Asset Trip with Whale Shark: A Prolific NFT Collector and His Non-Traditional Investments

About the avatar

"The avatar that I use is from one of the first on-chain NFT projects called ‘Avastars’ which automatically generates portraits that are forever on the blockchain. This is Avastar #63, also known as "Old Money" and I have been using him as my main profile picture since my prominence in the space began."

Oh, my gosh, you're kidding me.

The issue with saying I had over 200,000 is because I wasn't counting some of the wallet. There has since been a platform that came out that offered to help me do it. They released a beta feature that allowed me to plug in all of my Ethereum addresses and just pull out the total number. I think it was a few days back, but yes—403,847.

If you had to estimate what percentage of your income is invested in NFTs, what would you say?

I'm at the point where I don't have any income. It's all capital gains. So I would say out of the capital gains that I dispose of and acquire, I reinvest probably about 20% to 30% back into NFTs.

Okay, and how does that compare with your more passive or traditional investments like index funds, ETFs, mutual funds, etc.?

So, I shifted. I mean, I grew up investing in the stock market and traditional equities. And today within my portfolio, I'm still holding gold, property, and some traditional financial instruments. But I think as my wealth base has grown, I've been more focused on investing in things with a larger runway. So investing in NFTs, crypto, and directly investing in companies through equity rounds. If you take into account equity rounds as a more traditional approach I would say that my traditional investment portfolio is probably about 20% to 30% of my total portfolio in general.

When you say a longer runway, can you explain exactly what you mean?

With traditional investment opportunities, something good is 10%, 15%, 20% returns. If you're lucky 50% or 100% over the course of a year. 

When I look at investing now, I’m looking to get 10,000%, 20,000%, 30,000% returns. When you're armed with the knowledge about the space, you are able to make a lot more educated decisions with a mitigated risk. 

When I look at some of the investments that I've made over the last five years, I think my return on investment has roughly been around 30,000% to 40,000%, or 300 to 400 times. When you look at other traditional investment opportunities—for example there was an investment tool that my private bank was trying to sell me the other day which was offering me a guaranteed 5% return and then after that 10% or 15% on the upside—it really makes it really difficult, right? To move your money into things like that.

I'd actually be curious to know if there are parallels between the inflation conversation that's happening here in the U.S. and the inflation conversation that's happening in Hong Kong. Everybody's so worried about inflation, and I speak to a lot of conservative financial planners who encourage index funds, high yield savings accounts, CDs, etc. Can we really give that advice?

When you look at the economy, number one, inflation is already starting to become rampant. Number two, you're looking at the equities market and stock prices are close to an all time high, right? What is the case for investment in traditional equity in the traditional equity market? Again, I was sitting down with my private bankers about two weeks ago, and when you bring up the risk of inflation, it seems like traditional and larger institutions are really overlooking the potential immense risk that inflation has on currencies all around the world. Savvy investors are very aware of the fear of inflation, and they're making the appropriate plays to mitigate that risk. When you have large banks telling you hey, don't worry about it, as long as you're holding for the next 10 years, you're going to be fine, I think that's a little bit misguided.

Technically passive investors are mitigating the risk of loss in the market through diversification, but it sounds like you’re saying they may be overlooking other kinds of loss from inflation. Would you categorize overlooking inflation as an opportunity cost?

I would say it's an opportunity cost because you could be investing in more nascent spaces like blockchain and like NFTs and all these other high-growth areas, but at the same time it is a legitimate risk in the short- to mid-term. 

Again, when you look at the economy, the economy is not as healthy or as buoyant as everyone thinks. Particularly when we have Omicron coming into the picture. And then on top of that, throw on inflation numbers. And then after that, the equity markets are still performing as well as they are despite the underlying economical factors not making any sense. I think there's a lot of pain for a lot of people headed in the short- to mid-term. 

Now, given that, when I sat down with my private bankers, I did sign the paper to actually invest in their fund. It is a makeup of public equity, private equity, and fixed income. When I signed it, I actually said, “This is probably the most stupid mistake that I've ever made as an investor.”

So why did you do it?

Diversification. No one is ever 100% right. I can see the risk to it. When you think you're right all the time you probably are going to be wrong. It was just a virtuous diversification. But literally you should have seen the faces of all my bankers when I said it, they had nothing to say. They were still happy, though. I think they understood that it was very much a diversification play rather than a savvy investor play.

Just kind of checking all the boxes. 

Yep.

So at what age did you start investing?

My investment journey started very early on. I actually started investing when I was seven or eight, collecting Dragon Ball Z cards. I invested in trading cards from the age of seven to 12. So I started off from a very non traditional form of investment, right? Probably why it's very easy for me to do this today. 

I used to have this toolbox that my dad gave me and I would separate all of these regular cards from the rare cards from the shiny cards, and actually go to school with my little toolbox. The school didn't like it and eventually they were confiscated. My parents got a couple of phone calls from other parents, but the hustle was real.

