Into The JPEG Jungle
My take on the chaotic, lucrative & fast-evolving market structure of NFTs
If you’re reading this, you’re a Premium member of Front Month, a newsletter dedicated to exchange & market structure research & analysis. Thank you for reading & supporting my work! Please reply to this email with any questions or feedback & I’ll be more than happy to answer. Enjoy:
On the afternoon of Saturday, October 9, 2021, most people might’ve been relaxing at home, watching football with family & friends or preparing for the coming work week.
I was not one of those people.
That afternoon, an NFT project called the Pesky Penguins had finished their mint of 8,888 unique tokens on the Solana blockchain, of which I had purchased 6. The project’s dedicated Discord channel was roaring with activity - users frantically shared screenshots of their new NFTs, discussed where prices would go & asked questions to the NFT’s developers. Although the living room where I sat was quiet, I felt like I had stumbled upon a rock concert just as the band walked on stage.
“This project is GOING TO THE MOON 🚀🚀🚀”
“Don’t list your penguins!! We set the price! DON’T YOU WANT TO GET RICH?!”
“I AM MY PENGUIN & MY PENGUIN IS ME”
“I’m never leaving this community, I’ll hold these penguins til I die”
Exchange listing time took community hype to an entirely different atmosphere. Prices quickly rose from the ~$50 USD cost to mint up to $400 per NFT and volume soared past half a million dollars on its first day of trading. High fives & chest bumps filled the Discord & Twitter became flooded with bulls sharing the Pesky Penguin gospel & attracting more buyers in to chase prices.
The hours long saga from project launch to community hype to eventual listing & trading was chaotic & at times hard to follow. It was obviously an investment that involved intense amounts of risk & energy to manage. It was also one of the most thrilling experiences I’ve had as a market spectator. I vividly remember this quote flying across the Discord chat at one point because it made me stop & realize how wild the NFT game truly is:
“This is the best of all my addictions.”
Welcome to the JPEG Jungle.
In this post I want to share as much as I know about the underlying market structure of NFTs, an asset class that is still extremely young & unformed but will not be fading from the public spotlight anytime soon. I’ll be combining a top-down view of the NFT exchange landscape, as much concrete data as I can find & my own personal experience to give you as complete of a market structure picture as I can create. After reading this post my hope is that you’ll be better able to separate important industry headlines from noise, grasp the amount of money flowing through the NFT ecosystem, and which firms are in the best position to profit in the coming years.
In past posts we’ve approached heavyweight crypto exchanges Coinbase, Binance & FTX from a historic & investing lens to better understand how these companies are changing the exchange space. All three are diving head first into NFTs with ambitious financial goals in tow - where they go, we must follow.
Alright, enough build-up; let’s start wrapping our heads around the JPEG Jungle: