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NFT Investing
Want to try something other than traditional investing methods? Have you considered jumping into the world of NFTs?
Non-Fungible Tokens (NFTs) have taken the art world by storm, providing a unique opportunity for creators to sell their digital art directly to buyers.
With the help of blockchain technology, NFTs allow for a secure and transparent transaction process, granting artists the ability to earn a percentage of royalties with every sale. But before you dive into the world of NFT investing, there are some risks to consider.
This blog post explores the world of NFT investing and discusses the pros and cons of this new investment trend.
Key Takeaways
- NFTs are unique digital tokens that prove ownership of a digital asset, which can include music, digital art, GIFs, sports highlights, and more.
- NFTs use the same blockchain technology as cryptocurrencies, but they are not a currency and are non-fungible.
- NFT investing refers to purchasing NFTs with the goal of earning a return on investment by buying and storing NFTs and hoping their value will appreciate over time.
- Investors should research available NFTs in the marketplace and select a reputable brokerage firm to buy cryptocurrency.
- Investors should also consider transaction fees and choose an NFT marketplace to purchase NFTs.
Disclaimer
The contents of this article are for educational purposes only. They are not intended to be a source of professional financial advice. You will find experts on financial planning, financial management, and real estate here. More on disclaimers here.
What Is NFT?
NFT stands for ‘non-fungible token’ and simply, it refers to a unique digital token that proves ownership of digital assets. These assets include music, digital art, GIFs, music, sports highlights and many more.
NFTs make use of the same blockchain technology that powers cryptocurrencies, but they're not a currency. The fact that they are non-fungible means that they are unique and can't be traded or exchanged for another NFT.
For example, money and bitcoins are fungible. A dollar is always worth another dollar and one bitcoin can be traded for another bitcoin. For NFTs, if you trade it, you don't get another NFT but you get something completely different as they have unique identifying codes. For example, you can't trade Beeple, Human One for an NBA Top Shot clip, even though they are both NFTs.
Is buying an NFT profitable?
NFTs have been around since 2012 but gained a lot of popularity in 2021. You can generate profitable returns when you buy NFTs and sell them. Miami-based art collector Pablo Rodriguez-Fraile, for instance, made almost 1,000 times the original price by reselling a Beeple digital art piece in less than six months.
Remember, it's worth noting that not all NFTs or NFT collections are created equal. So far, a whopping $22bn has been spent on NFTs and this number continues to rise. The 3 most expensive NFTs that have been sold to date are:
Pak’s ‘The Merge’ - $91.8m
Everydays: the First 5000 Days - $69.3m
Clock - $52.7m
What are NFTs used for?
Blockchain technology and NFTs have opened up the marketplace to artists and content creators who mainly relied on mainstream channels to sell and monetize their art. With NFT technology, these creators are now able to sell their digital art directly to buyers, consumers and collectors. Artists are also able to earn a percentage in royalties whenever their piece of art is sold to a new owner.
With NFTs taking over the digital space, some well known celebrities like Snoop Dogg and Lindsay Lohan have also hopped on the trend.
NFT investing
NFTs have taken the digital world by storm, and with their unique properties and potential for financial gains, many investors are now considering them as a viable investment option.
What is NFT investing?
NFT investing refers to the practice of making NFT purchases with the goal of earning a return on investment (ROI). Investors can buy and store NFTs in the hopes that their value will appreciate over time, and then sell them for a profit. However, it's worth noting that an NFT investment can be risky, as the value of NFTs can be volatile and unpredictable.
How can I start investing in NFT?
If investing in NFTs piques your interest, you can participate by utilizing an NFT marketplace. The optimal NFT marketplace offers a user-friendly online platform where potential investors can peruse NFTs that have been generated by other users and make purchases if they desire. Here are a some things that you should do before getting started:
Research available NFTs in the NFT Marketplace
When getting started, choose an NFT that you think will be valuable to you. It's important that you check out the upcoming NFT sales and take note of the cryptocurrency requirements.
Also, be sure to take note of how many NFTs are being sold as this helps you understand the level of digital scarcity behind the NFT that you're choosing to invest in.
Select a brokerage firm where you can buy cryptocurrency
A cryptocurrency brokerage is a firm or individual that facilitates the buying and selling of cryptocurrencies. It more or less acts as a middleman when you're transacting. Most, but not all NFTs are bought using Ethereum.
Some of the reputable brokers include Binance, OpenSea, Mintable, among others.
Something that you should consider when purchasing cryptocurrency is the transaction fees. It is important to review the fees charges based on the transaction sizes that you plan to conduct in order to get an accurate estimate of the amount that you'll be spending overall.
Select an NFT marketplace to purchase your NFT
The NFT marketplace is where buying and selling of NFTs happens. You will be required to register and connect your crypto wallet before you start NFT trading. Please bear in mind that every marketplace has its own digital wallet requirements.
For any transactions that you're planning to conduct, ensure that there's enough crypto in your digital wallet to conduct your transaction as well as cover the transaction fees and gas fees. Transaction fees might include the cost of buying and transferring cryptos as well as converting one crypto to another.
Some popular NFT marketplaces include OpenSea, Rarible, NBA Top Shot marketplace, among others.
Is an NFT a good investment?
While NFTs offer an exciting new way to collect digital art, whether they are a good investment choice depends on various factors. The current market conditions, demand for a particular NFT, perceived value of the underlying asset, and potential for future growth or appreciation all play a role.
While some NFTs have sold for millions of dollars, others have struggled to find buyers. Additionally, since the NFT market is relatively new and still evolving, investing in NFTs carries uncertainty and risk.
