Footprint | What is the ultimate "blue chip" crypto asset: NFTs, Bitcoin, or land?

The so-called risky assets may not be as unstable as you think.

• Jun. 2022, Vincy
• Data Source: Footprint Analytics – BTC & ETH Trend Analysis

The biggest change in today's cryptocurrency market compared to the last bear market is the existence of different types of assets.

Instead of choosing between Dash, Litecoin, Ethereum, Bitcoin, etc., investors can now invest in digital assets in NFTs and the Metaverse.

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Compared to BTC and ETH, these new and experimental assets carry higher risks. While it's challenging to objectively measure risk, we can use on-chain data to assess their price volatility.

As the bear market unfolds, it's a good time to compare crypto assets and understand the future prospects of blue-chip assets. Asset comparisons may include: cryptocurrencies, NFTs or virtual land in the Metaverse.

In this article, we will compare three hypothetical investors: Abe, Bob, and Cathy. A year ago, they all allocated funds to different asset categories in cryptocurrencies.

• Abe's portfolio: 50% BTC & 50% ETH.
• Bob's portfolio: 50% BAYC & 50% CryptoPunks.
• Cathy's portfolio: 50% Decentraland Land & 50% Sandbox parcels.

The above comparisons are not one-to-one (e.g., a year ago, buying 3 Bored Apes at $6,000 each is a completely different move from investing $6,000 in a long-term "safe" token like ETH). Therefore, we will create three "reasonable" portfolios based on a 50%:50% approach, but the results may not be identical.

Below, we will analyze the performance of each investor's portfolio and discuss why their investments may be more volatile than others.

Abe Token Investment Portfolio

Investing in tokens has advantages over investing in NFTs in terms of liquidity and divisibility. We can set a precise dollar value for BTC and ETH on any given day, purchase any quantity, and obtain a fair market price.

One year ago today, on June 28, 2021, the price of BTC was $35,867. For ease of calculation, we rounded to the nearest hundred—BTC at $35,900, ETH at $2,160, rounded to $2,200.

At that time, investors in token investments would choose a good entry point. The market was in turmoil after the enthusiasm of Coinbase's listing on April 13, 2021, and the Federal Reserve lowering rates to 0.25% to stimulate the economy. However, the prices of cryptocurrencies temporarily crashed due to strict regulatory measures in China.

Abe bought in at the bottom, investing $50,000 in BTC and $50,000 in ETH (obtaining approximately 1.39 BTC and 22.7 ETH).

Subsequently, prices skyrocketed continuously until November 8, 2021, when Abe's initial investment value reached $203,767.52.

Retail investors and traders began reducing risk assets, dampening the speculative fervor for cryptocurrencies.

• From January to June, the Fed raised rates by 75 basis points, the largest increase in 28 years.
• In February, the Russia-Ukraine conflict led to a downturn in the macroeconomic situation, putting the cryptocurrency market in a bearish environment.
• Most importantly, in May, Terra Luna's collapse appeared to mark the beginning of a series of "accidents" in the blockchain industry.

All these events led to a decline in the prices of BTC and ETH assets, which for most non-crypto individuals are substitutes for the "cryptocurrency price" itself.

On June 28, 2022, Abe's investment portfolio of 1.39 BTC and 22.7 ETH was valued at $54,197.7, a 45.8% decline from the all-time high and a 73.4% drop.

NFT Investment Portfolio

Although NFTs are not as liquid as BTC or ETH, they possess uniqueness and collectible value. Holders can also derive a certain dollar value from them when the market is in a better condition.

What was the NFT market like in June 2021?

• Emerging and construction period:

In June 2017, the world's first NFT project, CrytoPunks, was officially launched, pushing the concept of NFT to its peak. Led by OpenSea, NFT transactions became more convenient and comprehensive, gradually expanding the NFT application field from games to art.

• Expansion period:

By 2021, Axie Infinity's sales volume surged, driving the development of the NFT market. That year, BAYC was also established and entered the public eye.

This was the best time for Bob to enter the market, as NFTs were still in their infancy. Because NFTs follow a rule where the earlier they are, the rarer their attributes, the higher their value, and prices are relatively balanced at lower levels (NFT trading market is not yet mature with low trading frequency).

BAYC and CryptoPunks were among the top NFT projects in terms of trading volume in 2021.

Assuming Bob purchased 1 BAYC (3.5713 ETH) and 1 CryptoPunk (28.9191 ETH) at the average price on June 28, 2021, his initial investment value was $71,478.88.

In 2021, global economic development was severely impacted by the pandemic, and the loose fiscal policies of major economies led to inflation and currency devaluation, prompting users to shift to art, NFTs, and cryptocurrencies like BTC. The NFT market's trading activity increased from August 2021 to March 2022.

