NFTX - Good Idea, Bad Design

It’s no secret that Delphi has been bullish on the NFT space for some time, having worked closely with Axie Infinity to consult on, and invest in, the game’s governance token. Late last year, we doubled down on our conviction by purchasing a portfolio of highly sought after Mystic Axies. More recently, we invested in Yield Guild which we believe to be a promising project operating across this ecosystem. Other engagements are also in the works. That said, we still believe the NFT market to be very early and are concerned that investors in the ecosystem may be getting carried away with the current hype cycle.

As mentioned in our note from earlier this week, it seems that things are getting very heated in the NFT sector. People are hungry for exposure, but it’s not clear that the space is mature enough yet to absorb all of the capital being thrown at it. The use cases are beginning to be well-defined, but the paths to their fulfillment less so. Delphi’s investments in the space are limited to a handful of concentrated bets in standout projects that have stood up to rigorous scrutiny from our team. Much in the same way not all projects survived crypto’s last big hype cycle, we believe many of the NFT-related projects currently garnering attention have fundamental flaws that could prove difficult to resolve, albeit not impossible. One such example is NFTX, which we shall examine