Coachella NFTs

Good morning. Today we've got a surprising move from the SEC, a metaverse land rush, NFTs at Coachella, and more!

Bonus Content Coming Soon: I'm close to having my notes out from Messari's Crypto Theses for 2022. I'll include a link to my notes in this newsletter, however, the full report is definitely worth a read. The report is now in podcast form and can be found here.

Market Update (as of 6:57am ET):

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Top 5:

1. Metaverse real estate sales top $500 million in 2021. And that number is expected to double in 2022 according to MetaMetric Solutions, who reported that January sales alone exceeded $85 million. Real-estate sales in the metaverse are dominated by the "Big 4" virtual worlds: Sandbox, Decentraland, Cryptovoxels, and Somnium. Republic Realm, an NFT and metaverse investment firm, purchased land in Sandbox for $4.3 million to develop 100 "Fantasy Islands" along with a market for boats, jet skis, etc. Ninety of the islands sold for $15,000 on day one and some are now reselling for $100,000. Another firm, Tokens.com, has purchased $16 million worth of land in Decentraland's Fashion District and is about to announce deals with two North American apparel brands that will be renting space from the company.

While I'm personally skeptical of metaverse real-estate projects, I do think they create some interesting opportunities/questions. Could there be a metaverse REIT (real estate investment trust), will DAOs form to invest in metaverse real estate similar to ApeDAO, what kind of financial infrastructure (e.g., mortgages) will form around metaverse real estate?

SSS (sat-sized summary): Metaverse real estate sales have exploded and show no signs of slowing down. MetaMetric Solutions forecasts $1 billion in metaverse real estate sales in 2022 and investors, speculators, and other companies are piling in.

2. India decides to tax crypto, and introduces CBDC. On Tuesday India's finance minister announced plans to tax crypto income at a rate of 30% and also introduced plans for a central bank digital currency (CBDC). The announcement is welcome news in the world's largest democracy given there were concerns late last year that the government would ban crypto outright.

SSS: The Indian government backs away from plans to ban crypto and decides to tax gains on crypto transactions at 30%. The country also plans to launch a digital version of the rupee, with more details to come.

3. Coachella is launching NFTs with accompanying perks. The music festival will have three NFT collections each with different price points and perks. The top-tier NFT, known as the Coachella Keys Collection, will consist of 10 tokens that will offer lifetime access to the festival, a celebrity chef dinner, and other benefits. Tickets and festival passes are ideal use cases for NFTs outside of the art world, with benefits including:

- An ability to limit access to events with limited capacity
- Easy digital resale and transfers, with a record of the transaction on the blockchain
- Revenue sharing with the artist or event venue for each resale of the NFT
- Easy segmentation of customers with certain "levels" of NFTs that could provide VIP access, early admission, etc.

The festival is partnering with FTX to offer the tokens on the Solana blockchain.

SSS: Coachella is launching three NFT collections one of which provides you with lifetime access to the festival. NFTs as tickets to concerts, games, and other events are a perfect use case for the technology and I think more venues, teams, and artists will begin to leverage NFTs to enhance customer experiences and capture additional revenue.

4. Solana Labs launches payments protocol. The new protocol called 'Solana Pay' will allow merchants to accept crypto payments including the USDC stablecoin, SOL, and other Solana native tokens. The Solana Labs team points out that, "merchants and consumers want a frictionless experience without taking on unnecessary volatility risk, and consumers don’t necessarily want to transact with their investments." The new protocol provides "real-time" transactions with fees costing less than a penny. Solana Pay integrates with digital wallets from FTX, Phantom, and Slope and Solana Labs is currently working with Shopify to support transactions on their site.

SSS: Solana is building infrastructure on its blockchain to facilitate crypto-payments. The new protocol, Solana Pay, allows merchants to accept crypto payments from consumers using Solana based tokens. Solana Pay is now in direct competition with companies like Visa and Mastercard and the head of payments at Solana Labs says the team is "trying to change the whole paradigm of payments to one that puts merchants in control by creating rails that are decentralized, permissionless...and enable new commerce experiences in web3."

5. SEC departs from usual rejection of spot-Bitcoin ETF. Is there a possibility that the SEC is reconsidering its stance on spot-Bitcoin ETFs? I lean towards no, but the Commission has asked Bitwise, a crypto index fund manager, to clarify how the investment firm plans to prevent fraud, share price manipulation and other issues in their proposed spot-Bitcoin ETF product. This request is unusual in that the SEC has typically outright denied requests rather than going back to the applicant with further questions. Bitwise has 21 days to respond to the SEC's questions.

SSS: The SEC may be softening (very slightly) its stance on spot-Bitcoin ETFs. The Commission has asked clarifying questions on how Bitwise would protect investors from fraud which is a departure from their usual denial of applications. I still think it's a long shot that this ETF application will get approved, but its worth watching given the change in tactics from the SEC.

Top Sharers of the Crypto Top 5:
1. Donna Y. - Nashville, TN
2. Jake Y. - Greenville, SC
3. Forrest H. - Evansville, IN

External Resources:
1. Cryptopedia from Gemini - if you see a word, acronym, or phrase in this newsletter that you don't understand, there's a good chance you can find an explanation here
2. Crypto Explainer+ - intro level courses on Bitcoin, Ethereum, decentralized finance, NFTs, and more

Disclaimer: The information contained in this newsletter shall not be understood or construed as financial advice. I am not an attorney, accountant or financial advisor, nor am I holding myself out to be, and the information provided is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation.