18th Feb 2022
Although their blockchain structure and high-profile sales may make it seem otherwise, NFTs (non-fungible tokens) are simply commodities that can be bought and sold like any other. The marketplace where a commodity is traded can be extremely valuable, often much more so than the commodities themselves (think Amazon, Airbnb, or Etsy). Therefore, rather than focusing on specific NFTs or other types of top NFT stocks, investors are increasingly showing interest in NFT marketplaces and infrastructure.
Leading the list is OpenSea, which has established itself as a prime leader in the field of NFT commerce. Founded in 2017, OpenSea now holds an estimated 97% of NFT market share1. (Think about it this way–Google is responsible for “only” 92% of internet searches). In July 2021, OpenSea raised $100 million in venture capital with a $1.5 billion valuation in a round led by Andreessen Horowitz. The company’s impressive performance and market dominance have led many experts to believe that if it were to go public, it would likely be one of the top NFT marketplaces stocks and could lead the NFT stocks list.
What is NFT stock? The Coinbase example
Coinbase, the largest cryptocurrency exchange in the U.S., has already demonstrated that the market is ready for crypto marketplaces to go public. Coinbase allows users to buy and trade bitcoin easily, rather than having to mine it using sophisticated, powerful computers in a process that requires extensive know how. Like Spotify and Palantir, Coinbase decided against a traditional IPO and instead posted its shares directly on the Nasdaq stock exchange in April 2021.
The stock has had its ups and downs in the volatile pandemic economy. However, in November 2021, in the lull between the Delta and Omicron variants, it reached a peak price of over $357 per share, indicating the potential of crypto and NFT stocks after the pandemic subsides. Coinbase is expected to be the harbinger for a plethora of other crypto and NFT infrastructure companies that are expected to go public in the future.
Will OpenSea go public?
Speculation about an OpenSea IPO reached a pitch in December 2021 when Brian Roberts joined OpenSea as the company’s first CFO. Roberts, who served as the CFO of the ride-share company Lyft, is credited with guiding that company through its multi-billion IPO in 2019, leading market observers to speculate that he may lead a similar process at OpenSea. Roberts himself stoked the speculation in an interview with Bloomberg when he said that, “I’ve seen a lot of P&Ls (profit and loss statements) but I’ve never seen a P&L like this. When you have a company growing as fast as this one, you’d be foolish not to think about it going public.2” Roberts isn’t in a rush–in the same interview he also mentioned that the NFT industry is still in very early stages, so-called “day one”, and compared it to the internet in the 1990s. However, he made it clear that an IPO is a definite consideration, especially if the company’s 2022 trajectory is similar to that of 2021.
OpenSea’s future hasn’t always looked so rosy. Two years after going live, the company had only 4000 users and was barely generating revenue. However, after Mike Winkelmann, the digital artist known as Beeple, sold an NFT of his work for $69 million in March 2021, demand for NFTs skyrocketed and OpenSea was perfectly positioned to leverage that demand.
In August 2021 the company’s sales volume grew tenfold to $3.4 billion, which meant an $85 million commission for OpenSea in one month3. In 2020, the company processed only $94.8 million in NFT sales volume, but in 2021, it is expected to surpass $27.5 billion, a 30,000% increase from the previous year4.
So, how did OpenSea do it? Contrary to popular wisdom that recommends focusing on a specific niche, OpenSea is open to all types of NFTs. The OpenSea team created a flexible platform that is easy to use, marketing it as the “eBay for cryptogoods”. They also included lots of user-friendly features like an advanced filtering system and an automatically-generated webpage for every NFT that is created, making it easy for users to display their NFTs on their social media channels and helping to establish NFTs as status symbols.
The company is also the first marketplace to work with multiple blockchains. Although it was originally built on Ethereum, it now supports other blockchain currencies as well, so users can buy and sell in the cryptocurrencies they feel most comfortable with. Most of all, the company’s timing was impeccable. The development was done before the surge in demand, so everything was in place to make the most of the opportunity following the media hype of the Beeple sale.
