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March 15, 2023 25 mins

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Some might argue that the popularity of NFTs faded as quickly as it rose. NFTs boomed in early 2022 when the crypto mania was at fever pitch. But a steep decline in sales and prices quickly followed, as 2022’s crypto winter set in, and digital asset bankruptcies piled up, culminating with the collapse of FTX late last year. But as we move into 2023, some crypto traders and NFT owners are cautiously optimistic, eyeing a Bitcoin bump despite the last year.

Former bond traders Ovie Faruq and Mike Anderson recently sold 72 iconic Bored Ape Yacht Club NFTs for around 78 Eth each, which translated to roughly $9.25 million at the time. 

Bloomberg reporter Abhinav Ramnarayan and Ovie Faruq, Co-founder at Canary Labs, join senior editor Anna Irrera to discuss the ins and outs of trading NFTs.

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Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
I'm Stacy Murray Ishmael, Managing editor of Crypto for Bloomberg News.
And this is Bloomberg Crypto, a daily Bloomberg IHOD podcast.
It's Wednesday, March fifteen. I'm Annerera, Senior editor for Bloomberg News.

(00:29):
In for Stacy Murray Ishmael. Some might argue that the
popularity of NFTs faded as quickly as it rose as
a refresher. Non Fungible tokens, also known as NFTs, are
digital certificates of authenticity for anything from collectibles to art.
They're usually minted on the Etherean blockchain, but are now
also available on the Bitcoin chain. NFTs boomed in early

(00:52):
twenty twenty two, when the cryptomania was at fever pitch,
but a steep decline in sales and prices quickly followed.
As twenty twenty two crypto winter set in and digital
acid bankruptcy is piled up, culminating with the collapse of
FTX late last year. As we move through twenty twenty three,
though some crypto traders are cautiously optimistic, the price of

(01:13):
bitcoin has risen more than forty percent, and some investors
have even managed to make hefty profits selling their NFT investments.
Former bond traders Ovifarouk and Mike Anderson have become well
known for recently selling their iconic board apes for around
seventy eight eight, which translated to roughly nine point two
five million dollars at the time. That's a whopping seven

(01:34):
hundred percent profit. Board Apes are one of the most
popular NFT art collections. You may have seen them online before.
They are essentially digital pictures of apes and varying outfits
and facial expressions. Joining me in the studio today to
discuss the ins and outs of trading NFTs or Bloomberg
reporter abinav Ramnarayan and Ovifarouk, co founder of Canary Labs.

(02:06):
Abby ov thanks so much for joining me today. It's
good to have two people in the flesh inside the
studio off and we do these like recorded from all
over the world, so it's quite nice. I can't really
see your faces properly because of the mics, but probably alright,
all right, so we're starting. You're gonna you know, it's
gonna be a fun episode because we already have some

(02:27):
humor from the beginning. So let's start over. Do you
want to maybe give our listeners an overview of what
sort of the board ape collection is, um, and why
you bought it and when you first got interested, and
then we can take further steps back to what you
were doing before. But just to set the scene for
people who may not have heard of them. Yeah, that's
a you know, and all these things that I've done,

(02:49):
and no one's ever asked me what are the board apes?
So um, it's nice to actually figure out how I'm
going to answer that question. But um, you know, in
this most basic phone that just ten thousand pictures of
randomly generated apes with different traits and stuff, and some
are rarer than others, some are more valuable than others
based on their rarity, And only one of those apes

(03:10):
has given you access to all these various things that
the Yuga Labs of the creators have done, whether it's
access to new drops, whether it's access the parties that
they have, whether it's access to some of the crypto
tokens they've dropped, and the original drop they did back
in April twenty twenty one that served as the access
parcel tokens to everything that they've done since then. So

(03:30):
when did you get interested and when did you buy
your first board ape. So I actually bought them when
they minted. That's when something mint and the n FT world,
it's the same thing as like you consider it as
an ICO or an IPO or whatever. So it's the
first time they were selling it. I actually was working
at Barkleys at the time in New York and I
just quit my job, so I was kind of like

(03:51):
feeling a bit emotional and stuff when I got home,
and I was already trading NFTs at this point, and
I basically just saw it on Twitter and thought it
looked interesting because the website was the first professionally done
the thing that I'd seen, And you know, I went
ahead and minted them, and I think they were about
two hundred dollars each at the time to actually buy,
and then how much were they when you sold them?

