NFT Token Talk: SEC Scrutiny, NFT Downturn Hampers NFT Utility Tokens

Over the last year, many NFT projects have yielded to consumer excitement and speculation by creating their own ERC-20 token. Most projects label these a "utility token," designed to be the currency of a larger ecosystem or game. At one point in time the words staking and tokens were a catalyst for sellouts and upwards price movement, regardless of the project's underlying "fundamentals" or the token's clear purpose. 

Today though, "token meta" seems to have largely fizzled out. Perhaps NFT collectors are wiser to the potential regulatory concerns. Or, the hints at a potential bear market have spooked them from owning the lowliest class of low-liquidity shitcoins. Either way, the random $ZOMBIE tokens have faded, and only those that are actually useful are worth watching (I typed this VERY lightly). 

If you're new here, each week I'll walk through a hand-picked portfolio of NFT utility tokens and talk about all the major storylines, price movements, and more. 

SEC Scrutiny Inbound

A Bloomberg report dropped yesterday headlining the SEC's looming scrutinization of the NFT market and the potential of unregistered securities, mainly via the creation and distribution of NFT utility tokens. This regulatory concern is not new, and has been expected for quite some time - but the headlines did send a shakeup through NFT Twitter, leading to speculation on which projects and tokens may be on the edge of legality. 

Additionally the report from Bloomberg highlighted potential concerns with fractionalized NFTs, noting that the SEC "has asked for more information on the topic." 

It's too early for us to report on which of the tokens mentioned in this piece may be subject to regulatory pressure, but as of now, it is fair to assume projects with tokens may be met with some caution and trepidation from the market until more regulatory certainty is exposed. 

The NFT Token Portfolio 

Reminder, you can find the public portfolio that I built on CoinGecko here. If you have believe a token on CoinGecko should be included, please reach out to me on Twitter. 

Right now I've categorized the tokens in the following ways. 

Metaverse + Ecosystem Coins

Though these could be argued as adjacent to NFT utility tokens, I've deemed the tokens like $WRLD, $SAND, $MAGIC, and $MANA as important enough for inclusion. All relate to popular Metaverses or Metaverse-like projects and economies that are able to support other NFT collections. 

NFT/PFP Utility Tokens (no game) 

As certain brands and IP look to extend their reach, they've built utility tokens to introduce mechanics for new mints and more. This group includes SupDucks and $VOLT, and Cyberkongz and $BANANA. Both projects are without games, but allow their tokens to accrue to holders for use in minting companions Baby Kongz or Mega Toads. 

NFT/PFP Utility Tokens (game) 

The largest group in the portfolio includes projects that are looking to build in-game currencies for eventual games. This group includes $MILK (Cool Cats), $POW (MetaHeroes), $WOOL (Wolf Game), $RAIDER (Crypto Raiders), and more. 

This group is likely to be the most scrutinized as the respective utility tokens in this group are supposed to play an integral role in the games they belong to. 

Miscellaneous 

Last but not least, I've built a group to maintain any oddballs that warrant paying attention to - like $ASH, Murat Pak's token. Pak's ultimate plans for $ASH are still unwinding and as it remains the most cryptic of the group, it seems only fitting that it remains in "Miscellaneous" until the mechanics may allow us to better define or categorize it. 

The State of NFTokens 

Three Positives

1. $RAIDER Up Big

In the face of NFT downtrends and the aforementioned SEC scrutiny, a handful of projects saw their tokens trade higher over the last seven days, most notably $RAIDER which saw a 40 percent increase to $4.67. CryptoRaiders remains one of the lone, functional P2E games with a token at present time and despite the hiccups the Polygon network has provided others (like Cool Cats and Cooltopia), there have been few issues in it gaining popularity. 

2. $BANANA Adds Utility

$BANANA, which was initially uses for breeding Baby Kongz, is now going to usher in a new era of utility. The CyberKongz team recently announced "Play & Kollect" a play-to-earn game on the Polygon blockchain. Play & Kollect will feature jungle adventures, allowing users to send their CyberKongz VX assets out on jungle runs in groups of 1-5 assets. The CyberKongz VS will gather Kongium Ore, which can then be redeemed for prizes like $BANANA or exclusive NFTs. 

To play, users will need to enter with $BANANA. Then, 50 percent of the $BANANA entry fee is sent to the prize pool, 40 percent is burned, and 10 percent goes to the CyberKongz treasury for seasonal specials and promotional events. 

3. $ASH Rides Pak Creations

$ASH, the utility token for Murat Pak's "ecosystem" saw a 10 percent gain over the last 7 days, moving to $18.68. In typical fashion, Pak released a video about the second iteration in the unfolding $ASH plan, which features a collaboration with over 30 notable NFT artists. 

Two Negatives

1. $MAGIC Panic, Treasure Exploit 

Late on Mar. 2, an exploit was found in the Treasure Marketplace that allowed certain notable assets, including SmolBrains and some Legions to be sold for 0 $MAGIC. While quickly addressed, the issues created a sharp downward trend in the price of $MAGIC, which was then followed by a sharp uptrend back towards the price leading into the exploit. The 24-hour chart tells the story. To learn more about Treasure and the $MAGIC ecosystem, refer to our introductory guide. 

2. No News Isn't Good News for $MILK

Here's what I wrote about the $MILK frustrations last week.

"Unfortunately, while the token was created, $MILK is currently not usable as the Cooltopia game remains delayed due to technical difficulties. Another concern that may be impacting the price of $MILK is the imbalance which is growing within the Cooltopia ecosystem. At present time, Cool Cats NFT Holders earn $MILK per day, pursuant to their rarity tier of Cool Cat. However, because the Cooltopia game has not yet launched, Cool Pets holders are not earning any $MILK from their pets. The Cool Cats team is aware of the disparities and imbalance this is creating in regards to $MILK ownership, but their formal plans for rectifying the issue have yet to be fully announced."

The same is true this week. The Cool Cats team is no closer to releasing Cooltopia, citing issues with the Polygon blockchain and its inability to handle the scale of transactions that the game would require at present time. While the broader NFT selloff has impacted Cool Cats prices, the Cool Pets are down to a 1.28 ETH floor and $MILK, which has no use without the game, is down another 26.5 percent to $0.048. 

Disclaimer: Lucky Trader is not a registered investment advisor. You understand that the service is furnished for your personal noncommercial, information, purpose only. No mention of an NFT in the service constitutes as a recommendation to buy, sell, or hold that or any other NFT. Nothing within the service shall, or is intended to, constitute financial, legal, accounting, or tax advice. Any decision that you make to buy, sell, or hold an NFT should be based on an assessment of your risks in consultation with your personal advisers.