OpenSea's Critical Mistake
$500M AUM Wallet | $3B ETP Growth
Marco Manoppo & Karon Pangestu
August 21, 2023
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Good Morning,
OpenSea is removing royalty. $120M+ of tokens are being unlocked this week. Binance’s BNB onchain position liquidation fear continues. Meanwhile, Friend Tech's trading volume continues to increase.
Would you buy my share?
In Today's Email:
What Matters: OpenSea removes royalty 💵 🔥
Products: MPCVault wallet 🔒
Charts: $3B ETP growth, Yuga Labs impact 📈
Narratives: Stay cautious and keep an eye on BNB liquidation level.
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WHAT MATTERS
OpenSea to Make Royalties Optional
State of play: OpenSea announced that it will no longer enforce a mandatory royalty fee for creators, making it optional for new collections starting August 31.
Sellers will be free to decide whether or not to provide a percentage of the sale price to the artist when an item is resold.
Several existing collections will still have royalty fees until February 2024, when fees will become optional for all sales.
OpenSea's CEO, Devin Finzer, stated that the fees are being enforced ineffectively and unilaterally, suggesting creators will find other monetization avenues.
Another reason for the creator fee removal is the success of NFT marketplaces with zero creator fees (Blur, Dew, and LooksRare).
OpenSea argues that in order to keep the creator fees in the ecosystem, all NFT marketplace has to unitarily enforce creator fees.
Yuga Labs, the issuer of Bored Ape Yacht Club, plans to sever its connection with OpenSea's Seaport due to this new policy.
One of OpenSea's prominent investors, Mark Cuban, expressed disapproval on Twitter regarding OpenSea's decision to stop the mandatory collection of resale fees for creators
Not collecting and paying royalties on NFT sales is a HUGE mistake by @opensea. It diminished trust in the platform and hurts the industry. And I say this as an @opensea investor @DevinFinzer
— Mark Cuban (@mcuban)
2:20 PM • Aug 18, 2023
What’s next: It remains to be seen whether the move will help OpenSea regain its market share.
Many are condemning the move, stating that this will further deteriorate the use cases of NFTs.
Our take: Blur’s growth is via fancy tokenomics and by focusing on the core users of NFTs, large traders that want to make profits.
It is important to note that a lot of Blur’s volume comes from whales trading NFTs to earn airdrop rewards.
OpenSea might fare better by keeping royalties and implementing its own incentive programs via tokens rather than removing royalty fees.
For builders and investors: Your products need a real moat and racing to the bottom by cutting fees is never the “correct” answer.
Mark is 100% on the mark.
If the way you compete with others is by “racing to the bottom” in an open-source environment with forkable codes and no IP defensibility -> good luck
Royalties is a key factor of NFTs.
The answer is not to remove it.
If Blur is taking market share… htttwitter.com/i/web/status/1…t
— Marco Manoppo (@ManoppoMarco)
8:18 AM • Aug 21, 2023
Take a peek at our referral reward at the bottom of this issue. Share this newsletter and receive our list of 100 smart crypto investors' wallet addresses 👇
PRODUCTS OF THE WEEK
MPCVault, A Non-Custodial & Multi-Signature Wallets
A multi-signature crypto wallet for teams. MPCVault offers non-custodial, multi-signature crypto wallets as a service to support crypto businesses.
MPCVault already has 100+ institutional customers.
MPCVault has surpassed $500M in AUM and has helped move over $1B in assets.
MPCVault raised $3M in a seed funding round in March 2022.
Jason Li, MPCVault’s co-founder, stated that MPCVault’s addressable market is potentially enormous.
Stablecoins facilitated over $7T in transactions in 2022, which is close to Visa's $12T, despite the relatively recent emergence of stablecoins.
Other cool products:
Layer 2 Summer, a hub for all things related to Layer 2.
Whitepay, a payment gateway that accepts 140+ crypto from any wallet.
XFounders, a boot camp for early-stage Web3 founders.
Connect3 Listen, an innovative NFT music streaming service.
Monitaur, a hybrid APM and observability platform.
CHARTS OF THE WEEK
Crypto ETPs Grew by 43.6% to $8.92B
State of play: Shares in select crypto ETPs grew in the past year despite the ongoing bear market.
ETPs are investment funds that are listed for trading on a national securities exchange and can be bought and sold in the equity trading markets.
AUM of crypto ETPs increased 43.6% over the last year from $6.21B to $8.92B.
The number of products covered increased from 110 to 151.
Our take: BlackRock's Bitcoin ETF entry spurred activity in the crypto product landscape. The growth of crypto ETPs is expected to continue, as experts are putting higher odds on the success of Spot Bitcoin ETF applications.
The SEC's response to BlackRock's application is due by September 2, 2023.
There are 7 renewed crypto ETF applications.
A Grayscale case ruling might also impact the US spot Bitcoin ETF dynamics.
Yuga Labs Collections Impact on OpenSea
State of Play: Yuga Labs, the issuer of Bored Ape Yacht Club, will end its connection with OpenSea by February 2024. This decision is a response to OpenSea's shift towards a model in which royalties become optional.
From April to August 2023, Yuga Labs contributed 14.9% of OpenSea’s total volume.
Our take: We do not know yet how much volume OpenSea will gain (or lose) from the creator fees removal, but one thing is for sure, they will lose 14.9% from Yuga, the biggest NFT “company”.
QUICK BITES
JPMorgan says Bitcoin miners diversify ahead of halving.
Mark Cuban criticizes OpenSea's removal of royalties.
Recur to shut down despite a $50M raise and big-name backers.
Gemini pushes to get the SEC case dismissed.
Coinbase suspends trading for three stablecoins in Canada.
Tornado Cash sanctions affirmed by Federal Court.
Friend.tech’s fees climb to $1.4M.
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