It's crucial to evaluate the potential risks and rewards before deciding to invest in NFTs. While some NFTs have generated significant returns, there is also the possibility of losing money. The odds of experiencing financial losses, partially or entirely, from investing in NFTs are notably high. Moreover, with the availability of Blue Chips and index funds, there's no necessity to rely on NFTs to achieve financial independence.
Top NFTs
NFT investing has become a big deal. If it is part of your investment strategy, here are some top NFTs that you should consider.
1. Bored Ape Yacht Club
Bored Ape Yacht Club is a collection of 10000 unique Bored Ape NFTs that is built on the Ethereum blockchain. This is a highly sought after NFT, and as the name suggests, the digital art collection is made up of apes that look bored.
2. CryptoPunks
CryptoPunks is a project that was launched in June 2017 by the Larva Labs studio. They are 10,000 uniquely generated characters on the Ethereum blockchain. They were the inspiration for the ERC-721 standard that powers most digital art and collectibles.
3. The SandBox
The Sandbox is a community-driven platform where creators can monetize voxel assets and gaming experiences on the blockchain. The Sandbox metaverse comprises a map made up of 166,464 LANDS. LAND owners can host contests and events, stake SAND to earn and customize assets, monetize assets and experiences, vote in the metaverse governance, play games that you or others create, and much more.
4. Azuki
Azuki is a collection of 10,000 avatars that gives people access to the garden. The garden is a section of the internet where artists, creators and web enthusiasts meet to create futuristic magic.
5. Art Blocks
Art Blocks is a platform that leverages the Ethereum Blockchain to provide unique, programmable, and on-demand generative NFT art to collectors globally.
6. Decentraland*
Decenraland is a 3D virtual reality platform that is based on the Ethereum Blockchain that allows users to create, experience and monetize assets in a decentralized virtual space. .
7. Mutant Ape Yacht Club
The Mutant Ape Yacht Club is a collection consisting of 20,000 apes that was created as a derivative collection of the well known Bored Ape Yacht Club. The collection is based on the Ethereum Blockchain.
The Mutant Apes can only be created by exposing an existing Bored Ape to a vial of MUTANT SERUM or by minting a Mutant Ape in the public sale.
8. Meebits
The Meebits are 20,000 unique 3D voxel characters, created by a custom generative algorithm, then registered on the Ethereum blockchain. Larva Labs, the creators behind CryptoPunks are also the creators behind Meetbits. The project boasts 20,000 procedurally generated 3D characters that are tradeable on the Ethereum blockchain.
9. Rarible
Rarible is an Ethereum-based platform that facilitates the creation, sale and purchase of ownership rights to digital works of art via non-fungible tokens (NFTs).
10. Autograph
Autograph is an experience driven NFT platform that brings together the most iconic brands and legendary names in sports, entertainment and culture to create unique digital collections and experiences.
Pros & cons of NFT investing
Are NFTs a good investment or not? This is a question that you may ask yourself. Here are some pros and cons of NFT investing that may help clarify some things for you.
Pros
- NFT trading has opened up the NFT marketplace to more potential buyers and sellers as everything is done online.
- Some physical assets such as art have a history of appreciating in value over time. With digital assets like digital art, this could also be the case.
- Availability of smart contracts ensure that creators and digital artists get paid when their work is used or when it's resold in future.
Cons
- Most NFTs represent digital assets in the online marketplace and so they may not be an income generating assets on their own. Also the high prices attached to NFT digital assets may not last forever as NFTs could lose their value over time.
- NFTs are built on a blockchain technology which uses a considerable amount of energy to create and verify online transactions. This may have a negative impact on the environment.
- In order for you to buy and sell NFTs, you'll have to incur some transaction fees. These fees may compound and end up costing more than the value of an NFT that's listed in the marketplace.
So, are NFTs the perfect fit for you when it comes to investments?
With the sudden NFT craze, it would be prudent to do your research, assess your risk appetite, equip yourself with as much knowledge as possible and stay on top of the ever changing market trends before diving into NFT investing.
Bay Street Capital Holdings
Bay Street Capital Holdings is an independent investment advisory, wealth management, and financial planning firm headquartered in Palo Alto, CA. They manage portfolios with the goal of maintaining and increasing total assets and income with a high priority on managing total risk and volatility. Although many advisors may focus on maximizing returns, they place a higher priority on managing total risk and volatility.
Our founder, William Huston founded Bay Street after 13 years of supporting the United States' largest retirement plan ($650B) Thrift Savings Plan. He is recognized as Investopedia’s Top 100 Financial Advisors for 2021. In California, only two black-owned firms out of nineteen firms received this recognition.
In Scottsdale Arizona, Ekenna Anya-Gafu CFP, AAMS is recognized among the Best Financial Advisors for his responsiveness, friendliness, helpfulness, and detail. Bay Street was founded to advocate for diverse and emerging fund managers and entrepreneurs. In 2021, Bay Street was selected as a finalist out of over 900 firms across the US in the category of Asset Manager for Corporate Social Responsibility (CSR).
Sources
https://www.forbes.com/advisor/investing/nft-non-fungible-token/
https://seekingalpha.com/article/4471296-how-to-invest-nft
https://www.investopedia.com/pros-and-cons-of-investing-in-nfts-5220290
https://www.fool.com/the-ascent/cryptocurrency/nft-marketplaces/
https://boredapeyachtclub.com/
https://www.larvalabs.com/cryptopunks
https://opensea.io/collection/mutant-ape-yacht-club