(04:12):
So there were two iterations of this. When the first
time I actually minted about one hundred and fifty of them,
and I sold them all within the space of about
a week, and I saw them anywhere between I think
there were about two hundred dollars to mint. I saw
them anywhere between about two thousand dollars to like up
to thirty thousand dollars each, I would say. So, taking

(04:35):
a step further back, you were mentioning your New York
days and you'd you'd quit your job. So what were
you doing before and why did you quit that job
to go into NFTs. Yeah. So I used to be
a trader. I used to trade hiled and distress credit
at Barclays. I did that for about ten years. I
spent six years in London and three years in New York,

(04:56):
and I enjoyed doing it. But look, in twenty twenty one,
I had this big every like many people had this
big view on inflation and the Fed not increasing interest rates,
and I couldn't express that in the book that I
was trading. I was like, well, none of this stuff
is going to get impacted in year one. So I
once to find a way to put that trade on.
I was like, oh, I'll just do it myself. I'll
just do it pa. And I've been cryptoskeptic for many,

(05:19):
many years, and that was the first year I bought
bitcoin in twenty twenty one after pacing it for so long,
and myself and my colleague Michael, we were looking at
potentially buying art or collectibles. These are very like inflacion
proof investments, and we just stumbled on NFTs, which isn't
too fair, as Michael that stummled on the first which
are basically collectibles on chain. So we had this like
crypt tournament to it, and we had the collectibles element

(05:42):
to it. So the way that we used to describe
it was its inflaition squared and it was obviously a
very risky trade, and but you know, we knew if
we took a shot as it and we were right,
the upside would be a lot bigger. So this brings
Abby and Abby you cover credit, right, Can you give
us an overview of the macro environment, what it was
at the time and how it's changed now, right, because
because it's a very different situation and a lot of

(06:02):
the narrative around bitcoin at the time, as you were saying,
is like it's a hedge against inflation, whereas now you know,
inflation has shut up and it's not really turned out
to be great for bitcoin or any other risky asset. Really, Yeah, no, absolutely.
I mean I think I did a little bit of
reporting on bitcoin when I was part of the FS
and Rates team in the past, so I had a

(06:23):
small flavor of what cryptocurrency was like. I mean I
was by no means the Crypto Report or anything. I
just did a little bit of work on it. What
I found really interesting was looking at all the various
factors that went into it. On the one side, I
did see the argument that it was an inflation hedge,
that crypto was an inflation hedge. But on the other
on the other side of that, there was so much

(06:46):
irrational exuberance. I mean today you look at how SPACs
have completely collapsed. I mean the last few SPACs are
now being flogged for nothing. You look at a lot
of the IPOs at the time, they've gone down like
eighty percent, ninety percent. Did look at Peloton as a stock,
you know, I mean, there was a lot of the
rational exuberance, and um, there's no doubt in my mind
that crypto was very much a part of that. I've

(07:07):
pulled up a few correlations today. I had to look
at how HIGEL European high Eel bonds UM compared to ETHA,
which is I guess the closest comparable to NFTs that
we can get on the terminal, And there is a
little bit of a correlation UM, not a super strong correlation,
but the correlation to Tesla is quite striking as a stock,

(07:29):
and the correlation to Peloton is unbelievably striking. I mean,
it's almost taking the same trajectory that I'm talking about
et versus um um versus Peloton. So if you take
credit markets as I would say that cryptocurrency is a
souped up version of credit markets, and I would say

(07:51):
NFTs are sort of I mean, you call it inflation squad.
I would call it exuberance as well. Yeah, so, but
there is a code and that I find that interesting
and it actually makes me more hopeful for the future
of NFTs. Then then and then anything else I've seen
actually in terms of anything else you've seen, like crypto wiser, Well,

(08:12):
what I mean is there seems to be a method
to the madness. There seems to be some some logic
to why it's training. The Waird is O. I see
you're nodding there. Yeah, I mean, I think the big
thing that we touched upon was inflation. And it's actually
a common misconception that bitcoin is a good hedge for inflation.
That's incorrect in my view anyway. Bitcoin is a hedge
for inflation when you have a low interest rate environment,

(08:34):
and that was the environment Trains twenty one. The FED
refused to increase interest rates inflatition starts to go higher.
And that means like in this in this environment where
like money is cheap, if you like, everyone wants to
take the highest ris possible. And that's the environment that
we had. So twine Pains, We're all broke down because
we still had inflation. But the fab is like, we're like,
oh damn, like we have to increase interest rates now finally.