Was this in the U.K. (where you were born)? 

No this was actually in Hong Kong and Singapore.

Got it. So then what was next?

When I hit 18 I started to invest in equities. I thought I was a hot shot. I had a nice education, nice background. I got my grandfather to front me $1,000 and thought I was going to turn that into $100,000 overnight. 

I made all of my mistakes in the very first year that I started investing. I bought stocks in Worldcom [a telecommunications company that went bankrupt in 2002] and Riverstone [which was involved in a scandal]. I saw my portfolio dwindle from $1,000 all the way down to either nothing or like $100. So I made all of the mistakes that I needed to make when I was 18 or 19. 

I wasn't too demoralized and continued to put more effort into understanding how to analyze companies, how to analyze balance sheets and cash flow and all of that. After that I was really a traditional investor in my 20s. I was investing in foreign currencies as well as investing in traditional equities. I did relatively well and expanded my portfolio into property in my late 20s. And then after that, I entered into crypto in my early 30s. So, it's been very much a transition for me and I think that there is a common skill set that is actually transferrable as you move from investment vehicle to investment vehicle.

Yeah, it’s almost like you came full circle.

Yep, absolutely. And no plans to move back into traditional investment tools.

Why is that? 

The more you're in the market, and the more you get into corporate, the more you understand that the amount that companies hide from investors, particularly those who are trading on the open market, is immense. There's too much information asymmetry, and I like to invest in things where I have complete transparency, which is what the blockchain brings. Investing in the blockchain is actually a lot more transparent than investing in companies.

What was your role in corporate again?

I actually started off as an analyst, so that's why I'm very comfortable with spreadsheets. I was analyzing markets, analyzing categories, analyzing companies.

So when you did make it to alts—specifically NFTs—what was the first NFT marketplace that you used? 

The very first NFT platform that I used was OpenSea. The first NFT that I purchased was actually a digital trading collectible game (TCG), which is again going back to my roots.

What’s your favorite NFT platform?

I actually have quite a few. OpenSea holds a very special place in my heart simply because they're the OG. We—a lot of the OG investors—spent a lot of time there simply because it was all of the NFTs in the world on one single platform.

For art, I'll usually go to places like MakersPlace, KnownOrigin, and if I want to buy basketball cards, I'll go directly to NBA Top Shot.

If I want to buy photography nowadays, I'll either go to OpenSea or I'll go to Foundation.

So what was your biggest NFT win and loss?

My biggest NFT win would probably be the collection of two of Pak’s genesis collection. I was able to collect them when they first came out and again recently, with their cooperation with Nifty Gateway. I think they are close to breaking $100 million in sales on a single project, which is just amazing. They are probably the most prolific creatives in the web 3.0 space today and holding their two initial genesis pieces means a lot to me. 

For losses, I'm not going to name names, I don’t like to shame projects. But there are some independent creatives that I backed in this space very early on back in 2019, simply because I loved the concept. I still have the NFTs and they hold sentimental value to me. They also help me make sure that I'm really not being overly generous with my investments. I hold maybe 10 or 20 entities that have no value today.

Ten or 20 out of 400,000? That’s not bad.

That's not bad at all. But I should have seen it. The thing with being an investor as well as being someone who wants to raise creatives is that you want to support creators and their projects. There may be one project where I really wanted to support the creative simply because of their living circumstances, but really got bit in the end for doing that. It was an insignificant amount of money. But again, as an investor, you really do need to learn lessons from every single investment that you make, no matter how big or small the losses, there's always something to be learned.

What do you think went wrong?

I don't think [the creator] had a clear enough roadmap. And honestly, that project could have been done and still today, nobody has picked up on that same concept. I think that project could have done extremely, extremely well.

I think that's such a valuable lesson for investors and also creators themselves. If you don't have that clarity as a creative person, it can be a disservice to the work because a good idea deserves to be backed up with a strategy and vision.

You're absolutely right. The two things that I've learned to put a lot more weight on as an investor is number one, the clarity of thought behind the roadmap in terms of: what are you trying to do and how are you going to do it?  The second thing is: how committed are you to this? We've seen founders who have dropped their projects altogether, to move on to something else. And then all of the investors who had purchased their stuff in the beginning are left holding banks, right? Some of these people are anonymous, some are pseudo anonymous, some are well known in the space. Honestly, I do not believe in founders that do not have a strong commitment to their initial collector base. It’s what you equate to a money grab and what we're seeing a lot in the space right now.

If you have a project, you have to finish it, you have to commit to it, you have to make sure you take it as far as you can. There are some pretty well known people in the space who started off projects and had a bunch of investors who came in and those projects are either languishing or dead right now. It’s a real shame.

When you say projects are languishing, do you mean they did their initial genesis drop and then they just kind of abandoned the community?

Yep. You want them to follow through and build a community after that. 

