Dialogue with NFT giant WhaleShark: How to build your own NFT investment framework?

This article was published on Block Rhythm, with the original title “WhaleShark Interview: The Whale Who Bought 210,000 NFTs Teaches You How to Invest in NFTs,” author: Jeff Wilser, translation: 0x13

Are you planning to buy some NFTs for fun? Or have you started considering investing in NFTs? Or maybe, even though you still can't understand why a digital image can be sold for a staggering $69 million, you remain open-minded, have done your homework, and believe that the returns on investing in NFTs outweigh the risks? Or perhaps you wouldn't mind losing this money, so you just go for it?

Disclaimer: The following content does not constitute investment advice. Investing in NFTs or any crypto project carries various risks and may result in the loss of all your assets. Please proceed with caution.

In this somewhat unfamiliar new world of NFTs, you need a guide to lead the way.

Introduction to WhaleShark

WhaleShark is actually a pseudonym for a 38-year-old man from the UK, currently residing in Hong Kong. Notably, he owns as many as 210,000 NFTs. The total value of his NFT collection may rank first in the world, or perhaps second or third, but he is confident that it is definitely in the top five, and he gladly accepted an independent audit from Nonfungible.com.

WhaleShark is very eager to help newcomers understand the NFT space. He has previously assisted Paris Hilton. "I was just helping Paris and her fiancé Carter Reum get on this NFT ship and helping them understand NFTs more deeply," WhaleShark said. "She was very enthusiastic, very excited, and she already knows a lot about NFTs." (Recently, Paris Hilton announced on Twitter that she is "ready to make a big splash in the NFT space.")

You might ask, "What if I'm not a big shot?" No worries, WhaleShark will help you too. WhaleShark has formed a community focused on the NFT space called "WHALE," which has over 10,000 members in its Discord group and has issued a $WHALE social token with a diluted market cap of $265 million. This token is backed by the value of Whale's treasury and aims to allow people to invest in NFTs without spending millions of dollars. (In a previous article published on Medium, WhaleShark mentioned that he has donated some $WHALE tokens to charity.)

"I have always wanted to be an art collector because I love art," WhaleShark said. "But I was afraid to enter the traditional art collecting space because the barriers to entry are just too high." He finds the traditional art world intimidating and very opaque, and those who enter it are often somewhat snobbish. However, the "crypto art" space is something he feels he can grasp.

A few weeks ago, I had my first conversation with WhaleShark to understand his views on the entire NFT space. Now I want to get more specific. There are many potential investors who are "curious about NFTs" and eager for guidance; what advice would WhaleShark give them?

WhaleShark shared some good news and some bad news with these potential NFT collectors. The bad news is that he believes "99.99%" of NFT projects will fail. So, perhaps you shouldn't max out your credit card to buy a pixelated photo.

So what’s the good news? He said, "I think it's absolutely not too late to get into the NFT space." WhaleShark believes there are still plenty of investment opportunities available, and even newcomers can participate. WhaleShark provided some rational, practical advice (such as a detailed Twitter follow list) that will help those looking to dive into the NFT space quickly get started, build their investment decision framework, and ensure their digital collectibles are not stolen.

Jeff: Suppose someone wants to start investing in NFTs, what should they do first?

WhaleShark: First, they should understand what NFTs are and how they are changing the ownership and management of digital assets. People can watch some videos on YouTube that provide a brief introduction to NFTs, including what NFTs are, how to use MetaMask, how to mint, how to buy, etc.

Jeff: Let’s continue. For example, this person has grasped the basics; what should they do next?

WhaleShark: The second thing is to ensure he/she uses Twitter. The social platform commonly used in the crypto and DeFi space is Telegram, but the main battlefield for NFTs is still Twitter. Please start using Twitter and follow major collectors, renowned creators, and some well-known projects.

Jeff: Which accounts would you focus on?

WhaleShark: There are several categories. The first category is information sources: nonfungible.com, L'Atelier, DCL Blogger, and Andrew Steinwold. The projects you follow mainly depend on your interests, but you should also pay attention to some key projects like Gods Unchained, MakersPlace, Known Origin, Super Rare, Nifty Gateway, Sandbox, Crypto Voxels, and Decentraland.

Then there are some famous artists; you must follow artists like Trevor Jones, Pak, and Xcopy. I mean, they not only talk about their own art on Twitter but also discuss the health of the NFT space because they are already integrated into this ecosystem. Then, for collectors, you should definitely follow people like MoCa, Pranksy, myself… Gary Vee, Jamie Burke, and others.

