Investing in Non-Fungible Tokens and the Future Demand for NFTs
What is an NFT and how does it work?
With new technologies comes new innovations and one of the fastest growing sectors is the demand for digital art in the form of an NFT. You might ask what is an NFT or Non-Fungible Token? The simple answer is an NFT is a unit of data or a token that is stored on a digital ledger, better known as a blockchain, which can be sold and traded. An NFT can be a digital or physical asset and grants a license to the owner of the NFT but not necessarily the copyright of the digital asset a token represents. The most common NFTs are digital art, music, video, collectibles, and gaming files.
What is the global demand for NFTs?
The global demand in NFTs is expected to skyrocket to $21.33 billion in 2022 and this creates a huge opportunity for artists to reap the rewards of their talent and labor. Never before could an artist retain the copyrights to their work and be able to license their product out with such ease. There is no need for lawyers to get involved to draft licensing agreements and ownership rights. This is all done through the transparency of the blockchain technology that acts as an open ledger for everyone to see. The future looks very promising for NFTs and is predicted to reach $82.43 billion in 2026.
Where can I buy an NFT?
The most popular place to buy, sell, and auction NFTs is on the OpenSea NFT marketplace. OpenSea uses the Polygon blockchain which is a gas-free marketplace for NFTs. Meaning that you don’t need to pay a fee that is incurred when conducting a transaction or executing a contract on their blockchain.
What are the most popular NFTs?
Since the blockchain is transparent and anyone can access records that are stored in the blockchain it is easy to assess which NFTs are the most popular. OpenSea provides real time data on trading volume and based on the last 7 trading days from when this article was written these are the top five collections: CyptoPunks, Meebits, Bored Ape Yacht Club, CyberBrokers, and Mutant Ape Yacht Club. It appears that the Ape theme is very popular at the moment.
Is NFT Speculation a problem?
The popularity of NFTs in the form of artworks and digital collectables have seen them evolve into a speculative asset. With any form of speculative assets, the concern is that there is an economic bubble that is forming in this category. This being said, NFTs are trading and growing at a remarkable pace. Everyone from record labels to celebrities are entering this market and this has caused a lot of buzz on the internet and in the news. Recently, Snoop Dogg announced that Death Row will be an NFT record label and it was reported that Eminem’s recent NFT purchase of a Bored Ape Yacht Club (BAYC) NFT that costed him 123.45 Ether (approximately $450,000 USD). The purchase of BAYC #9055 was done by the account holder Shady_Holdings on the OpenSea platform.
Why are NFTs so expensive?
The NFT marketplace is what creates the demand and dictates the price that buyers are willing to pay for an NFT. Just because an NFT trades hands multiple times doesn’t necessarily mean that it will be expensive. It’s the perception of the buyer, the scarcity, and the popularity of the artist that will define the price of an NFT. Typically, NFTs are not that expensive when you look at the entire NFT marketplace and this is what makes it so attractive to investors. The barrier to entry is very low and this is the reason why it’s become such a popular investment tool.
Are NFTs a good investment?
Any money manager would probably advise against investing a significant portion of your wealth into an NFT. However, if you like to take risks and you see the value in this type of investment then investing in NFTs can payoff quite handsomely. With high risk comes big rewards and there are plenty of people who are making a large amount of money trading NFTs. Like any early adoption of technology, the first ones in are usually the ones making the largest gains. NFT technology is ground changing when it comes to smart contracts, licensing rights, ownership, and IP. There is a huge potential to the applications of NFT technology and like anything else time will tell. The good news is that you don’t need to spend a fortune on NFTs. There are plenty of NFTs that are affordable and a good entry point for anyone who is interested in entering into this market.
What is the most wanted NFT?
The Most Wanted NFT was created by RankWorks™ and is available on the OpenSea marketplace. This highly valued NFT represents a collection of most wanted posters of popular outlaws from the wild west during the 1800s. It portrays infamous outlaws from a period of American history that has been romanticized in movies and TV shows. Each NFT has the image of the outlaw with the reward amount and their names. The collection includes famous gun slingers such as: Billy The Kid, Jesse James, Butch Cassidy, and The Sundance Kid. The collection is very limited, and the series is very popular amongst American history buffs and collectors who want to own a piece of Americana.