(08:54):
And then that hits NASDAK as you said, and all
the tech docs, and that has the highest correction to scrypt,
which then in turn has correlation to NFTs. But I
think NFT is an interesting hybrid asset class, Like on
the one hand, you have traditional market correlation, you have
cryptic correlation. But on the other hand, they are collectibles.
Like people go out there and buy things that they
want to own from an art perspective or from a

(09:15):
from a collecting standpoint, and you know, it's the same
thing when you see you might see a crazy auction
at Christie's for like a banana stuck to the wall
that goes for millions of dollars and people are like,
you know why, Like, I don't get understand where that
prices come from. NFTs definitely have that element of it
where you have institutions that are collecting, you have maybe
galleries that are collect and you have large collectors who

(09:36):
are collecting and their mindsets like I just want to
own the most expensive cryptopunk because I have the bragging
rights for it, and that's where some of these crazy
exuberant prices come from, if you like. But you know,
sometimes it just takes two people to tango in an
auction and that's where that's where you get it. And
that's where I think people have a misunderstanding of what
NFTs actually are versus when trying to compare them to

(09:58):
traditional assets. After the break, we'll hear more from Bloomberg's
Abena from Narayan an NFT investor Orvi Farouk on what
makes a good trader and the intersection of NFTs and AI. So,
you know a lot of people lost money on crypto

(10:20):
this year and NFTs. How much has your experience as
a trader helps, Like would you suggest that someone who
doesn't have finance experience, dosn't have trading experience, quit their
job and start trading NFTs. I would say two things.
The first thing I would say is that we had
a massive, massive advantage having been institutional traders for seven
or eight years. Should retail traders be investing in this market? Well,

(10:43):
I have to say a lot of people who have
probably I'm sure they've lost a lot of money doing it.
But I've come across and met so many people who
have zero experience in trading, zero work experience at a bank.
A lot of them haven't even gone to university. Some
of them are probably seventeen to eighteen years old, and
they would make like three times more money than anyone
else on bulls on the City of London. Because trading
you don't need the education for it. You haven't. You

(11:04):
have to have a natural aptitude for knowing where the
momentum is going, understanding how to manage a risk, understand
how to have discipline. And that is a natural thing
that you can't um, you can't teach, you can't train that.
It's it's it really is a natural skill set. And honestly,
I've met so many people are like, wow, like you
should be if you went and spent a year trade
in high your bonds. You have made more money than

(11:24):
anyone else because you understand how to take risks, you
understand when to take profits. And those are two things
you don't need to go to university for. You don't
need a career in finance for. And so I would
say yes, like maybe retail investors should have more protection
and there should be you know, more regulation to to
help that. But should retail investors not trade NFTs, not
trade crypto? Absolutely not. You should give it a go,

(11:46):
and you never know you might be good at it
because it's a skill that you don't practice or learn
it in any other or many other facets of your life.
And I think you need to try it to know
if you're good or not. Basically, what are the biggest
things that are like things that you watch out for
right Like this last year you could have lost money
on FTX, Block five, Gemini, like a number of places

(12:07):
that you know where your money could have been locked up.
So you know, how do you how do you manage
all these risks? It's not just a question of like,
you know, a trade downside, it's like you could lose
all your money, all your collateral, everything from one day
to the next. Yeah. Number one rule of any trading investing,
if you're doing it personally, is only invest or gamble

(12:27):
gamble with then I will use about gamble because there
is an element of that with money. I wanted to
say it before and you were describing the situation, but
I was like, oh, let's be nice, but you said it.
So go on with money that you can afford to lose.
So if you have your net worth and crypto, then
take nine percent of it out because or fifty percent
of it out because there is huge how risk in crypto,

(12:49):
and like FTX and block finding, all this stuff was
a big example of that where I know people who
were some of the best traders in crypto who lost
millions of dollars in the whole net worth and FTX
because of just like some blacks one event. And so
the number one rules, don't invest more than you can
afford to lose. Number two rule, which would have staged
you for FTX, And the golden rule of crypto is
not your keys, not your crypto. So and if you're

(13:11):
not self customing something, so by that I mean you
don't have it in your own wallet. Way you're the
only person who has access to it and has the
private keys to it, then it's a risk. And that's
the problem with FTX because if you have your crypto
one in exchange or if you're staking it, then you
don't have access to it like someone else has access
to it and controls your money. And this is the
whole original thesis of bitcoin anyway. So you know, with

(13:32):
those two things, you already eliminate something like eighty percent
of the risks, and then from then on it's like
learning by doing, you know, like remember the shady characters
who told you to buy something and it went down,
Like remember that time you got greedy and didn't take
profits and you should have sold half of what you
have set yourself rules, guidelines and stick to them and
strip the emotion out of it. Those things. You I
really think you can eminate a lot of risks by

(13:53):
doing that, and most people just don't take these these steps.
I would say, So, where do you see now opportunities
with with NFT is that you know what's interesting? Right?
Because the names we keep hearing are the ones that
we're around during the rally. Is there anything new that's
like interesting or anything you know, funner like even not
from like an investing perspective, but like an art perspective,

(14:14):
you're an art you're you're also an artist, right, that's right. Yeah,
there's this idea of the digital Renaissance, which I know
sounds really funny but cheesy. Yeah, a bit cheesy, I
know I might love to use anyway. But if you
think about the world and where it's going, and you
know this whole concept of AI and chat GPT, and
you had this segment of art which is generated by code,
whether it's AI art or generative art, and it's all stored.

