so by that I mean you don't have it in your own wallet. Way you're the only person who has access to it and has the

private keys to it, then it's a risk. And that's the problem with FTX because if you have your crypto one in exchange or if you're staking it, then you don't have access to it like someone else has access to it and controls your money. And this is the

whole original thesis of bitcoin anyway. So you know, with those two things, you already eliminate something like eighty percent of the risks, and then from then on it's like learning by doing, you know, like remember the shady characters who told you to buy something and it went down, Like remember that time you got greedy and didn't take profits and you should have sold half of what you have set yourself rules, guidelines and stick to them and

strip the emotion out of it. Those things. You I really think you can eminate a lot of risks by doing that, and most people just don't take these these steps. I would say, So, where do you see now opportunities with with NFT is that you know what's interesting? Right? Because the names we keep hearing are the ones that

we're around during the rally. Is there anything new that's like interesting or anything you know, funner like even not from like an investing perspective, but like an art perspective, you're an art you're you're also an artist, right, that's right. Yeah, there's this idea of the digital Renaissance, which I know sounds really funny but cheesy. Yeah, a bit cheesy, I

know I might love to use anyway. But if you think about the world and where it's going, and you know this whole concept of AI and chat GPT, and you had this segment of art which is generated by code, whether it's AI art or generative art, and it's all stored. A lot of it is stored on chain or is generated on chain, And like intellectually, I think that's very interesting,

and it's actually used to create and produce arts. And if you think about art as in the history of art overalls spans thousands of years, and you have different periods like the Renaissance, et cetera, where you could collect early pieces and generative art is not a new thing, but genest of art on chain is a relative a new thing, and there's probably only existed for three or four year So I think it's a great, big opportunity to actually collect what will become pieces of history because

it's new, you've never really had it before, and NFTs only really started in what twenty sixteen, twenty seventeen, So you're at like you're five years into what could potentially be decades or even centuries of this idea of art on chain and art generated by code. And I think this whole AI buzz thing is going to keep getting bigger and bigger and bigger, and it will be in

many elements of our lives. And um it's application to art, I think it is very very interesting and presents a big art made by computers basically, and then and then it's the NFT of that of that art made by computers, essentially art made by code, and um it's then they're

made as NFTs. But you know, if you if you want to get really geeky and nerdy about it, there there are more aspects of it, like like something that's provably random is the art doesn't exist, the code exists, and when you go to actually mint your piece, um, you don't know what it's going to be until it's created and it's minted, and it still looks good because

of the way that the code was written. So and you're sure no one came up of it, came up with it like in the last month when all the AI stocks were going up, and like, let's find out find a way to show something new, right like they were thinking about it before. It's got a narrative to fit, to fit the selling need. Generative art has been around, no, okay, around for a while, and I think the best things are things that are high value, that have been high

value for at least two it three years. But um no, this is this is not me, This is not I'm using Bloomberg as my exit liquidity thing. Good. I'll be right back with Bloomberg reporter Abina Ramnarayan and bond trader turned NFT founder of I Farouq as we discussed the future of NFTs and what it's like to have snoop

dog by your digital art. So what about sort of the macro environment right like, because if you we look ahead, you know it's we've had crypt so downturns before, we said many times, but you know the macro environment was kind of the same throughout and the reasons why I crashed or like crypto specific, what's the outlook now for like the world you're you're like broadening out sort of person um. I mean, it's very hard to be definitive about it, but I would say that crypto probably has

another sell off in it. Um yeah, sorry, I don't I'm not if I'm not sort of agreeing with on this, but I mean, essentially, we've seen a little bit of recovery in most risky assets. So once again, this we've talked about this correlation between m NFTs and crypto and the credit market and all of these assets. What they have in common is that they're risky and that investors

take risk when they buy them. And we've seen risky assets in general rally quite a bit at the stud in the first couple of months of this year, and I'm not sure that the rationale for that rally is completely solid. So I think there could be another painful sell off in risk in general, and I would imagine that crypto is a part of that. So I do

think the immediate future is uncertain, very uncertain. The long term future, I mean, once again, I'm a little bit encouraged by the fact that it has behaved like a risk asset, and it's not just behaved in some kind of completely random manner. So I suspect this here to stay. One of the reasons why CRYPTO and nft is rallied quite strongly in the last couple of years is that a lot of capital was available. There was stimulus checks in the US, there was a lot of leverage available.

