📈How much do you make #2

• This week we spoke with James (pseudonym), a 26-year-old writer and investor in the NFT space

• He makes ~$175k per year

• And earned 40x+ his initial capital investing in NFTs in ~12 months 🚀 

James, what do you do professionally and how much do you make?

I’m an investor, writer, and operator in the NFT space. I’m based in Toronto, Canada. And I currently make between $175-200k per year.

What are your sources of income?

I have three sources of income today:

1. Part-time work for an NFT project ($4,200 per month)

2. Consulting for other NFT projects and crypto companies ($100 per hour, 10-15 hours per week)

3. Trading my own crypto / NFT portfolio (averaging $10-15k per month).

That last one is by far the most volatile.

Can you walk us through your monthly expenses?

I keep my expenses somewhat lean for someone my age living in a big city. I’m not balling out, but I’m not pinching pennies either.

My biggest spike in expenses is how much I spend on Uber Eats. I’m super busy with my work and don’t want to cook so I order food delivery a lot.

What’s your philosophy for how you save & invest your money?

I look at my personal finances as having two main categories:

1. Things that generate cash flow that I use to fund my day-to-day life.

2. Things that I view as investments.

The first bucket is so I can live. The second is so I can build wealth.

Together with Rollfi

Give your employees the power to choose exactly how and where they want to get paid. We're building the payroll & HR platform for companies creating the future.

Click here to learn more and get paid.

Can you walk us through your current asset allocation?

• 5% cash

• 25% stablecoins

• 30% crypto (mostly BTC & ETH)

• 40% NFTs

I’m personally heavily allocated to crypto. Even most of my cash sits in stablecoins. Definitely not what most people are or should be doing.

NFT Investing 🌑

What kind of NFT projects are you investing in?

I focus on emerging ecosystems that start small but have viral potential and / or can expand to a massive number of holders. Recently, I’ve been especially focused on areas like art and gaming.

From a returns perspective, I’m looking for projects that have legitimate 100x return potential within a year.

How many 100x returns have you achieved so far?

I’ve had about three 100x returns so far.

The first one was Solana Domain Names. I minted about two hundred rare Solana Domain Names at like $20 each. I’m still holding most of them, but I sold enough to break even on the investment (about $10k worth). From an unrealized gain perspective, that estimated return has hovered between 25-100x.

The second one was an NFT art pass by an artist called OSF. I bought the pass for 0.3eth. The pass went up to about 20eth. I got airdropped another 10eth worth of worth NFTs. That was close to 100x in six months.

The last one was the 6529 memes collection. My initial investment is up about 75x but it's given my allowlists for other NFTs that netted a 30x return on the ~3 ETH in mint costs. That’s been about 150x in the past eight months.

What are the top misconceptions the public has about NFTs? Many think they’re scams. What’s your take?

I would say that in some cases people defining NFTs as scams would be correct. You could make that argument. But the same argument applies to everything else that people pay a premium for above actual physical value.

You could say Gucci bags are a scam because they cost $100 to make and sell for $1,000. They slap their logo on the bag and that adds an additional $900 because the consumers purchasing have attached additional subjective value to what the underlying bag is worth.

NFTs are just an abstraction of that subjective value without the physical good. People subjectively think items like a board ape NFT have value. It’s the same representation of subjective value but applied to the digital world.

To understand NFTs, it’s important to understand the two different types of value:

1. Utility Value – The basic function of the good. The basic job or service that purchasing the good allows you to achieve.

2. Meme Value – The meme value is the subjective value. The value of the brand, idea, perception, community, etc.

Meme value is like this inner subjective, shared truth. It’s hard to define. Like one day people just decide fuck Balenciaga because of their use of children in campaigns. We don't like them anymore. The bags are still the same bags but now nobody wants to buy them. The manufacturing didn’t change. The utility didn’t change. Nothing changed about the company. The only thing that changed is the subjective shared belief of what a Balenciaga bag is worth.

So you could say that NFTs are a scam but, you could also say any good that people pay a premium above basic utility is a scam.

Unlike physical goods, NFTs are easily financially tradable. It’s not easy to trade a Balenciaga bag but it’s easy to trade an NFT. Does this explain why NFTs exploded in the first place?

100%. One of the best examples is the traditional art business model. The economics are terrible compared to NFT art.

There’s so much time, BS, and gatekeeping to actually get your art into the market.

If you're an emerging artist, you have to partner with a dealer that can help you get into a gallery. You need to make all these physical pieces of art. You need to take photos of them all. Put the photos on the internet. You need to get people to physically come to the gallery. You need to ship them to different museums. You need to get the right people into a room to bid at an auction. Etc.

But with NFTs, you don't have nearly the same physical overhead. You can create something and get it into the market immediately. Once the digital art is ready you can put it up on Manifold or whatever minting site you prefer. From there, people can purchase it, track the art’s history, trade / exchange the art, etc.

The minting site is taking a cut but it’s a far smaller cut than what traditional art auction houses take and it’s far faster and better economically for the artist. It’s a very different model.

Art and creator collectibles are one of the first examples that have taken off, but I think this can apply across many other categories, especially as people assign more and more value to their digital lives.

How do you approach analyzing, trading, and investing in NFTs?