(14:36):
A lot of it is stored on chain or is
generated on chain, And like intellectually, I think that's very interesting,
and it's actually used to create and produce arts. And
if you think about art as in the history of
art overalls spans thousands of years, and you have different
periods like the Renaissance, et cetera, where you could collect
early pieces and generative art is not a new thing,
but genest of art on chain is a relative a

(14:57):
new thing, and there's probably only existed for three or
four year So I think it's a great, big opportunity
to actually collect what will become pieces of history because
it's new, you've never really had it before, and NFTs
only really started in what twenty sixteen, twenty seventeen, So
you're at like you're five years into what could potentially
be decades or even centuries of this idea of art

(15:18):
on chain and art generated by code. And I think
this whole AI buzz thing is going to keep getting
bigger and bigger and bigger, and it will be in
many elements of our lives. And um it's application to art,
I think it is very very interesting and presents a
big art made by computers basically, and then and then
it's the NFT of that of that art made by computers,

(15:39):
essentially art made by code, and um it's then they're
made as NFTs. But you know, if you if you
want to get really geeky and nerdy about it, there
there are more aspects of it, like like something that's
provably random is the art doesn't exist, the code exists,
and when you go to actually mint your piece, um,
you don't know what it's going to be until it's
created and it's minted, and it still looks good because

(16:00):
of the way that the code was written. So and
you're sure no one came up of it, came up
with it like in the last month when all the
AI stocks were going up, and like, let's find out
find a way to show something new, right like they
were thinking about it before. It's got a narrative to fit,
to fit the selling need. Generative art has been around, no, okay,
around for a while, and I think the best things

(16:22):
are things that are high value, that have been high
value for at least two it three years. But um no,
this is this is not me, This is not I'm
using Bloomberg as my exit liquidity thing. Good. I'll be
right back with Bloomberg reporter Abina Ramnarayan and bond trader
turned NFT founder of I Farouq as we discussed the
future of NFTs and what it's like to have snoop

(16:42):
dog by your digital art. So what about sort of
the macro environment right like, because if you we look ahead,
you know it's we've had crypt so downturns before, we
said many times, but you know the macro environment was

(17:04):
kind of the same throughout and the reasons why I
crashed or like crypto specific, what's the outlook now for
like the world you're you're like broadening out sort of
person um. I mean, it's very hard to be definitive
about it, but I would say that crypto probably has
another sell off in it. Um yeah, sorry, I don't

(17:25):
I'm not if I'm not sort of agreeing with on this,
but I mean, essentially, we've seen a little bit of
recovery in most risky assets. So once again, this we've
talked about this correlation between m NFTs and crypto and
the credit market and all of these assets. What they
have in common is that they're risky and that investors

(17:45):
take risk when they buy them. And we've seen risky
assets in general rally quite a bit at the stud
in the first couple of months of this year, and
I'm not sure that the rationale for that rally is
completely solid. So I think there could be another painful
sell off in risk in general, and I would imagine

(18:06):
that crypto is a part of that. So I do
think the immediate future is uncertain, very uncertain. The long
term future, I mean, once again, I'm a little bit
encouraged by the fact that it has behaved like a
risk asset, and it's not just behaved in some kind
of completely random manner. So I suspect this here to stay.

(18:28):
One of the reasons why CRYPTO and nft is rallied
quite strongly in the last couple of years is that
a lot of capital was available. There was stimulus checks
in the US, there was a lot of leverage available.
People are able to take on debt to buy things.
All of that has gone. So whether or not this
is gonna if it's ever going to go back to
the heady heights of twenty twenty one or twenty twenty personally,

(18:51):
I don't think so. But I'm but I'm putting myself
on record here and so maybe I'll be proving horribly
wrong and all vocation. Fortunately we're not traders here, right,
We're not the traders, so like it's fine, we're not
We're not. Actually, have you could just say what you
what you see? Is there anything that you miss about
bond trading? Yeah? I have you actually asked me that

