Insights on NFT Market From FUN Team
1.Why we are bullish on the NFT market
Everyone can make NFTs. A higher market value needs buyers’ consensus to ensure strong liquidity and transferability. For this reason, digital artworks are naturally suitable for NFTs.
Recently, digital artworks have been increasingly exposed to the public, such as arts, collectibles (including blind boxes) and game assets. Correspondingly, those digital artworks also embrace high profitability. For example, the Beeple’s < Everdays: The First 5000 Days> has been sold for US$6930 million this year, LeBron James Top Shots Moments was sold for $210 thousand, and another crazy thing is that a game enthusiast spent $1.5 million to purchase the NFT map of Axie Infinity.
Generally speaking, the authenticity, the provision of ownership and the transferability together create such high value of NFTs. Due to these three unique traits, NFTs can provide unlimited possibilities for the real world and virtual assets. Although the overall market is still in its infancy, we believe that NFTs can reshape digital goods’ liquidity and revalue the market value of digital assets while being widely used in digital arts, digital collectibles, and game assets. Moreover, the positioning of the above resources and IP will be the core NFT industrial chain.
2. The advantages and core mission of FUN protocol
(1) FUN has constructed a diversified risk portfolio
Some people may question that whether NFT is a bubble and its value is inflated. However, the price of artwork and collectibles is determined by supply and demand, resulting in a significant deviation from the “earning value”. In other words, We cannot simply think that a “bubble” appears when the price is greater than the ‘’earning value’’, because we can’t value NFT the same way we value practical commodities. Shill bidding do exist in NFT market, but the scarcity and artistic value can support the rationality of its current price.
Let’s take the top 20 best-selling NFT collectibles as examples. The TOP 20 sale amount reached 5.3 million with an average price of $141. Approximately 400,000 buyers contributed US $800 million. CruptoPunks (pixel avatars with different elements), as one of the most expensive digital collectibles, was sold at an average price of 16,000 US dollars with about 2,200 participants. It can be concluded that NFT digital collections have a variety of buyers, and the range of prices is also vary widely. Though there are hypes, the demand also exists.
Therefore, we realized that facing numerous NFT assets, those enthusiastic outsiders usually do not know what kind of NFTs they really should invest in. Basing on this market demand, we come up with the idea of the index token pegged to the whole NFT market, which is very meaningful for institutional investors seeking to diversify the entire industry’s cryptocurrency assets and individual traders who want to hedge or diversify their investments.
Up to now, we have finished the development of algorithmic index token FUN Money,(FUN)， which can act as an index trading tool for NFT that allows holders to speculate on the entire NFT market, instead of just one token or a portfolio of some selected NFT tokens.
(2)A token design integrating psychology and economics
Our team has conducted in-depth researches on Ampleforth and deeply understood its design and price mechanism, as well as the psychology and demand-driven factors. We found three main factors driving the growth of market demands:
a. Incentives
At present, in the first phase of our NFT protocol, users who provide liquidity in Pancake can obtain rewards through farming in the FUNStaking section. Meanwhile, we also plan to increase another rule — obtaining doubled rewards by lengthening the staking period.
In the future, in the second phase of this project, We will develop NFTMoney’s purchase function to create a NFTs’ buying platform.
b. Speculation
The rebase mechanism is very suitable for speculators who expect to earn quick money and gain the upward momentum of assets. This mechanism will push up the value of tokens, but the continuity highly depends on the actual market performance, which means the token price will always regress to the anchored NFT market cap. We want to clarify that people should not judge a project arbitrarily only based on speculation occurring in its market, since speculative demands also exist in BTC and ETH markets. The quality of a project needs time to prove its community support and popularity. Besides, according to understanding of psychology and economics, different market participants, including mean reversion traders and trend traders can also develop their own appropriate rebase arbitrage trading strategies.
c. Store of Value
Projects built on public chains, including Bitcoin, are iterated to add more functions and characteristics, such as total supply, privacy, governance and consensus. Supply is a dimension of our distinctive design. We believe that the increase in supply will be detrimental to holders’ interests, if it is not distributed to the holders in proportion. Therefore, we choose the supply elasticity method to anchor the NFT market index and ease positive or negative demand shocks through supply increases or decreases, so that prices remain relatively stable. The most crucial benefit of this supply method is that when the NFT market continues to prosper, FUN holders can also witness a continuous growth of their assets.
3. The future potentials of the NFT market and the impact of market value growth on our rebase
The above analysis has mentioned that the most significant potential of NFT is liquidity reshaping and revaluation. In reality, the circulation of art is minimal:
1) In reality, artworks must be verified for authenticity, but blockchain technology can guarantee the authenticity of digital artwork without an exhausting verification process;
2) The pricing level for artworks in reality is extremely high, causing a large number of artworks with medium values are submerged;
3) Traditional artworks only receive attention from a small amount of audience and they are sold only through auction houses;
4) Many artworks are difficult to be sold separately. For example, it is difficult for traditional auctions to price each picture of a gallery;
All in all, NFT greatly reduce the transaction cost of digital art and improves its liquidity, thus reshaping the value.
According to the trading volume date (source: https://dappradar.com/nft), the market with the highest transaction volume is NBA Top Shot, and it far surpasses the second place OpenSea, which proves the preference of NFT market participants. In terms of capital flow, according to NonFungible, since 2021, the total NFT transaction volume has an obvious upward trend, reaching the first peak of $20 million on February 21, 2021. More capital injection indicates a significant rise in NFT value; correspondingly, it can also cause a good market effect to further increase transactions and market liquidity.
The NFT market is still in the early developing stage; its market value must show rapid and impressive growth in the future. Since the total token distribution is transparent, the amount of credible NFT Money we create is adjusted by self-decentralized elastic supply. Additionally, taking advantage of this rebase mechanism, the long-term FUN holders will also hold substantial potential profitability when NFT market from the budding period to the booming period.
More info：
website：https://nftfun.org
Telegram：https://t.me/NftFunProtocol
Twitter：https://twitter.com/NFTFunProtocol
Medium：https://medium.com/@NFTFunProtocol
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