If you follow them and really look at what they post every day, you will quickly integrate into the NFT space.

Jeff: After following these Twitter accounts in the NFT space, what’s the next step?

WhaleShark: I think everyone should listen to some NFT podcasts; you can listen while you work. I highly recommend Andersen Steinwold's "Zima Red," NonFunGerbils' "NonFunGerbils," and "The Matthew and Rizzle Show."

DCL Blogger also has a podcast and a YouTube channel. And "The First Mint" is a fantastic podcast about NBA Top Shot, with rich content that often hits the nail on the head and is very objective. There's also Jamie Burke's "Outlier Ventures."

Jeff: Should I join some Discord groups?

WhaleShark: Basically, joining the two largest NFT Discord groups in this space will be quite helpful. The largest one is Whale (note: this is the community founded by WhaleShark), which currently has over 10,700 members. The other group is TokenSmart.

Jeff: What if someone says, "OK, I now 100% understand NFTs, I want to collect, I want to invest. How can I do it without losing money? What is the smart person's approach?" I think it can't be as simple as "buy what you think is cool," right?

WhaleShark: I have already mentioned on Twitter that one thing to keep in mind is that 99.99% of NFT projects that exist today will have no commercial viability when mainstream resources flood in. So, as you said, people really need to be very cautious when investing in NFTs and carefully analyze what they want to do in the NFT space and what they want to collect.

Now I think they can be divided into two categories: one is true collectors who collect certain things simply because they like them; the second category is investors who may collect what they like for the long term, but they also have another goal of making a profit in the long run. But I believe the most important thing about collecting is, "If I don't love it, I won't collect it."

Jeff: Let’s temporarily set aside "collectors" and just consider you as an "investor." Do you have any common strategies for evaluating an NFT project?

WhaleShark: In a project, the first thing I look for is whether it can draw a parallel concept from traditional collectibles and digital collectibles. I want to ensure that digital collectibles have a historical proof and that the value of physical collectibles is also upgrading.

Jeff: Interesting, can you give an example?

WhaleShark: For example, sneakers. In recent years, people have gone crazy over sneaker speculation. This makes me very optimistic about digital sneakers that can be worn in the Metaverse, like RTFKT. Let's also look at digital sports trading cards, which have also become popular again in the traditional world. Digital trading cards can be held by me for 10, 20, 50, or even 100 years, and their value will continue to appreciate. Therefore, NBA Top Shot bringing traditional collectibles into the digital realm makes me very optimistic about it.

DJ 3lau, also known as Justin Blau, on Randall's Island in New York City. (Brian Killian/Getty Images)

Jeff: Got it. What’s the second thing you look for?

WhaleShark: The second thing is the team. A brilliant idea can be dragged down by a bad team, but a bad idea can be elevated by an excellent team. Whenever I invest in a project, I carefully examine the founders and the team to understand whether they have expertise, whether they have a professional spirit, what their past performance is like, and whether they can steer the project in the right direction.

Jeff: What about the third thing?

WhaleShark: The third thing is the nature and quality of the NFTs. I believe some people's works are shortcuts; they just put 2D works on the chain without anything special. I usually won't invest in those.

You really want to see some high-quality projects that fully utilize the potential of the digital canvas and bring collectibles into the digital age. Similarly, we will see many mainstream projects entering this space, and only those truly high-quality projects will succeed.

Jeff: In your view, what projects have fully utilized the potential of the digital canvas?

WhaleShark: The most famous example should be NBA Top Shot. Its production team didn't just take a 2D player card, scan it, and send it out; on the contrary, they created 3D works. Moreover, these works include all the information about that Moment, and they don't just use a static image but tokenize a video.

Jeff: What else do you pay attention to?

WhaleShark: Before investing, the last thing I pay attention to is funding, which many people do not care about. In short, I like to invest in projects that have strong investor support and robust funding lines.

In the NFT space, the rise and fall of a project can happen very quickly. Only those projects with real funding that can maintain vitality during a bear market can thrive in a bull market; once a company goes bankrupt, it's really over.

But I find that those with substantial funding and the ability to remain resilient throughout the bear market are not only the most likely to survive but can also build a large fan base.

Jeff: What categories of NFTs do you particularly favor?

WhaleShark: I have always believed that crypto art will be the first to explode. Over the past two years, I have been heavily promoting this on Twitter. So once people own crypto art or digital artworks, I believe they will look for places to showcase these digital arts.

