(Bloomberg) — Two former Barclays Plc traders have swapped junk bonds for unique computerized art, amassing a collection of Bored Ape Yacht Club nonfungible tokens in a bet on the growing lure of digital collectibles.
Ovie Faruq and Mike Anderson, former high-yield cash and derivatives traders, have amassed 70 images of apes in various states of boredom, and three Damien Hirst NFTs, among other digital images. They wouldn’t reveal the value of their collection, or specific ID addresses, citing security concerns, but a Sotheby’s auction in September of similar images gives a ballpark figure. A lot of 101 Bored Ape tokens was sold for $24.4 million — and valuations have increased since.
“It’s an illiquid market with large price swings, so much of the same discipline and skill around trading high-yield and distressed assets are transferable,” Anderson told Bloomberg News in a joint interview with his business partner. Both traders left Barclays in December, almost a year after they started to collect NFTs.
A cousin of the cryptocurrency market, NFTs, or digital collectibles, have soared in value in recent years, drawing investment from venture capitalists such as Andreessen Horowitz. The NFT market will approach $30 billion in value this year and reach $80 billion in 2025, forecasts Stephanie Wissink, an equity analyst at Jefferies.
The Bored Ape Yacht Club tokens, which have been limited to 10,000, have been at the forefront of the NFT craze, rising several times in value since their release in April 2021 and by 73% this year, according to CoinGecko, a cryptocurrency aggregator. Owners also get “airdropped,” a kind of reward system, which includes other NFTs and so-called ApeCoins. The market, though, remains volatile and fraught with risks.
The U.K. government followed the trend this week when the Chancellor of the Exchequer, Rishi Sunak directed the state-owned Royal Mint to create an NFT, which is expected to be rolled out this summer.
Boom and Bust
Faruq likened the NFT craze to the boom and bust cycle of the dot-com era in the late 1990s, whose results continue to shape the investment world decades later. Faruq and Anderson said that their phones “blew up” with interest when other bankers found out that they left their jobs to pursue NFT investing full-time.
“In the dot-com bubble you saw 90% of companies go bust, but the 10% that survived are some of the world’s biggest companies,” he said. “It will be the same for crypto and NFTs, and we’re focused on utilizing our skillset to find the 10%.”
According to OpenSea, a NFT marketplace, prices for Bored Ape Yacht Club tokens first surged above 100 ether ($329,183) in January. Their values have largely fluctuated since, and over the last seven days averaged 118.75 ether, with a transaction volume on this platform of about $18.5 million in the past week.
That said, the value of digital art is still tricky to pin down — most transactions on the LooksRare platform show users selling tokens to themselves in a bid to earn more rewards. On the other hand, a copy of the first-ever tweet — by Twitter Inc. co-founder Jack Dorsey — has been offered for almost $48 million on OpenSea, 16 times what the owner paid for it a year ago.
NFTs use blockchain to create a digital signature that make them unique. They have come under closer scrutiny recently after a string of NFT projects faltered and essentially died, sparking memories of the ‘Initial Coin Offering’ bust of 2018, when thousands of digital tokens quickly lost value.
There’s a lot of work to be done to develop the market. The partners are seeking to invest in “seed opportunities” in web3 startups — a phrase used to describe the blockchain-driven internet for a decentralized economy. They’re interested in companies seeking to build infrastructure for the digital world, including crypto tokens with a focus on play to earn models, where participants take part in online games for digital payouts.
One of the partners, Faruq, has even dabbled in creating digital art.
“I’ve also started creating and selling crypto art myself,” he said. “I used to do a lot of artwork and coding when I was younger, so it’s been nice to rediscover these interests.”
(Adds U.K government’s plans to issue an NFT in sixth paragraph.)
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