It’s been a wild year in the crypto world. In the first half of 2021, the NFT industry exploded with record-breaking sales, and then fell dramatically over the summer. The popular cryptocurrency Bitcoin rose to unprecedented heights in the spring and in June, President Nayib Bukele led El Salvador to become the first country to adopt Bitcoin as legal tender and use a national crypto wallet.
The dramatic changes have left many investors holding their breath and unsure of what to expect next. While there is no surefire way to predict the future, one of the best ways to assess an industry is to watch what venture capital is doing. And in the first half of this year, Venture Capitalists (VCs) invested $17 billion in the crypto space, which is almost equal to the total amount raised in all previous years combined. That’s a number that’s definitely worth paying attention to.
Much of the VC investment has been in the crypto and NFT ecosystem. For example, the NFT marketplace OpenSea raised $100 million this summer in a Series B round led by Andreesen Horowitz and is now valued at $1.5 billion. Katie Haun, who co-leads Andreessen Horowitz’s new crypto investing platform that raised $2.2 billion said recently, “There’s a mainstream recognition now that crypto is more of an architecture and operating system, and that all kinds of products and services can be built on top of cryptosystems.”
What is a Blockchain Ecosystem?
Much of the public attention on the blockchain has been on specific NFT purchases or the value of cryptocurrencies like Bitcoin. That has led people to perceive blockchain as a product when it is actually more of an architecture and operating system upon which all types of products and systems can be built.
Think about it this way. In the beginning, Amazon sold books. The books were the product, and Amazon was the ecosystem. Buying an art NFT today is like buying a book on Amazon in the early stages, and investing in blockchain infrastructure is like investing in Amazon itself, an ecosystem that may soon expand far beyond the products for which it was originally conceived.
Amazon isn’t an anomaly. Many companies that exploded in the past two decades are infrastructure and ecosystems, from eBay and Alibaba to PayPal, CoinBase, and many more. VCs now see the same type of potential in the ecosystems and infrastructure surrounding NFTs and other blockchain products, and that’s where many of them are investing. Many analysts believe that the NFT revolution is only a matter of time and that it has the potential to drive growth in almost every sector.
With all this in mind, how might an investor looking for a way into this disruptive arena, approach the question of the best blockchain and NFT stocks (as they are referred to in mainstream media) to buy? Below are some ideas.
1. Defiance’s NFTZ (NFTZ)
Defiance’s NFTZ launched in December 2021, joining a suite of first-mover ETFs that include the first 5G ETF with over £1.2 billion in AUM.
As an Exchange-Traded Fund (“ETF”) rather than a simple stock, NFTZ effectively enables you to invest in several different companies in the blockchain ecosystem (or metaverse) rather than focusing on a single company. This means that you can buy and sell it like a stock, but its net asset value is linked to the value of its composite stocks, which in this case, is an index of publicly listed companies with relevant thematic exposure to the NFT, blockchain, and cryptocurrency ecosystems.
While it’s not a pure NFT ETF -it taps not only into companies that produce NFTs directly but also those that compose and affect the NFT markets as a whole; you could call it a meta ETF or metaverse stock, because of its reach across the whole blockchain universe – it is positioned to capture potential growth in an industry that is showing extreme promise. It promotes an investment strategy that seeks exposure to this sector while mitigating the risk of buying an individual stock.
2. Coinbase (COIN)
With approximately 73 million verified users, 10,000 institutions, and 185,000 ecosystem partners in over 100 countries, Coinbase has come a long way since its launch in 2012. Back then it was considered quite radical that the company offered an easy and secure platform for anyone to send and receive Bitcoin.
It has since expanded to cover the broader cryptocurrency space, and in October 2021, Coinbase announced its plan to launch a marketplace that lets users mint, collect and trade NFTs. It’s not operational yet, but users can already sign up to a waitlist for early access.
The marketplace is set to include “social features” and tap into the so-called creator economy. It pits Coinbase against other crypto start-ups like Gemini, Binance and OpenSea, and moves the company beyond its existing business model which relies on transaction fees. It has contributed to some analysts’ positivity towards Coinbase’s positioning in the crypto economy. With a $90.4 billion market capitalization and strong price-to-earnings ratio, some see Coinbase’s potential as the crypto and NFT space grows.
