Whale watching

Gm, everyone! And hello from the editor of the Coinsider Radar. Today, we're trying something new—you're about to read a fantastic piece from a friend of the newsletter, YouTuber and writer Jacob Kozhipatt. It was inspired by some of the big conversations our team has been having lately about where we go next in crypto, given *gestures to everything* all of this.

I hope you enjoy reading this piece as much as we enjoyed bringing it to life. And as always, we welcome your thoughts, your ideas, and your perspectives. After all, crypto is at its best when we all work together to architect a promising future. So hit reply once you make it to the bottom and tell us what you think.

—Kinsey, editor of the Coinsider Radar

A Tale of Whales and Sales

This hasn’t been a great year for NFTs: Transaction volume is down 97%, while the overall market cap of NFTs has shrunk to ~$11 billion from north of $41 billion just a year ago.

Public sentiment is at an all time low for the digital collectibles. Of the people who’ve heard of NFTs, 44% view them as a bad investment. Moreover, there are millions of negative posts online about NFTs—but one in particular has stood out:

• The viral video “The Problem with NFTs” by Dan Olson, of the Youtube channel LineGoesUp. In the 2+ hour video, Olson argues the primary use case of NFTs is getting new people to buy crypto.

So why is this problematic? Sure, inequality exists in most other markets, but Olson and similar critics suggest that NFTs are a form of social engineering, one in which whales instigated the boom of NFTs for two reasons…

1. To get people to purchase crypto to mint and trade NFTs

2. To create a public use case for cryptocurrency as…a currency

If there’s truth to this claim, the future of NFTs could be jeopardized. So…is there any truth? Let’s explore.

Time for whale watching. According to this report from blockchain analytics company Moonstream in October of 2021, only a “handful” of Ethereum whales own the majority of NFTs. In fact, the top 17% of NFT owners control 81% of the NFTs, per Moonstream’s findings.

It’s a far cry from those “for the masses” rallying narratives that dominated crypto during the NFT heyday. But…there are some buts:

• It’s important to note that this small, centralized group of Ethereum whales bought their Ether for much cheaper than the current market price.

• For example, the buyer of the $69 million dollar Beeple NFT, Metakoven, brags about “being in the same room as the founders” of Ethereum back in 2015. But back in 2015, Ether never traded above $1.

But even if these whales just had impeccable timing and good instincts, the reputation of NFTs as an industry within crypto has been plagued by suggestions of elitism, inequality, and overhype.

Why that might be fair: During the NFT boom last year, massive price tags for “monkey JPGs” created a media mania for everyone from the New York Times to Forbes and The Economist, the latter two even selling their own NFTs. Searches for “NFT” shot up 3,600% on Google Trends directly after the Beeple sale. Celebrities including Paris Hilton, FaZe Clan, and Tom Brady stepped into the NFT space, bringing their millions of followers (and dollars) with them.

All that hype—and notable interventions from venture capitalists, pre-miners, and inside promoters—made it feel as if this little world within the crypto universe might fail to live up to crypto’s biggest promise: creating a new financial system for the masses that isn’t controlled by the 1%.

And to be fair, the sheer volume of whales controlling the bulk of NFTs does suggest that the 1% are pulling strings that are antithetical to the ethos of crypto. But does that mean NFTs as an industry are doomed to go the way of traditional finance, what with its rampant inequality and rigged systems?

Perhaps not. While it seems NFTs were dominated in their early days by Ethereum whales with ulterior motives, a potential positive growth trajectory for NFTs isn’t entirely impossible to achieve.

Right now, there are conferences, video games, and even commercial real estate operations that leverage NFTs to create value for people. The engineers and creatives behind those products and projects likely aren’t after a major payday, but rather a means of providing value and utility through nascent technology.

Millions of young, smart, creative, and talented entrepreneurs have embraced this space, bringing their new perspectives and ideas. Many artists cite NFTs as a transformative means of finding new ways to monetize their careers.

And NFTs have served as a gateway to crypto more broadly in significant and important ways. Overall, 28.6 million NFT wallets have been opened since 2021, meaning almost 30 million new crypto users joined the ecosystem.

Much like the rest of the world of crypto, NFTs are going through a tough period that necessitates transformation. But that’s the name of the game when you play by the rules of new technology.

Imagine if we abandoned the web because it was dominated in its early days by Yahoo and WebCrawler—the “few.” Where might we be today? Without Google. Without YouTube. Without so much of what makes being online so rich.

Perhaps, then, it’s best we wait to see how the next generation of NFT players change the game before we call the whole thing off.

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Thanks for reading this Sunday edition of the Coinsider Radar, written by the talented Jacob Kozhipatt. On his YouTube, Jacob interviews all kinds of people in tech, culture, business, and entertainment. You can check him out on YouTube, Twitter, and Instagram.

Have a great rest of your weekend and see you back here Tuesday!