It mainly happens in the profile picture space, what you call the “PFP space.” You’ve got a lot of projects where the creators of this PFP essentially dropped the genesis drop, people bought in assuming that there was going to be future use case, a founder promised to provide future use case, but in the end, nothing happened. And then the founder moves on to do something else, because there's money to be made somewhere else.

What are some of the promises that they make?

Like you know, Bored Apes for example. Where you basically can switch your profile picture to the apes and stuff. There were earlier projects that were promising that if you buy this PFP we're going to create you a 3D avatar and you're going to be able to use it in the metaverse. Or we're going to tie these avatars into digital identity. You had a lot of these empty promises.

That’s disappointing on many levels. Now, you told me once that you used to spend something like four hours a day looking through all the new NFTs, but now you don't have time to scratch the surface. Can you say more about that?

Back in the day in 2019 you could spend four or five hours a day and go through every single artwork NFT that had entered the market. I've been spending about 12 to 14 hours a day, every single day, for the last week because I've gotten this new hobby of collecting and investing in NFT photography. I can't even go through all of the photography that launches on the space every single day within those hours. The amount of NFTs that are flooding into the market is absolutely insane. 

There are again, if you're looking at this not as a collector but as an investor, it becomes even more important to do the due diligence on the creative work and on the significance of that work before one invests within the NFT space. Due diligence is so much more important now than it was in 2019 and 2020.

How does somebody do their due diligence and how do they gauge what is significant?

The first thing is that they need to have an understanding of what the investment thesis is. Why is this form of NFT going to be more valuable than another type of NFT? 

The way that I usually go about that is by understanding what traditional markets look like and understanding whether NFT technology is going to digitize that value when NFTs are created in parallel with traditional collectibles.

The second thing is that traditional markets and blockchain markets are very different. So just because you understand the art market in the traditional world, does not mean that you're going to understand the art market in the blockchain world or the web 3.0 world because the collectors are different, right? The aesthetic, the preference for aesthetic, the preference for NFT quality or token quality are different. You're going to have to take a significantly larger amount of time looking at the market and understanding what people really buy and what really sells. 

The third thing is due diligence on the NFT itself and looking at that in comparison with all the other related or comparative NFTs that you could buy versus this one.

And then the fourth and last thing is due diligence on the creator. Understanding whether or not this creator actually has a mainstream market. Do they have the social media following? Do they have the social media presence? Is there validation from traditional institutions or web 3.0 institutions on the value of their work? And really getting that market validation to understand whether or not it's a good idea. So I would go through those four points to really understand how to invest in NFTs.

Talk a little bit about the “degen” world of NFT collectors. What does the expression “degen” (degenerative) mean?

So let me put it this way: the degen world is essentially a bunch of OG NFT collectors who have become extremely wealthy either through crypto or through NFT investments. And it's an echo chamber of investment, if I might put it that way. 

So essentially, if there is something that they believe has value, you're looking at projects with, let's say, 5000 NFTs within them, but they're all being bought up by 10 to 20 people.

The concept of why degens are profitable is really not because they are profitable in reality. It’s all paper money. So when you have 5,000 NFTs that are being controlled by 20 of the top collectors and none of them have any pressure whatsoever to sell, anyone who wants to buy into that collection has to buy in at a very high floor price. 

Now, given that these 20 collectors own all of the NFTs does this project have any liquidity in the market? No, I could do a floor price at $100,000 but it doesn't make any sense because if they decide to dump all 5,000 NFTs tomorrow they might get $5,000 or $500. So that's what I see from the degen phase and I can tell you I have never bought into any NFT degen project in my life simply because I understand the concept of liquidity.

What are some of the telltale signs that a project might have good liquidity?

I think the number one telltale sign is the number of collectors that enter into the project itself, right? If you have 5,000 NFTs and there are 5,000 different unique collectors, then you probably know that liquidity on that project is going to be pretty good. 

The second thing that you have to look at is the long term secondary market. So if projects you see have not only a large pool of collectors, but also incremental value and secondary sales, then you know that you've hit a very liquid NFT market.

Got it. Well, this has been a wonderful trip down the rabbit hole. Thank you for your time and for sharing your expertise.

Megan, thank you so much for allowing me to do this. It's always nice to catch up.

Take your own Asset Trip

If you're interested in investing like Whale Shark, you can check out these platforms:

• Rarible: Rarible is an online marketplace that aims to make the world of buying and selling valuable non-fungible tokens (NFTs) more approachable and affordable for everyday users.
• OpenSea: OpenSea is the first and largest marketplace for user-owned digital goods, which include collectibles, gaming items, domain names, digital art, and other assets backed by a blockchain. Buy, sell, and discover rare digital items.
• Fractional: Fractional ownership of the world’s most sought after NFTs. Fractionality unlocks liquidity and reduces entry costs, so everyone can get in on the action.