By Alejandro A. Tagliavini*
Over the past week and early this week, Bitcoin (BTC) saw unstable pendulum swings, moving in a range and closing in a downtrend just like most altcoins. Factors such as geopolitical tensions in Ukraine, rising global inflation, speculation on interest rates and its supposed correlation with the US stock market are affecting its price.
Some fundamental data looks bullish. The hashrate – which refers to the amount of computing power used to verify transactions – of BTC soared more than 31% over the past weekend, reaching an all-time high of 248.11 EH/s (exahashes per second). By the way, the total capitalization of the cryptocurrency market is around USD 2 B and the dominance rate of BTC has increased slightly to over 42.5%, showing that investors prefer it over Dogecoin, DOT, Cardano or Shiba Inu among many others.
But cryptocurrencies are the tip of the iceberg of a completely new world that is just beginning and that promises so much that, today, most people have not even had the time to find out how fast events are happening.
While the retrogrades -not said pejoratively but meaning those who see an involution- predict a «new normality» that implies more violence, that is, the coercive imposition of «norms» that have to be coerced since they do not occur naturally, they are not natural , like the «sanitary pass», the new normality that is really and naturally taking place implies empowering the human being to unsuspected levels of freedom, that is, lack of coercion, creativity and enrichment.
To understand the phenomenon from the point of view of the economy, let us remember, as I had pointed out in a previous column –Tesla, Elon Musk and Bitcoin: a masterful lesson in economics– that the market, that is, the ordinary people that make it up, is unpredictable, it does not move at the whim of state operators or planners but at its own pace. And it is not moved by costs, that is, the public never decides how much they want to pay for a product according to how much it costs the manufacturer, they decide to buy if they consider that the price suits them, if they feel like paying that price for whatever reason.
The market, people, do not decide to pay a price based on the current fundamentals of a company or investment. Many like to say that they do it based on “expectations”, but it is more like “hope” because expectations refer to the forecast that those fundamentals will be exceeded in the future, while hope refers to that some ideas clear, progressive, with important advances and firm leadership can achieve achievements that are unthinkable today.
I open parentheses, since in this note I mentioned Moderna and Pfizer and, on the other hand, in one of my last columns –Buy Mercado Libre or short the laboratories?– I foresaw the possibility of shorting the laboratories, I note that those who followed the advice gained a few points since, from the highs of February Pfizer and Moderna fall 10% and 20%, and more than 20% and 60% from their historical highs that occurred last year, respectively.
Going back to the topic, «Why do people buy something that doesn’t really exist except in its digital format? Mainly, due to the business opportunities they provide,» says Nicolás Palacios, Chief Digital Officer of Capitaria. Let’s see, NFTs (non-fungible tokens) are the new trend, some are worth fortunes even if they don’t exist according to the old normal. First, you have to know that digital tokens can represent a property, a work of art, an exclusive benefit, a song, and even purely digital goods such as a house or a vehicle inside a digital game, among many other things.
Within these tokens there are fungibles, goods that can be divided and even have a value equal to another of the «old normality», so there is no problem in exchanging them, such as one that is equivalent to a USD 100 bill. But then they are the NFT, the non-fungible, which are unique digital elements, which are not repeated, particular and specific. NFTs, like a famous painting, being unique and identifiable, necessarily come from an author and have an identification that allows them to be tracked to see the increase in their value and transactions.
The price is, as in the real world, market, what people are willing to pay. The most expensive NFT that has been sold to date, during an auction at Christie’s in March 2021, is called «Everydays» and is a collage by artist Beeple Winkelmann, who brought together 5,000 images created by the same user from 2007 to 2021 and was sold for USD 69.3 M. Jack Dorsey, founder of Twitter, searched for his first tweet and sold it for USD 3 M, and thus many personalities and artists are valuing elements that fans and collectors are willing to buy, such as the son of John Lennon that will sell NFT of the Beatles.
NFTs can also provide benefits and exclusive access to users who hold certain digital tokens, allowing them to be part of a virtual elite. And, later, these also serve as a guarantee to request a digital loan, in this case of cryptocurrencies, and without the participation of a bank, the loan is only agreed with another user and a collateral is left, which can be from a digital drawing, even the armor of a video game.
You can also create a token to sell it and add a percentage of royalties to it, in order to receive a commission every time it is exchanged; and also, is possible to buy a token belonging to another person and hold it until it rises in value to sell it.
Even the big companies are investing in the metaverse; the virtual universe that is increasingly developed. The metaverse or metauniverse (a portmanteau of «meta-» ‘beyond’ and «universe») is generally composed of multiple shared and persistent three-dimensional virtual spaces linked to a perceived virtual universe.
This is how NFTs open the door to a world that, together with the blockchain and the metaverse, revolutionize our digital universe, which, due to the broad business opportunities, status, and significance it provides for its users, will continue to make people talk and it becomes the basis for the creation of new platforms that could probably make life easier for us in the “normal” universe.
As Diego Schargorodsky, General Director of Globant in South America, points out, in the new virtual spaces, there are, among many, two popular cases: Pixel and Decentraland, platforms that create their own economic model where non-expendable goods are managed. When buying virtual plots, the currency itself (Mana) is used and users have activities, an avatar, clothing, a house, a story and interact with others.
Although gamming is the sector that has the greatest incidence today, the truth is that, even in smaller sectors, technology has become a great ally. Even in marginal merchandise such as cannabis -a sector that did not «explode» when it became relatively legal, as many predict, but rather remains quite depressed- the cryptographic and virtual world is becoming popular.
Back in 2014, PotCoin made its entrance into the world of cryptocurrencies dedicated to the cannabis industry, and in 2017, it became world famous when former NBA star Dennis Rodman wear a t-shirt with the legend potcoin.com. In 2021, Peakz, an American cannabis brand launched a cannabis bag called Lava Coin on OpenSea, in a metaverse. According to Grundy, although Lava Coin cannot be smoked, as a bonus to purchasing the «first available digital cannabis strain», if the user resides in Oregon or California, they also get «real» physical marijuana.
The nascent cannabis industry, through various digital assets or decentralized finance, can raise capital to execute projects beyond the virtual world. In Colombia, for example, one of the first Latin American countries to approve medicinal use, in 2016, and which has just approved the export of dried cannabis flowers, a group of entrepreneurs created the Bancannabis digital platform where, not only can buy NFT of this plant, but also invest in real crops through a model like crowdfunding.
Criticisms of NFTs range from being a simple publicity stunt to Internet nonsense, but as long as there are people willing to invest real money in them, they will continue to grow and, by the way, in any case, technology, the digital world is unstoppable. Cristian Mazabuel has no doubt that this is open to the field of speculation. “There are many things that end up being fake. There are projects that have risen 1,000% in a week or 2,000% in less than a month».
For example, CryptoMines, as Sergio Morales from InterFinance points out, is a project that intended to be the largest science fiction game based on space travel but announced last December the end of its first version (Legacy), after its token $ ETERNAL suffered an astronomical 99.9% drop, after reaching a high of USD 807.58. But CryptoMines has announced the launch of its V2 version, called “Reborn”, we’ll see if this crypto game, which was one of the largest on the blockchain, can regain the confidence of the community and investors.
Be that as it may, and huge bubbles through as usually happens in completely new and revolutionary ventures, the new normality, a digital and virtual world that implies much more freedom, much more creativity and much more wealth for everyone is unstoppable and will cover practically all aspects of human life.
* Senior Advisor at The Cedar Portfolio and Member of the Advisory Council of the Center on Global Prosperity, de Oakland, California