3. Mattel Inc. (MAT)
Most of us know Mattel as a company that makes and sells popular toys like Barbie, but this eternally nimble company is now jumping into the world of NFTs and putting its first digital art featuring its Hot Wheels vehicles up for sale. Mattel is one of the first major toy companies to enter the NFT space, and the company has announced that it is planning NFT auctions for its other toy brands. “Mattel is creating a new way for innovation and artistry to converge in the toy space and will continue to express its brands in the NFT format,” the company said in a statement. Mattel’s popular brands are still going strong, and the company recently beat market expectations on earnings per share and revenue, which could make it a good bet for investors.
4. Plby Group (PLBY)
PLBY Group, founded as Hugh Hefner’s Playboy Enterprise, went public via SPAC (special purpose acquisition company) in February 2021. Looking to move beyond its iconic magazines, the company is now venturing into social media, metaverse and NFTs.
PLBY’s Centrefold subscription service is its new social media platform set to launch in 2022. It joins the firm’s initial foray into NFTs with its Rabbitars, digital art pieces of cartoon bunnies stored on the Ethereum blockchain. They sold out within hours for a total of around $9 million. PLBY’s stock surged more than 80% in April largely due to excitement at how it could capitalize on the NFT marketplace. Its partnership with online NFT marketplace Nifty Gateway is expected to bring original works from Boston-based collage artist Slimesunday in collaboration with the magazine’s editorial curators.
3 analysts in December 2021 had positive outlooks for PLBY, with one branding its NFTs business as a “massive opportunity.”
5. Sega Sammy Holding (6460)
The Japanese gaming company Sega Sammy entered the NFT market this summer, launching NFTs related to the intellectual property from its iconic games. Sega Sammy partnered with the Canadian start up Double Jump, which develops NFTs and blockchain games, to create the digital collectibles. No details are available yet, but experts believe that in the future the company plans to use NFTs in popular games, where the NFTs will be owned by the users. NFTs have enormous potential in gaming, making this stock one worth watching.
Risk Disclosure
Investing involves risk. Principal loss is possible. As an ETF, the fund may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. The Fund is not actively managed and would not sell a security due to current or projected underperformance unless that security is removed from the Index or is required upon a reconstitution of the Index.
The Index, and consequently the Fund, is expected to concentrate its investments (i.e., hold more than 25% of its total assets) in the securities of Crypto and Blockchain Companies. As a result, the value of the Fund’s shares may rise and fall more than the value of shares of a fund that invests in securities of companies in a broader range of industries.
The mechanics of using blockchain technology to transact in digital or other types of assets, such as securities or derivatives, is relatively new and untested. There is no assurance that widespread adoption will occur. A lack of expansion in the usage of blockchain technology could adversely affect Crypto and Blockchain Companies. Transacting on a blockchain depends in part specifically on the use of cryptographic keys that are required to access a user’s account (or “wallet”). The theft, loss, or destruction of these keys could adversely affect a user’s ownership claims over an asset or a company’s business or operations if it was dependent on the blockchain.
The Fund is considered to be non-diversified, which means that it may invest more of its assets in the securities of a single issuer or a smaller number of issuers than if it were a diversified fund. As a result, the Fund may be more exposed to the risks associated with and developments affecting an individual issuer or a smaller number of issuers than a fund that invests more widely. This may increase the Fund’s volatility and cause the performance of a relatively smaller number of issuers to have a greater impact on the Fund’s performance.
Investments in non-U.S. securities involve certain risks that may not be present with investments in U.S. securities. For example, investments in non-U.S. securities may be subject to risk of loss due to foreign currency fluctuations or to political or economic instability. There may be less information publicly available about a non-U.S. issuer than a U.S. issuer.
The BITA Next Gen NFT Index is a rules-based index that consists of the common stock (or depositary receipts) of companies that are building a platform or developing technology to use, or have at least one use or test case for using, NFT (Non-Fungible Token), cryptocurrency trading platforms, cryptocurrency mining, cryptocurrency banking or related services, or blockchain-related technology, as well as companies that have announced publicly that they intend to enter such space or have begun working on such products (collectively, “Crypto and Blockchain Companies”). The Index consists of companies listed on North American and European exchanges and aims to capture the potential upside generated by earnings related to the adoption of crypto- and blockchain-related technologies, including NFTs and cryptocurrency.
NFTZ is new with a limited operating history.
Go to defianceetfs.com/NFTZ to read more about NFT including current performance and holdings information. Fund holdings are subject to change and should not be considered recommendations to buy or sell any securities.
The Defiance ETFs are distributed by Foreside Fund Services, LLC.
The Funds’ investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contain this and other important information about the investment company. Please read carefully before investing. A hard copy of the prospectuses can be requested by calling 833.333.9383 or at defianceetfs.com.
The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. The content was purely for informational purposes only and not intended to be investing advice.
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