NFTs are totally different than investing in stocks. There’s no DCF model for NFT projects.

The thing that’s most correlated with price is attention. That’s really the currency of NFTs and digital assets. It’s no different than any other physical brand or community that people believe in.

I think the opportunities that have the most upside are new emerging ideas that can start extremely small and proliferate all around the world.

The emergence of new brands enabled by crypto and NFTs. New games. New types of experiences. Etc.

The people who are invested early in these ideas will in my opinion have returns that rival the greatest investment returns of all time because nothing can stop them.

Nothing can stop these ideas from spreading. The only thing that's hindering them from growing is the idea spreading. More people adopting them. I very much believe projects like Bored Ape / Yuga and others that haven’t been started yet could be worth billions and billions of dollars someday.

Framework for diligencing NFT projects

1. Team – The team is the most important thing. A lot of projects are going to die. If you bet on good, long-term-oriented people – I think you’ll end up doing well.

2. Economics – It’s crucial to understand the underlying supply and demand for the asset. Supply is usually easier to understand. Demand’s a bit harder. You also want to understand how value is captured by a project or creator.

3. Community – You need a community of people that are actively involved, committed to, and excited about the project.

4. Meme – The idea is crucial. It’s how the project acquires and keeps attention. It should be an idea that people can capture and share with others. I look for projects that have viral ideas. I’m hunting for viral ideas that can spread like wildfire.

5. Product – The quality of the underlying product (digital art, digital goods, collectibles, etc.) and whether it's meaningful to the buyers.

Beyond a specific project, what market factors do you consider?

• Macro – The macro climate is quite important because it affects all financial markets. So I have a list of people I follow on Twitter for what’s happening in the broader world and broader financial markets.

• Crypto – I follow crypto broadly as an asset class, especially Eth since so much of NFT prices are denominated in Ethereum.

• NFT markets – What information can I find that isn’t widely known?

• Information Asymmetry – This game is really all about information asymmetry. Being able to countertrade the common sentiment of the market. You can do those three things when you have amazing information flows, great security practices, and great margins on how much risk you're willing to put up for every trade.

• Courage – Having the balls to be buying when everyone else is selling, which is not easy. This one’s all about managing your personal psychology.

These are the things that matter to me. The things I pay attention to and cultivate.

Investing and finance tool stack

• Tangerine for online banking and credit cards

• Blur for buying and selling NFTs

• NFT Go for market analysis, data, and dashboards

• Dune Analytics for data and dashboards

• Alpha Sharks for advanced analytics on specific projects

• Ninja Alerts which tracks the wallets of people who I think are good traders to try to help discover projects early

• oSnipe which has notifications when items are listed in specific price ranges and has an automatic sniping feature when NFTs are listed that fulfill pre-defined parameters

• NFT Butler bidding bot that lets me bid on thousands of NFTs a day

Lessons learned

The things that scare you are the best opportunities.

People overweight the “risk” in “risky decisions” significantly. Risky career moves, especially when they are bets on yourself, are rarely as risky as you think.

It’s okay to feel like an imposter sometimes. Everybody does.

The things everyone else is excited about are rarely the best opportunities. You don’t get outsized returns by doing what’s consensus.

Content recs (newsletters, discords, creators, etc.)

• Daily Ralpha – good breakdowns of different NFT projects

• Page One – a good synopsis of the week's events in NFTs and crypto

• Degenz Report – a catalog of NFT reports, a podcast, and tools

• NFT / Crypto Twitter List – a list of folks I follow on Twitter for crypto and NFTs

• Midnight Labs – My favorite private group for discussing NFT investments.

Can you share more about the writing you’re publishing in the NFT space?

I mostly write to think through investment opportunities. I admire people like Arthur Hayes who’s an incredible writer, investor, and builder.

I’m actually planning to double down on my own NFT content. My writing will not be focused on institutional research or 5 bullet-Friday style content. Rather, I’m going to publish research that’s ideal for people who spend a few hours a week trading and investing in NFTs.

I want my work to be a trusted source of information on emerging projects that folks can get into early. Instead of having to sift through Discord, Twitter, etc. —folks can read my synthesis and commentary on what’s happening in these emerging projects and ecosystems.

Financial + Life Goals

In 10, 20, or 30 years, how will you know you made it financially? Do you have a number you’re trying to hit?

I actually have a clear vision of what I want. I want to own a 20-50 acre property just north of Toronto with a nice big house that I can raise a family in. I don't really need many things but having a staple piece of land for my family for generations is something that is really exciting and motivating to work towards. Beyond that, I want the freedom to travel and have experiences with loved ones without worrying about financial costs.

The goal is really to build a great life that I love. – Being able to engage in this digital ecosystem I’m obsessed with, own property / build a house for my family, and travel / have experiences with loved ones.

The most important thing to me philosophically is maximizing my life experiences sooner than later. I don’t want to live a life where I sit in an office until I’m 65 so I can go sit on a beach when I’m old.

I would rather go for financial independence and wealth now. I want to achieve it all in a relatively accelerated timeline.

Disclosure: the content contained herein is not financial or investment advice. Today’s interviewee requested to be interviewed pseudonymously. The person and numbers are real, but their name has been changed for the sake of confidentiality.