Other NFT marketplaces to watch in the Metaverse
Although OpenSea is the dominant NFT marketplace, it isn’t the only player in the field that’s garnering interest from investors. Coinbase, which is already a publicly traded company, announced in October 2021 that it plans to launch its own NFT marketplace in 2022. Even prior to launch it’s already creating demand and has more than 2.5 million early sign ups. Since it’s already a publicly traded company, it could easily become potentially one of the best NFT stocks available and a good indicator of NFT stock prices.
Another leading player in the NFT commerce world is Mintable. Like OpenSea, Mintable is an NFT marketplace that sells and auctions a wide variety of NFTs including works by Grammy Award-winning artists and various high-profile artists and celebrities. Mintable has made a seamless user experience its differentiating feature, offering credit card purchases for NFTs and a gas-free minting option, overcoming major barriers of entry for people who want to trade NFTs on Ethereum. It’s been a successful strategy–Mintable boasts 10 million monthly users.
In December 2021, Mintable announced a partnership with ImmutableX to further reduce friction for developers and consumers and enable scaling. ImmutableX is also purchasing carbon credits to offset gas consumed on Ethereum, making any NFT activity on the platform completely carbon neutral. Major investors are taking note of the company’s innovations. Mintable has already raised $13M from high-caliber investors including venture capitalist and television personality Mark Cuban, Sound Ventures, a venture capital firm founded by Ashton Kutcher and Guy Oseary, and TIME Ventures, the investment fund for Marc Benioff5.
There are niche NFT marketplaces that are worth watching as well. For example MakersPlace, an NFT marketplace that focuses on digital art, secured $30 million in Series A funding in August 2021, led by Bessemer Venture Partners and Pantera Capital, with additional participation from Coinbase Ventures, Sony Music Entertainment, Uncork Capital, Dragon Digital Assets and 9Yards Capital6. The company plans to use the funding to attract NFT artists and aficionados, including the type that are willing to pay big bucks for the art they love.
Rarible is another NFT marketplace that focuses on digital artists and creators. Although it has only raised $16M since its launch in 2020, it already has 11,000 users–more than half the number of users on OpenSea7 and offers innovative royalties options for creators.
NFT marketplaces the “amazon” of the crypto world?
If OpenSea and other NFT marketplaces go public, they could soon become the most attractive NFT stocks to buy and any one of the leading players has the potential to become the Amazon of the crypto world. While the market is still young, it’s developing fast. If nothing else, it’s worth keeping an eye on how this emerging arena develops.
[Note that NFTZ does not invest directly in NFTs and mention of a marketplace or NFT in this article does not entail that it is included in the NFTZ ETF holdings. See here for a complete list of ETF holdings.]
1 “How OpenSea Captured 97% Of The NFT Market”, November 11, 2021 https://tokenist.com/how-opensea-captured-97-of-the-nft-market/
2 “Former Lyft CFO Roberts Joins Crypto Startup OpenSea”, December 6, 2021, https://www.bloomberg.com/news/articles/2021-12-06/former-lyft-cfo-roberts-joins-crypto-startup-opensea
3 “What Every Crypto Buyer Should Know About OpenSea, The King Of The NFT Market”, November 23, 2021 https://www.forbes.com/sites/jeffkauflin/2021/11/23/what-every-crypto-buyer-should-know-about-opensea-the-king-of-the-nft-market/?sh=83053e2f8923
4 “How OpenSea Captured 97% Of The NFT Market”, November 11, 2021 https://tokenist.com/how-opensea-captured-97-of-the-nft-market/
6 “Pantera, Coinbase Ventures and Sony back NFT-focused MakersPlace in $30M Series A”, August 4, 2021 https://cointelegraph.com/news/pantera-coinbase-ventures-and-sony-back-nft-focused-makersplace-in-30m-series-a