Finally, I’m sensing “animal spirits” again.

For months, crypto has felt like a wasteland of despair. An over-aggressive Federal Reserve fighting an inflation battle over which it has very limited control, combined with a bushy-haired crypto-fraudster involved in a polyamorous Caribbean sex circus will do that to a market.

Alas, the FTX scandal is fading, and the Fed is rapidly approaching an inflection point at which its interest-rate hikes will cease. The market is already telling us that day is near. The U.S. dollar, which had been riding an interest-rate sugar high for most of 2022, has been plunging of late. In last year’s final quarter, the buck suffered its worst quarterly decline in more than a decade.

And recently, we’ve seen Solana pop higher — up more than 120% since late-December lows.

Hard to say with any certainty if that will continue, of course. Solana could very well retest lows because we’re still mired in a morass of economic uncertainty.

But what seems likely is that the crypto market writ large will begin to benefit from structural tailwinds the moment the Federal Reserve officially announces that its rate-hike fever dream is finished.

As such, I am wading back into the NFT space these days, snapping up or adding to specific projects that have A) survived the last year of bloodletting, B) continued building during the downturn, and C) have bright prospects ahead of them.

One such project I’ve been adding to my portfolio of late is:

Degen Fat Cats

This used to be known as Degen Coin Flip (DCF) before the team rejiggered a wildly successful project based on a game-of-chance as simple as they come — the flip of a coin to win or lose Solana.

I missed the original mint and watched in awe as the DCF floor at one point was up more than 850x.

Worse, I missed out on a project that was spitting out a big and sustained stream of weekly income. By the time the team expanded the project last summer, the original DCF owners had recouped weekly distributions of 133x their original mint price.

Little wonder that only the tiniest number of Degen Coin Flip NFTs ever showed up on the secondary market.

To expand interest and opportunity in the project, the team last summer fractionalized the original DCF collection in one of the more unique strategies to date in the NFT space. This fractionalization functioned a lot like a stock-split on Wall Street: Each DCF turned into 35 new Degen Fat Cats — basically a 35-for-1 split. Of those new NFTs, 28 went to each DCF owner, while 7 went to a public mint (that I also missed).

In the wake of the expansion, the new Fat Cat NFTs have fluctuated between about 10 SOL and the mid-30s, which in dollar terms equates to a fairly consistent range between about $350 and $450, depending on the price of Solana.

Today, a floor model Degen Fat Cat is about 19 SOL, which puts the dollar price right near $450. Consistent.

What has changed is that the team has continued to grow and expand the project, recently adding a new game-of-chance: Degen Coin Dozer, a Web3 version of those IRL arcade games in which you drop a coin into a machine and a bulldozer-like rake pushes that coin into a sea of other coins, with the hope that a bunch of coins, or even bills or other valuable prizes, fall into the winner’s tray.

These two games combined generate a substantial amount of Solana for the project, and in turn for NFT hodlers.

How Much Cash Does A Fat Cat Clear?

In the week ended Jan. 19, Degen Coin Flip generated 5,808.44 SOL on coin flips valued at nearly 166,000 SOL. That was a week SOL averaged about $20, so we’re talking about users wagering more than $3.3 million on coin flips. Clearly, not an insignificant amount of money.

Degen Coin Dozer, meanwhile, added another 1,030 SOL on wagers of more than 29,428 SOL ($588,600). It’s a much newer game, only a couple months old, and still finding its groove.

More than half of that combined income returns to NFT owners in the form of what the team calls “affiliate marketer payouts.” For that particular week, the total payout was 0.2 SOL per NFT.

The income bounces around a good bit, based on wagering activity in a given week. But looking back over the last four weeks of payouts, each Degen Fat Cat has picked up nearly 1 full SOL, or an average of 0.25 SOL per week. I am not predicting that’s going to be static over the coming year, but for the sake of a mathematical argument, I will assume it’s static in order to make my point. If 0.25 is a fairly decent weekly average, that implies full-year payouts of 13 SOL.

If 0.2, the last payout, is the weekly average, then that’s roughly 10.4 SOL over the next year.

Degen Fat Cats are right now selling for about 19 SOL, as noted above. That seems mispriced to me, meaning “undervalued” relative to the amount of SOL that NFT will earn over the next year.

I mean, if I can own what’s clearly a blue-chip NFT that has a demonstrable likelihood of recouping nearly 70% of my investment in the first year, there’s no other word besides undervalued that captures the opportunity here. (My bet is that a Degen Fat Cat averages more than 0.25 SOL weekly over the next year, but we will return to that next January and gauge how well that expectation aged.)

This is a team that has continued to build and innovate. They clearly have a fanbase of engaged users/gamblers, and they’re managing the business well based on the reserve and contingency funds they’ve built into their operations.

As SOL increases in value in a bull market, those affiliate-marketing payouts that a Degen Fat Cat generates promise to be much more meaningful than when SOL is at $24-ish. Plus, one would suspect that the volume of flipping and dozing will only increase as a bull market brings more people back into the Solana ecosystem, which means the payouts will likely rise.

All of which means we could very well see a substantially higher Degen Fat Cat floor price in a bull market. Right now, a floor model Fat Cat costs about $450, as I mentioned. Imagine SOL back at, say, $100, and a Fat Cat is generating let’s call it 1 SOL per month in payouts. There’s no way the floor price remains $450 on a project that’s spinning out more than $1,200 a year (again, this is assuming a $100 SOL price).

This is why I snapped up a Degen Fat Cat back in December for 34 SOL, or about $450 at the time, and have since added two more.

If you can afford a $450 outlay right now, owing a Degen Fat Cat at these levels will very likely pay off in a big way across 2023 and beyond. This is an undervalued project relative to its ongoing stream of payouts. And, for what it’s worth, I’m told by the team that updates coming in 2023 are going to make Degen Fat Cat holders quite happy.