(19:12):
as I walked in, and um, it's been a while
since I've been to the city and I got the
tube and everything, so I was like kind of having
flashbacks of of getting to go into the office. But um,
I think though, I think the answer is yes, Like
when you're on this side of the fence where you
know I'm just sitting there making my wrist decisions, and um,
you know, on days with the markets down, I'm just like, oh,
that kind of stucks, but there's nothing that I can

(19:33):
really do to act on it. I miss it because
when you're on the trading floor and you're trading pile
bonds or distress bonds or CDs and there's like five
percent swings and stocks and you know, like twenty thirty
forty points swings and bonds, and you're there as a
market maker and someone's calling you and it's like, hey, like,
I need a price in this, and I need a
price right now, and you have to kind of think
on the spot, and it has this thrill and excitement

(19:54):
that you don't get in the world that I'm in
now because I'm not constantly being asked for a price.
It's just as simple as that. I just like sometimes
I say that as someone just asked me to like
make a market on an ether you working on board
as or something, because um, you know, I guess you
could say like maybe I'm somewhere I'm definitely a risk
seeker and maybe somewhere with real seeker, and um, that

(20:15):
element of it. I think the fast paced nature of
it I think I miss and um, I don't know
how I can recreate that for myself now without going
back to work working for a bank, but I would
I definitely miss that part of it for sure. All Right,
so you had you had a very famous purchaser or
one of your NFTs, Maybe start by telling us what
sort of NFTs you make other than you know, buy them,

(20:35):
and then who this famous purchaser was, who was very
known to crypto circles, right is it? Yeah? Um, so
I actually I actually used to create a lot of
digital art when I was younger, before I went to university,
and when I got back into NFT, I just got
the itch to start drawing and creating again. So um,
you know, I create like additions or one of one

(20:56):
artworks which are animated pieces. A lot of them is
like based on being a maid and all that kind
of stuff. And I have this collection called Wrecked Guy,
which is like eight thousand images of like a skull
drinking out of the bottle on The idea is like
this is someone who always gets wrecked in crypto or
training or whatever. A lot of people are right, which
is a lot of people, Yeah, a lot of people
right now exactly. That's basically it. And yeah, so we

(21:20):
launched the collection. I launched the collection in May of
last year, and a couple of weeks later, the Snoop
Dogg actually bought a couple of them, which was which
is very surreal. It was a strange moment. How did
you know that Snoop Dogg was buying them? Like? How
does that happen? So I was actually especially on like
a stag with my friends in Newcastle and we're all like,
you know, drinking and stuff, and so I was like, hey, like,

(21:41):
Snoop Dogg just brought one of you unts And then
I was like what. So I looked at his Twitter
account and he posted it. I think he wrote something
like time to get wrecked or something like that. And
he has a public Ethereum wallet, so you could see
that he owned it in his wallet and that he
purchased it. That's very cool. Does he still have it?
Do you know he still has I believe he has
two of them. Yeah, he still has them. Yeah, that's cool.
So I guess to wrap things up, what's your biggest

(22:05):
pet peeve now the NFT world? Like what needs to
be fixed? Like for it to be more efficient, and
you know, to raise some doubts if you have any
doubts about it, Like what is the biggest pain point?
I think the biggest pain point is there are still
way too many bad actors and if you take the
NT market as a whole, I really think ninety percent
of it is garbage, Like I really do. Sorry, so

(22:28):
sorry if I offend anyone with that comment. We didn't
say the ninety is right, Like everybody can think they're
part of the ten exactly exactly, and it just encourages
too many bad actors and people are coming to people
know they can sell things very seamlessly and make money
without actually fulfilling the roadmaps they put out or right

(22:48):
having the right intentions and be just you know, every
month or every couple of weeks, you just get another
NFT project which it says, hey, we're going to build
a mess verse game and conquer the world. And the
next thing, you know, three months later, they've all just
run up the money, and that something that needs to
be fixed. I think I'm not like a no regulation
guy foldy sexualization. I think you need responsible regulation for
this industry to thrive and achieve mainstream adoption and I

(23:11):
think laws around like communication and maybe having some kind
of like quality control aspects before coming to market. These
sources of things I think need to be there to
stop there being a flow of money out of in
some retail investors into people with bad intentions. All right,
on this very very responsible note, Thank you again for

(23:33):
joining me. Thank you so much. Thank you. That was
Bloomberg reporter Abinav from Narayan and Canary Lab's co founder
of a Farouk. You can find more of Abinav's reporting
on the Bloomberg terminal and on Bloomberg dot com. For more,
be sure to check out our twice weekly newsletter, Bloomberg Crypto.

(23:57):
This is Bloomberg Crypto, a daily podcast from Bloomberg and iHeartRadio.
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(24:38):
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(25:04):
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