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Key Takeaways:
- The NFT market size is on a steady rise, with an estimation of over US$ 40 billion;
- A growing number of market participants, including some stock exchanges and auction houses, are racing into the NFT market;
- With a history of financial achievements and rich experience in the art collectible sector, the Asia-based company Oriental Culture is going to engage in NFT offering business and intends to take a share.
The burst of the metaverse seems faded, but in many ways, it evolves to be a linear progression where it seems that not a day goes by without a company or celebrity announcing to build up its own presence in the virtual universe. As an important part of the metaverse, the Non-fungible tokens (NFTs) market is also expanding aggressively, taking a market cap of US$ 41 billion, according to a report released by analysts at JP Morgan Chase (NYSE:JPM).
Oriental Culture Holding LTD (NASDAQ: OCG), online collectibles and artwork e-commerce service provider, recently announced that its wholly-owned subsidiary will provide NFT services, with product casting and initial offering, auctions, and trading services. The company has long been laying the groundwork for its new NFT business. For example, it partnered with a blockchain enterprise providing technical support for its new frontier.
Attention-Grabbing NFT People who have little interest in NFTs may be aware of “CryptoPunks” and the digital collectible “Every day: the first 5000 days”, with slack-jawed shock in their lofty selling price. The overheated auctions associated with NFT hit a record high dealing price that courts a number of suitors. Technically speaking, any product can be tokenized as a digital asset that is priced and traded in the metaverse.
Driven by the advent of Web 3.0 technology, NFT can be used to encrypt the targeted product and generate an unalterable digital signature that will store on the blockchain. Types of NFT products may be associated with digital files like photos, video and audio, or physical assets. Despite an NFT product associated with a photo or other form of a digital file that would face the risk of copying and downloading, its intellectual property and ownership are effectively protected.
Market Participants OpenSea is the world’s biggest online NFT marketplace. Users can produce their own NFT and set up an auction on this Amazon-like platform. OpenSea will charge a 2.5% commission on every transaction. Data from Token Terminal showed that OpenSea had a total transaction volume of US$ 14 billion in 2021, a 646-fold increase compared to US$ 21.7 million for the same period in 2020.
Rarible, Axie Infinity and SuperRare are several other destinations for NFT trading. They offer similar services but differ in detail to attract creators. For instance, a maximum of 10% of creator royalty is allowed on OpeaSea while Rarible lifts that limit to 50%.
(Source: marketplaces’ websites)
An increasing number of enterprises are also poised to invest in the NFT business. Intercontinental Exchange Inc. (“ICE”)(NYSE: NYSE:ICE) filed an application with the United States Patent and Trademark Office (“USPTO”) to build a trading platform for all kinds of digital products, with NFT products no exception; CYIOS Corp. (OTC: CYIO) announced that its wholly-owned subsidiary Immortals Group Pty has partnered with Hong Kong-based Stan Lee Holdings Ltd. to manufacture and distribute the Superhero NFT under an exclusive development and distribution agreement. These late arrivals are all likely to be neck-to-neck in the race of NFT, so as OCG.
A Satisfactory Performance Oriental Culture used to be a service platform for trading art collectibles. In Hong Kong, it connects local art collectors, artists, art dealers and investors, and a vast majority of products ranging from coins to paintings, from jade to teas, and even vintage wines can be auctioned on Oriental Culture. At the same time, it is the world’s biggest service provider of transaction of banknotes and stamps, building integrated online and offline trading channels for devotees of stamp collection.
Currently, a total of 187 types of collectibles and artworks are listed and traded on its platform. The number of active trading users has reached 116,000, and the total value of transactions is$10.8 billion.
More noteworthy is Oriental Culture’s overall achievements in 2021. In the first half of 2021, the company reported a nearly nine-fold increase in revenue to$24.46 million, and a net income of$10.10 million, a sharp increase of 2601.8% over the same period of 2020 due to the gradual recovery from the Covid-19 pandemic.
NFT’s Role at Auction The introduction of NFT into auction is eye-catching since many securities exchanges are also tipping their toes into the field. Traditionally, an auction is associated with a physical asset, but the advent of Web 3.0 technology and the emergence of digital NFT collectibles make things different. What is the future look like for the auction sector? Maybe we can find the answer from Oriental Culture’s new launch.
In China, only companies with government-issued certificates are allowed to trade cultural collectibles, and Oriental Culture is one of them. However, Asian buyers are more cautious when they are placing a deal online because the traditional offline trading market of collectibles and artworks there is big and solid. In this context, Oriental Culture stands to its aspiration to expand the transaction size of art and cultural collectibles through its integrated online and offline model.
Lewis Wan, Chairman of Oriental Culture, said that with the development of blockchain technology, the market scale of cultural and art products is growing rapidly which leads to diverse needs of trading services.
For NFT sellers, an auction works out to be the optimal solution to assess the value of collectibles and is more evenhanded as a price responder; while for the buyers, a local platform with issued trading qualifications is more trusted and appealing than pure-online service providers like OpenSea.
By and large, Oriental Culture’s venture into the NFT business is noteworthy. But whether the new business can deliver remains to be seen as it is undoubtedly a capital-intensive investment that may cripple the company in the short run. In terms of valuation, Oriental Culture currently trades at a relatively low P/E ratio of 9.27. Oriental also has a PB ratio of 2.8 compared to that of ICE.
Image credit: Mentor Finance
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