- Nifty Gateway was acquired by cryptocurrency exchange and custodian Gemini in 2019.
- Co-founder Duncan Cock Foster explains the risks of investing in NFTs.
- The market has racked up $700 million in lifetime NFT sales, according to Cock Foster.
Duncan Cock Foster, co-founder of the Nifty Gateway market acquired by Gemini, has never doubted long-term investment for non-fungible tokens, or NFTs.
The 27-year-old told Insider he always had an “intuitive understanding of the human desire to collect,” which would lead NFTs to capture a market valued at $41 billion.
Growing up in Seattle, Cock Foster spent his teenage years playing the digital card game Magic: The Gathering and collecting sneakers. The problem with these collectibles, however, was interoperability and verifiable ownership.
In the online game RuneScape – which Cock Foster also played – if you purchased an in-game asset, such as clothing for your virtual character, you couldn’t take it to other games.
“Your digital item didn’t exist outside of the context of a single server. That wasn’t possible until blockchains,” he said. “Even back then, people were spending a lot of money on digital items. It just wasn’t things they thought possible for them to actually own.”
NFTs, on the other hand, have verifiable ownership because anyone who has access to the internet can see who owns a certain asset through the blockchain’s public ledger.
“The idea of a digital thing that basically only existed on the internet was really what made the concept of NFTs click,” he added.
In 2018, Cock Foster co-founded Nifty Gateway with his twin brother Griffin after they graduated from Emory University. The startup, which was acquired for an undisclosed amount by cryptocurrency exchange and custodian Gemini in 2019, has already racked up $700 million in NFT sales and has 1 million registered users.
The market has launched an NFT advisory board for institutions and
individuals in February — a mission that Cock Foster says will further Nifty Gateway’s goal of integrating 1 billion people into the nascent space.
“If you are a high-net-worth individual, NFTs are a great diversification tool for your portfolio,” he said, in part due to their divergence from broader cryptocurrency markets.
It was a rough start to the year for big cryptos like bitcoin and ethereum, for example. Over a two-week period, bitcoin is down 16%, while ethereum is down approximately 20%. Altcoins like solana are also down 27%, according to cryptocurrency data dashboard Messari.
NFTs as a diversification tool
While some predicted a bearish winter, monthly NFT trading volumes told a different story.
The NFT OpenSea market hit an all-time high of $4.95 billion in ethereum trading volumes in January, according to blockchain data provider Dune Analytics. Minimum prices for top-tier collections such as the Bored Ape Yacht Club have also increased, even as the digital currency used to purchase them has seen a significant decline.
NFTs as a diversification tool, he said, could be comparable to investing in traditional art. 88% of fund managers recommended investing in art, according to a 2017 report by Deloitte, which specifically cites using investments as collateral.
Art lending markets allow asset managers to underwrite loans, which gives their clients the opportunity to utilize capital more efficiently by leveraging their assets. An anonymous borrower took out an $8 million loan secured by his CryptoPunk collection of 101 NFTs in March.
Cock Foster said the NFT market is much better for individuals to participate in because most of the people who buy and sell are retail traders.
“It’s not like the stock market where you’re competing with some insane quant fund,” he added. “Most of the people on the other side of the business you’re doing are also individuals.”
With any speculative asset, however, comes risk for the investor – specifically with the title of an NFT collection.
Yuga Labs, creators of the Bored Ape Yacht Club, was targeted by a hack that led to a loss of at least $3 million in NFTs on Tuesday. The attacker logged into his official Instagram account and sent a
post to followers.