In March 2021, an image file sold at auction for $2.9 million...

The image pictured the first-ever tweet by Jack Dorsey, the co-creator of Twitter. (It simply read, "just setting up my twttr.")

Why the astronomical price tag? Well, this tweet was no ordinary JPEG file. Dorsey had turned the image into a non-fungible token ("NFT") in December 2020... just when NFTs were exploding in popularity.

It was a clear sign of investor euphoria.

That's mostly missing from the market right now. Despite the major rally that has happened in recent months, investors haven't been excited about volatile assets.

Now, though, we're seeing the first hints that sentiment is beginning to change. And as I'll explain, that's a good sign for the bull market...

NFTs are digital tokens. Each token acts as a "certificate of authenticity" that proves an item is yours and authentic. With NFTs, you can own and trade art, music, videos, and even tweets... all verified by the blockchain.

NFTs are also coded to exist in scarce amounts (and can even be made to be one of a kind). That's where the excitement began...

In 2021, Americans were flush with stimulus cash and earning near-zero interest on their savings. So folks plowed money into any asset that might offer big yields.

Stocks, cryptocurrencies, and collectibles soared in the frothy markets. And NFTs entered a full-on bubble. Ten months after Dorsey sold the image of his tweet, monthly NFT market volume reached a peak of $17.2 billion.

Then, 2022 rolled around...

The Federal Reserve turned hawkish, raising rates to curb soaring inflation. Suddenly, volatile assets didn't look so appealing. Investors went "risk off." And over the next 18 months, NFT trading volume plunged 81%... while sales figures dropped 61%.

The NFT boom gave way to a bust. Today, the best offer for Dorsey's tweet is around $3,000... just above 1/1000th of its original sale price.

The appetite for these assets fell dramatically. That's why I had to look twice when I saw this front-page Bloomberg News headline in February...

The article reports that NFT sales almost tripled from October to November in 2023... before surging another 85% from November to December. Sales went on to hit another recent high in March.

You might be wondering why I'm talking about NFTs at all. They're not something I'd recommend putting money into. And you might not think they tell us much about stocks.

But if you lived through the 2021 Melt Up, you know what NFTs represent more than anything else: risk.

NFTs combine the volatility of cryptocurrencies with the speculative upside of collectibles. Folks buy NFTs when they're willing to take on big risks for a chance at big returns... And today, NFT demand is soaring for the first time since the 2022 bust.

It's the first sign that euphoria is coming back... and that the "risk off" market is over.

Investors are once again dabbling in risk. That's good news. It means the current bull market has a path to even higher highs.

This is a departure from the skepticism we tend to see when a new bull market is just beginning. The pain of the prior bear market puts everyone on guard. But the gains eventually overwhelm those fears.

That's when stage two begins... where folks begin to believe in the bull run, but haven't moved into the euphoria you see near the end of a boom. We're in this second stage today. And that means the current bull market has plenty of room to run.

We're still a long way off from the frenzy we saw back in 2021. The speculation we're starting to see is a healthy development for the current bull market.

So despite the recent pullback, you shouldn't worry. It's a great time to be an investor. And with markets beginning to turn back to "risk on," you should consider owning stocks today.

Good investing,

Brett Eversole