Non-fungible tokens (NFTs) are unique tokenized versions of digital assets that can come in the form of videos, digital art pieces, audios, images, etc. NFTs provide special ownership of that digital item to the owner. NFTs are unique because they are stored in a blockchain ledger that cannot be copied, lost, or fraudulently duplicated, which is the problem with other cryptocurrencies. NFTs are “non-fungible” in nature i.e., they cannot be exchanged for something else unlike bitcoin or other cryptocurrencies which can be traded for the same type of cryptocurrencies. That means if you trade an NFT of a soccer player for a different card, you will have lost your unique NFT for something completely different. NFTs are supported through the Ethereum blockchain. Many people are interested in NFTs because they are kind of an investment in digital art. People buy them as an investment hoping that their value grows over time. Besides that, some people buy NFTs to have unique ownership of that digital item. However, it should be remembered that the art creator still retains copyright and reproductive rights of that artwork.
Why are NFTs getting popular now?
NFTs were initially introduced in 2015; however, they became prevalent recently when some art pieces were sold for millions of dollars. For example, the Gucci ghost was sold for $3600, Beeple artwork at Christie’s for $69 million, and then Claude Monet’s water lilies painting was sold for $54 million at an auction. A cryptopunk NFT with white hair and dark lipstick was sold for $500 million. NFTs provide advantages to both artists and collectors. If you are an artist, you can sell your artwork as an NFT. Thus, NFTs have provided artists with a platform and opportunity that was not available to digital creators earlier. If you are an art collector buying NFTs, you are supporting digital art creators, and at the same time, you will get individual ownership rights over that item.
The sale of NFTs has skyrocketed during the pandemic. The reasons can be simple like the boredom from the lockdowns, people spending too much time online, or just plain curiosity. It seems like NFTs have grabbed the attention of affluent people on the internet. Another can be the entry of major brands like the NBA into the NFT market. They are selling card collectibles of sports players and videos of certain moments as NFTs, which has piqued the interest of sports fans. Being at home, they were not able to attend live matches. Thus, these NFTs have given them a way to reconnect with their favorite teams. Additionally, there is a massive hype around the technology, which has increased the craze.
NFTs are all over the headlines these days. More and more people are creating and selling NFTs. For example, the music artist Grimes and Twitter founder Jack Dorsey sold their NFTs for millions of dollars. This, however, doesn’t mean that all NFTs have similar value, and all of them will be as successful. People determine the value of NFTs, and they will only hold value until they are in demand. Therefore, they might be as volatile as bitcoin, if not more. But given the current craze over NFTs, their value has been just going up. However, we do not know when this bubble will burst. The current NFT boom might have been caused by people who can no longer go to art galleries and have a significant disposable income. The other reason could be an increased interest in digital art collectibles.
What Should Investors Do?
There is an increased interest amongst people, especially the younger generation, willing to invest in NFTs. They believe that NFTs can be the next big thing in the crypto space. Technically anything on the internet can be sold as an NFT, even a New York Times article. The concept of NFT is unique because physical art can have limitations like being transient, fragile, and motionless. NFTs, on the other hand, is digital art forms that will remain in the same state as they were bought originally. People say that NFTs can be copied and thus hold no value. But that argument is invalid because NFTs uniquely exist on the blockchain, so the copy will always be different from the original one.
If you are looking to invest in NFTs, you should learn as much as you can about them. There is no one-size-fits-all rule that has to be followed. You need to check for yourself which meme or tweet is a good investment. Due to relative instability in the NFT market, it is hard to know how much your unique NFT will be worth. If you want to invest in NFTs, you should understand that this might as well just be a trend now and, thus, might not last for a long time. That being said, people are making millions selling their art pieces on the internet. If you are a new investor and want to jump on the NFT bandwagon, invest only what you can afford to lose. On the other hand, if you are an experienced crypto investor looking to explore the NFT market, you should easily navigate the space.
The Bottom Line Cryptocurrencies have been around for much longer than NFTs; therefore, more people are willing to invest in them. However, NFTs are taking up these times, so it might be a bad idea to invest some of your savings in the new asset. Several NFTs are sold for millions of dollars now portray their massive potential as an investment asset. This seems like a good sign. At Unbanked, we believe in the potential of cryptocurrencies and NFTs in revolutionizing the financial and art world. To know more about how to invest, read our blog.