Ah, now I can see, those are good questions. So I've gone looking a little bit closer and this is what I can assess of the situation. There are layers that we have to lay out here.
1) You can only buy and sell these digital assets using the currency they are traded in, which in this case is Ethereum.
2) These "Canine Cartel" 10,000 assets were sold by the group that crated them at .05 Ethereum a piece.
2a) There seems to be an indication that most of these were minted "a month ago" which at the time ETH was worth around $3,900 per 1 ETH. This means that each token cost approximately $195 a piece. This goes to the minter as "profit" however, the buyer is under the assumption that the asset will increase in value over time (an investment).
2b) This means, since they are 'sold out' that the minters made all the money they are going to make on this. Multiply that $195 by 10,000 and you have $1,950,000.
2c) I'm not sure if they pre-generated the tokens and people bought them directly (like buying an individual pokemon card directly), or if someone bought a token slot and then were given a randomly generated canine (like buying a pokemon card pack). Which would be interesting to know.
3) After the original sale occurred, each of the 10,000 token are owned by individuals and are worth as much as people are willing to pay for it. Think of each token as a stock someone bought. Each has a price history on how much people would buy it for.
3a) One of the most interesting things is that the ones who have risen to the top of the value pool are actually not canines at all but felines: https://opensea.io/collection/caninecartel?search[sortAscending]=false&search[sortBy]=LAST_SALE_PRICE
3b) Note that those prices are the last price people PAID for it, not necessarily what the general populous would think it is actually valued at. So For those in that list holding the top NFTs, if no one is willing to pay the price they paid for it, ever, then they're basically just sitting on a liability than an asset. Think of them buying a brand new car and then no one will pay full sticker price for it once it is off the lot.
The risk in this to the buyer of NFTs it two fold:
1) You are assuming your NFT will got up in demand over time
2) You are assuming the underlying Crypto currency will go up over time.
However these risks can also mitigate each other in this way:
1) If both 1 and 2 are true, big money for you.
2) If one is true and not the other, it will probably be a wash.
3) If both are false. You basically just screwed yourself twice over.
In this case, from the month these NFTs were sold, Ethereum has suffered a 12% decline in value.
This means if you spent $195 on the NFT then 12% of that taken off means that it is now worth $171.50 if you sold it at the same price in Ethereum. Oops. But if the token has appreciated to .056 ETH from .050 then you still have an item that is worth $195.
This is headache, yes, which is why most people are going to lose money on these things. It's too complicated and complexity means Dunning Krugerism is going to get you making bad investments.
As noted in the article, crypto's volatility makes it hard to buy real world goods, and if they are they are usually translated into another currency first. It would not be acceptable for me to write up a contact one month, and then the next month when I have to pay them for their services, they get 12% less value just because the value of what I pay them in is so volatile.
For the US, the changes in the value of the dollar going out of a 2% per YEAR (not month) window (1% to 3% inflationary) would be considered disastrous. We are in one of those inflationary periods now funnily enough (@5%).
A 12% curtail of purchasing power in a month would be cataclysmic for any central bank. Not in the crypto world though. Which is why it's hard for me to call these a currency at the time. They clearly operate under different rules than a traditional currency. Probably because they actually don't have people relying on their value as directly as current currencies. El Salvador did adopt it, yes. But most people there still use the USD as their backing currency when they adopted to take that one in 2001.
Ah, now I can see, those are good questions. So I've gone looking a little bit closer and this is what I can assess of the situation. There are layers that we have to lay out here.
1) You can only buy and sell these digital assets using the currency they are traded in, which in this case is Ethereum.
2) These "Canine Cartel" 10,000 assets were sold by the group that crated them at .05 Ethereum a piece.
2a) There seems to be an indication that most of these were minted "a month ago" which at the time ETH was worth around $3,900 per 1 ETH. This means that each token cost approximately $195 a piece. This goes to the minter as "profit" however, the buyer is under the assumption that the asset will increase in value over time (an investment).
2b) This means, since they are 'sold out' that the minters made all the money they are going to make on this. Multiply that $195 by 10,000 and you have $1,950,000.
2c) I'm not sure if they pre-generated the tokens and people bought them directly (like buying an individual pokemon card directly), or if someone bought a token slot and then were given a randomly generated canine (like buying a pokemon card pack). Which would be interesting to know.
3) After the original sale occurred, each of the 10,000 token are owned by individuals and are worth as much as people are willing to pay for it. Think of each token as a stock someone bought. Each has a price history on how much people would buy it for.
3a) One of the most interesting things is that the ones who have risen to the top of the value pool are actually not canines at all but felines: https://opensea.io/collection/caninecartel?search[sortAscending]=false&search[sortBy]=LAST_SALE_PRICE
3b) Note that those prices are the last price people PAID for it, not necessarily what the general populous would think it is actually valued at. So For those in that list holding the top NFTs, if no one is willing to pay the price they paid for it, ever, then they're basically just sitting on a liability than an asset. Think of them buying a brand new car and then no one will pay full sticker price for it once it is off the lot.
The risk in this to the buyer of NFTs it two fold:
1) You are assuming your NFT will got up in demand over time
2) You are assuming the underlying Crypto currency will go up over time.
However these risks can also mitigate each other in this way:
1) If both 1 and 2 are true, big money for you.
2) If one is true and not the other, it will probably be a wash.
3) If both are false. You basically just screwed yourself twice over.
In this case, from the month these NFTs were sold, Ethereum has suffered a 12% decline in value.
This means if you spent $195 on the NFT then 12% of that taken off means that it is now worth $171.50 if you sold it at the same price in Ethereum. Oops. But if the token has appreciated to .056 ETH from .050 then you still have an item that is worth $195.
This is headache, yes, which is why most people are going to lose money on these things. It's too complicated and complexity means Dunning Krugerism is going to get you making bad investments.
As noted in the article, crypto's volatility makes it hard to buy real world goods, and if they are they are usually translated into another currency first. It would not be acceptable for me to write up a contact one month, and then the next month when I have to pay them for their services, they get 12% less value just because the value of what I pay them in is so volatile.
For the US, the changes in the value of the dollar going out of a 2% per YEAR (not month) window (1% to 3% inflationary) would be considered disastrous. We are in one of those inflationary periods now funnily enough (@5%).
A 12% curtail of purchasing power in a month would be cataclysmic for any central bank. Not in the crypto world though. Which is why it's hard for me to call these a currency at the time. They clearly operate under different rules than a traditional currency. Probably because they actually don't have people relying on their value as directly as current currencies. El Salvador did adopt it, yes. But most people there still use the USD as their backing currency when they adopted to take that one in 2001.