If Bob sold at the peak on November 8, when ETH was $4,826.25, and the average prices of BAYC and CryptoPunk were 43.8835 ETH and 98.5848 ETH, respectively, his investment portfolio would be worth $687,587.63, a 861.95% increase.

The crypto market crash led to a waning interest in NFTs, greatly affecting their overall trading volume and market value decline. Within the last 90 days, total trading volume decreased by 63.84%, and total market value dropped by 38.07%.

As of June 28, 2022, with ETH at $1,144, BAYC at 113.5035 ETH, and CryptoPunk at 77.6991 ETH, Bob's investment portfolio is valued at $218,735.77, a 206.01% increase. From the all-time high, it has dropped by 68.19%.

Clearly, by the beginning of summer 2022, blue-chip NFTs and the so-called "safe" cryptocurrency investments in BTC and ETH are not as volatile as many believe.

*Because investing half of your portfolio in BAYC NFTs in June 2021 would be quite aggressive, we adopted a different 50%:50% approach in this portfolio. Bob bought 1 Punk and 1 Ape.

Land Investment Portfolio

Due to the interest in the metaverse in June 2021, Cathy can be seen as an early adopter. At that time, the term "metaverse" had not yet become a household name.

It was four months before Facebook changed its name to Meta.

Will the metaverse be a new version of "Second Life"? Will VR headsets be needed to view it? If we weren't deeply involved in cryptocurrencies, most people had no idea what it would be.

But the rumors gradually revealed. On June 4, Sotheby's opened a virtual gallery in Decentraland, causing a sensation as the first game to break $1 million in a metaverse land auction.

On June 28, 2021, Cathy became a "landlord" in the metaverse. Her purchase was one of the 37 NFT sales in Decentraland, generating a total of $148,500.

Because all transactions on the blockchain are recorded, we can directly view and analyze all LAND sold on that date.

The average price on June 28 was about $4,000, which seemed like a reasonable assessment based on the sales amounts.

Therefore, Cathy started entering the virtual world by purchasing a piece of land for $4,000—perhaps this one:

She also added a piece of LAND in the Sandbox. At that time, searching for "sandbox" wouldn't easily lead one to think it would dominate the headlines of the metaverse due to the 3842% surge in its token price in just a few months.

On June 28, 46 NFTs were sold, bringing in $43,500 in revenue, with an average price of $945. This was higher than the median price that day by a few hundred, but still accurate enough for general analysis.

To maintain a near 50%:50% ratio for these two major asset classes, Cathy purchased 1 piece of Decentraland LAND for $4,000 and 4 pieces of Sandbox LAND for $945 each, with a total investment cost of $7,780.

She would prove investing in LAND was a wise choice. By November 8, 2021, when ETH and BTC reached their peaks, the average selling price of Decentraland increased by 3.0469 ETH to $14,705. The Sandbox LAND's average price soared to $6,096, a 734.62% increase.

If we simply calculate based on averages, the 1 Decentraland LAND and 4 The Sandbox LAND she purchased would be worth $39,089.

If we look at the real assets mentioned above, their cost on June 28, 2021, was slightly less than $4,000, so they have increased by $59,135. They were sold on November 15 for $55,313, the closest to the ETH peak price.

Over the following year, as trading volume for Decentraland and The Sandbox declined to ATLs of 76.81% and 79.03%, respectively, the prices of metaverse land also fell.

As of June 28, 2022, Cathy's investment portfolio decreased by $14,811 from the ATH, a 62% decline. Despite the drop, it still far exceeds her initial investment. Metaverse land is evidently very unstable and can be seen as a Hail Mary game rather than a safe "blue-chip stock."

Conclusion

While NFTs and Metaverse LAND saw immense growth during the bull market, on-chain data from top projects indicates that their prices are not as unstable as many believe compared to "safe" assets like BTC and ETH.

In this article, we created three hypothetical investment portfolios and found that safe cryptocurrencies experienced larger declines from their ATHs (as of June 28) compared to investing in NFTs and Metaverse LAND. The returns on the latter two "higher-risk" assets also significantly increased during the bull market.

While there are several possible explanations for this (such as institutions finding it harder to suppress NFT and LAND prices), this data supports the view that top NFT and Metaverse LAND projects performed very well throughout the past year: in prosperity, recession, and collapse.

This article is from Footprint Analytics community contributions

The Footprint Community is a global collaborative data community where members use visualized data to create impactful insights together. In the Footprint community, you can get help, build connections, and discuss blockchain-related learning and research topics like Web 3, Metaverse, GameFi, and DeFi. Many active, diverse, highly engaged members are fostering a worldwide user group to contribute data, share insights, and drive community development.

The above content is for personal opinions only, for reference and communication purposes, and does not constitute investment advice. If there are obvious errors in understanding or data, feedback is welcome.

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