Now, everyone can display on their screens; everyone uses three to seven screens every day, but it's still limited, right?

Jeff: Staring at artwork on a phone is indeed not ideal.

WhaleShark: You are still limited by those screens. People who collect 10 pieces of art, 20 pieces, or 100 pieces will want a place to showcase their entire collection. As far as I know, the only place that can do this today is the Metaverse. So I think we need to prepare for the prosperous development of the Metaverse; it will develop very, very quickly. My main bet is on Cryptovoxels because many artists naturally love this platform due to its ease of use, and I believe the Metaverse is the next direction of development.

Jeff: What other categories of NFTs do you think can stand out?

WhaleShark: Music NFTs. Crypto art took two to three years to create this highway, paving the way for tokenization and commercialization. Music NFTs now just need to drive on that already built highway and speed to the finish line. This is also why I bid $3.5 million on 3LAU's first NFT album because it is historic. It is the first tokenized NFT album. I believe music NFTs will be able to stand out.

Jeff: When you buy an NFT as an investment, what is your estimated return period? One year? Five years? 20 years?

WhaleShark: I am looking for things that I can hold forever after investing without ever needing to sell. I am looking for assets that I can hold for the rest of my life and that will continue to appreciate. For example, if my grandfather had started buying player cards in the 1920s, I would have a collection worth millions or even hundreds of millions of dollars today. That’s what I am really looking for.

Jeff: Let’s talk about security. Given the scale of your collection, what measures do you take to avoid being hacked?

WhaleShark: I believe security is the most important thing. If you want to be a collector in this space, you must follow a rigorous security process.

The first step is to store your NFTs in a cold wallet. It’s easier to keep NFTs in your MetaMask or a custodial wallet provided by a platform, but I still take everything out and put it in a cold wallet.

Jeff: How should a cold wallet be properly stored?

WhaleShark: Make sure you store your cold wallet in a very secure place. I have multiple backups of cold wallets stored in safes in various locations around the world. And ensure that the private keys never touch any digital communication devices, not even connected to the internet; this is very important.

Then, take the private keys you have written down on paper, cut them into several parts, and store them in multiple safes. I might be a bit paranoid, but when your collection has a potential value of up to $300 million, this should be the safest approach.

You should know that if your private key is stolen, those NFTs are no longer yours.

Jeff: Whenever I hear about an investment opportunity, it always seems too late (not just in the NFT space, but in finance as well). In other words, if someone like me knows about it, the real bull market is over. I suspect many people feel the same way; the smart ones have already made a fortune and exited, leaving the "dumb" ones still flocking in. What do you think about this issue?

WhaleShark: That's a great question. The first thing I want to say is that I don't think it's too late to invest in the NFT space. I have two reasons. The first is that, as I mentioned earlier, currently 99.99% of projects will fail, meaning new projects will enter this space and become mainstream. Keep your ears open and your eyes on Twitter, and I think people will be able to distinguish which of these new projects will thrive in the mainstream.

The second reason relates to digital art. Sotheby’s and Christie’s have already stated that digital art will have long-term development; they see the huge potential of NFTs. The important question now is which of these visual artists will land at the auction houses. When you look at the crypto art space, very few artists sell works for sky-high prices. So, if you can identify which of the artists in the digital art space will auction at these two auction houses, investing in their artworks now could yield huge returns in the future.

I absolutely do not think it is too late, but understanding which of these artists will go mainstream requires a lot of research and analysis.

Jeff: Okay, the last question. I believe this is a question you often hear. But I’m curious. You mentioned that 99.99% of NFT projects could fail, yet you own 210,000 NFTs. How do you view this?

WhaleShark: (laughs) That's a great question; you are the first person to ask me this.

Jeff: I mean, I know you have an answer!

WhaleShark: I will analyze deeply. When I see a project, if after some analysis I find that I only understand 0.1% or 0.01%, I will continue to dig deeper.

Jeff: What does that mean?

WhaleShark: I really do a very in-depth study. So far, I have been very lucky to invest in the right projects at the right time. These 210,000 NFTs are probably distributed across (less than) 20 projects.

Jeff: Wow!

WhaleShark: What I want to say is that most of my NFTs are distributed among 15 projects. When I find a good project, I try to buy everything valuable within that project. I find this to be the best approach, though it may expose you to greater risks. But when I see a great project, a great team, a great idea, and strong funding support, I go All In. Not in the literal sense of "All In," but I mean I do very in-depth research and investment.