Over the past several weeks I’ve noticed a shift in both the trending NFT collections as well as the investor sentiment when it comes to what they expect out of projects. For months I’ve been preaching NFT’s with utility will become the standard in 2022. I think it’s safe to say after a period of 2 weeks where Proof Collective went to an eye watering 90 ETH floor, Vaynersports Pass launched to huge fanfare, and several software passes including Premint and Alpha Sharks had successful launches, utility passes are the new meta and are here to stay. Here is what you need to know to capitalize on this trend and why I think this is the best way to make reliable income in the NFT space at the current moment.
The first thing I think about when making literally any NFT purchase is “how will I make my money back?”. Cost basis reduction is something I’ve talked about in almost every article I’ve posted. If there is not a clear path to getting my capital back I don’t want to put my money into a project. By investing in a utility pass with a reputable team and clear vision, you give yourself the best chance of getting your initial investment back. Let’s use the Moonbirds launch from today as an example. If you bought the Proof Pass a couple weeks ago for 50 ETH you got to mint 2 Moonbirds today. So far today the average cost for a Moonbird has been 11.79 ETH. This means your cost basis on that one Proof Pass is now 26.42. On top of that the value of the pass is now at 66.6. This means your total unrealized gains are 40 eth or $120,000. Not bad for 2 weeks of work. Proof Pass was the cow, Moonbirds was the milk. By selling the milk you made a good chunk of your money back. These are the calculations I make with every purchase. What will this NFT do for me to get my money back? What milk will it provide? In this case Proof got you your initial investment back very very quickly. This is why utility passes are my focus in 2022. With a PFP project you hold a picture of a cartoon animal and hope for the best. With utility passes, you get value back, giving you a great chance of making profit and walking away a winner.
Not every utility pass is the same. Before I go into some utility passes I’m paying attention to at the moment let’s go into how I research them. First and foremost is the team behind it. In order to provide utility to holders the team behind the NFT needs to be strong in 2 areas, connection and capital. In my opinion connection is the most important factor in this equation. For instance, by investing in Proof, you are investing in their CEO Kevin Rose. Kevin Rose is a tech industry titan who has founded many successful tech startups. These connections will in turn provide value to the holder. He’ll be able to leverage these connections to hypothetically provide NFT holders access to industry events, software, and other high value experiences. By investing in Veefriends you get access to Gary Vaynerchuk’s connections. You get to attend Veecon, receive his books, and experience other events Gary organizes. Connection is the fire, and capital is the gasoline. This Moonbirds launch raised Kevin Rose close to $100 million dollars, allowing Kevin to take that money and start spending it on connections he has to provide even more value to holders. Moral of the story, the team behind a utility pass is everything. If they are an undoxxed no name team, odds are they won’t be able to provide you much value. The next thing I look at is the fundamentals. I want a high unique ownership percent, typically over 50% as well as a decent entry point. If the price is low, that means reducing the cost basis will be much easier. Despite providing provable value, I’m not buying into Proof at these levels. Reducing the cost basis from 66 eth will be just way too difficult and unpredictable. Now let’s move on and talk about some utility pass projects I’m currently watching and why I’m interested-
VaynerSports pass is the first release from Gary Vaynerchuk‘s brother AJ Vaynerchuk. One thing the Vaynerchuk’s do really well is build their online brand. AJ has successfully over the years built a strong sports brand through Vaynersports. With Vaynersports, AJ has signed famous and talented athletes across several professional sports leagues. Currently sitting at a .4 ETH floor, VaynerSports Pass is in my opinion a really interesting play. First, a .4 floor is relatively low compared to other passes in the space. Cost basis reduction is a lot easier on a .4 floor than a 40 floor. Why is the floor so low at the moment? I have a few suspicions. My biggest suspicion is AJ hasn’t announced any roadmap or utility yet. But with the connections he has to every sports league, as well with his name being on the line, it’s hard to imagine he will not deliver on truly valuable utility. Gary has delivered spectacularly for initial investors of Veefriends, it’s really hard to see a scenario where his business partner/brother doesn’t deliver in the same way.
Founded by artist Jeff Cole and art dealer Mark Mastrandrea, Relics Pass is a utility NFT that provides access to art drops as well as incredibly unique physical items. By holding the pass you get 50% off a custom NFT canvas printing service. By connecting your wallet you get to choose an NFT and a large high quality print is created and sent to your address. On top of that you get regular art drops, including the recently released Relic Punks. What’s really awesome here is you get an actual canvas of the Relic Punk you mint. Not only are you reducing your cost basis through these companion drops, you’re getting incredibly unique physical utility and collectables as well. While a little more pricy at the current 3.5 eth floor, it is still the beginning stages of this project. Many more drops are coming, meaning a lot more opportunities for cost basis reduction. This is certainly a project I’m watching closely.
Premint + Alpha Sharks
I lumped these two passes together because they are thematically the same and provide their own unique value proposition. Software as an NFT (SaaN) (I just coined this, I demand you credit me with all future use) is a new business model some companies are starting to adopt. By purchasing the Premint or Alpha Sharks NFT you get access to their programs and all the value that comes along with it. Alpha Sharks is an NFT analytics and sniping tool that allows you to monitor the NFT market and make quick purchasing decisions based on advanced data. Premint is a program that allows users to register for white lists, see upcoming mints, and understand which projects you are eligible to participate in based on your current wallet. Both provide possible cost basis reduction through the value propositions in their software. Say you buy Alpha Sharks for .4 eth then snipe a rare NFT for 5 eth below it’s market value. You just made your entire capital investment back. Say you buy Premint and get on the whitelist of an up and coming project that resells for a full eth above mint price. Software as an NFT is a business model I see a lot of companies adopting in the future. I wouldn’t be surprised if we start to see marketplaces just for tools that are unlocked with NFT’s.
Utility passes are no longer the future, they are the present. By investing in utility passes you are providing yourself more predictable ways to extract profit from the market. My goal with this article wasn’t to sell you on these projects, but to show you different options when it comes to utility and different ways to make your investment back. I think by shifting our expectations to utility and value, the NFT market has started to mature. A year ago cartoon PFP’s with anonymous teams and 0 expectations were the entire market. Now sophisticated investors are doing deeper research and expect more out of their capital. The evolution of this category will be fascinating to watch.
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