People are able to take on debt to buy things. All of that has gone. So whether or not this is gonna if it's ever going to go back to the heady heights of twenty twenty one or twenty twenty personally, I don't think so. But I'm but I'm putting myself on record here and so maybe I'll be proving horribly wrong and all vocation. Fortunately we're not traders here, right, We're not the traders, so like it's fine, we're not We're not. Actually, have you could just say what you

what you see? Is there anything that you miss about bond trading? Yeah? I have you actually asked me that as I walked in, and um, it's been a while since I've been to the city and I got the tube and everything, so I was like kind of having

flashbacks of of getting to go into the office. But um, I think though, I think the answer is yes, Like when you're on this side of the fence where you know I'm just sitting there making my wrist decisions, and um, you know, on days with the markets down, I'm just like, oh, that kind of stucks, but there's nothing that I can

really do to act on it. I miss it because when you're on the trading floor and you're trading pile bonds or distress bonds or CDs and there's like five percent swings and stocks and you know, like twenty thirty forty points swings and bonds, and you're there as a market maker and someone's calling you and it's like, hey, like, I need a price in this, and I need a price right now, and you have to kind of think on the spot, and it has this thrill and excitement

that you don't get in the world that I'm in now because I'm not constantly being asked for a price. It's just as simple as that. I just like sometimes I say that as someone just asked me to like make a market on an ether you working on board as or something, because um, you know, I guess you could say like maybe I'm somewhere I'm definitely a risk seeker and maybe somewhere with real seeker, and um, that

element of it. I think the fast paced nature of it I think I miss and um, I don't know how I can recreate that for myself now without going back to work working for a bank, but I would I definitely miss that part of it for sure. All Right, so you had you had a very famous purchaser or one of your NFTs, Maybe start by telling us what sort of NFTs you make other than you know, buy them, and then who this famous purchaser was, who was very

known to crypto circles, right is it? Yeah? Um, so I actually I actually used to create a lot of digital art when I was younger, before I went to university, and when I got back into NFT, I just got the itch to start drawing and creating again. So um, you know, I create like additions or one of one artworks which are animated pieces. A lot of them is like based on being a maid and all that kind

of stuff. And I have this collection called Wrecked Guy, which is like eight thousand images of like a skull drinking out of the bottle on The idea is like this is someone who always gets wrecked in crypto or training or whatever. A lot of people are right, which is a lot of people, Yeah, a lot of people right now exactly. That's basically it. And yeah, so we

launched the collection. I launched the collection in May of last year, and a couple of weeks later, the Snoop Dogg actually bought a couple of them, which was which is very surreal. It was a strange moment. How did you know that Snoop Dogg was buying them? Like? How does that happen? So I was actually especially on like a stag with my friends in Newcastle and we're all like, you know, drinking and stuff, and so I was like, hey, like, Snoop Dogg just brought one of you unts And then

I was like what. So I looked at his Twitter account and he posted it. I think he wrote something like time to get wrecked or something like that. And he has a public Ethereum wallet, so you could see that he owned it in his wallet and that he purchased it. That's very cool. Does he still have it? Do you know he still has I believe he has two of them. Yeah, he still has them. Yeah, that's cool. So I guess to wrap things up, what's your biggest pet peeve now the NFT world? Like what needs to

be fixed? Like for it to be more efficient, and you know, to raise some doubts if you have any doubts about it, Like what is the biggest pain point? I think the biggest pain point is there are still way too many bad actors and if you take the NT market as a whole, I really think ninety percent of it is garbage, Like I really do. Sorry, so

sorry if I offend anyone with that comment. We didn't say the ninety is right, Like everybody can think they're part of the ten exactly exactly, and it just encourages too many bad actors and people are coming to people know they can sell things very seamlessly and make money without actually fulfilling the roadmaps they put out or right having the right intentions and be just you know, every month or every couple of weeks, you just get another

NFT project which it says, hey, we're going to build a mess verse game and conquer the world. And the next thing, you know, three months later, they've all just run up the money, and that something that needs to be fixed. I think I'm not like a no regulation guy foldy sexualization. I think you need responsible regulation for this industry to thrive and achieve mainstream adoption and I think laws around like communication and maybe having some kind

of like quality control aspects before coming to market. These sources of things I think need to be there to stop there being a flow of money out of in some retail investors into people with bad intentions. All right, on this very very responsible note, Thank you again for joining me. Thank you so much. Thank you. That was Bloomberg reporter Abinav from Narayan and Canary Lab's co founder of a Farouk. You can find more of Abinav's reporting

on the Bloomberg terminal and on Bloomberg dot com. For more, be sure to check out our twice weekly newsletter, Bloomberg Crypto. This is Bloomberg Crypto, a daily podcast from Bloomberg and iHeartRadio. For more shows from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. A quick programming note for you, we're working on something new that expands on how we're covering crypto and the future of finance, and we'll be back soon to tell you more. Follow a

subscribe to Bloomberg Crypto to stay tuned for updates. We'll be bringing you info about what's next right here in this feed in the meantime, get caught up on all of our Bloomberg iHeart podcasts, The Big Take, Daily Crash Course, and our narrative series In Trust. To stay in touch with Bloomberg Crypto, you can find out coverage as always at Bloomberg dot com slash Crypto. The supervising producer of Bloomberg Crypto is Vicky Vergelina. Our senior producer is Janet Babin.

Our producers are Mohammed Faroup and Sharon Barrero. Our associate producers are Ty Butler and Moses on Desta. Wonder At is our engineer. Original music by Leo Sidron. I'm Stacy Mariaschmael. We'll be back tomorrow