Are NFTs An Investment?
NFTs – or non-fungible tokens – are here to stay. Barely holding on to their “new kid on the block” status, NFTs are rapidly going mainstream, opening up worlds of opportunity for brands, creators, artists, and fans. It’s an exciting world, fast-paced and full of opportunity.
NFTs have been around in a minor way since 2014, but the first chapter truly began in 2017, with CryptoPunks, a – you guessed it – punk-scene-inspired project. It’s since been acquired by Yuga Labs: the makers of the uber successful celebrity favorite, the Bored Ape Yacht Club.
While CryptoPunks set the wheels in motion half a decade ago, NFTs have exploded in popularity over the past year, with total sales reaching $25 billion dollars in 2021. Compare that to 2020, when sales hit just $90 million dollars globally – it’s a mind-blowing rise.
From Amex to Nike, Balenciaga to Marvel, influential household brands across all sectors are rapidly developing metaverse strategies and finding innovative, meaningful ways to jump on the NFT train. All aboard!
As the world wakes up to the power of Web 3.0, we reckon the only way is up. But just because NFT projects have exploded into the public conscience in a big way, it doesn’t make them solid investments. In fact, we’d wager that most aren’t.
We’re not here to give financial or investment advice – but what we can do is share our own observations and explain why we’re so pumped about NFTs, despite all of the challenges (spoiler: there are a fair few of those!).
Can buying NFTs make you money?
Are NFTs a good investment? Unfortunately, there is no clear answer to this. Just as it’s impossible to suggest that stocks might generally be a good investment, or could make you money – it’s the same with NFTs. It’s all in the detail – but factor in that we’re dealing with emerging markets, and highly volatile ones at that. Anyone investing in the cryptocurrency space right now should prepare for a rocky ride.
Unsurprisingly, the velocity of the market last year meant many who got in super early did rather well… Just type ‘NFT millionaire’ into Google and see. Traders cashed in, and even a 12-year-old founder created lifechanging wealth. Pretty impressive, huh? But this left a lingering notion that NFTs are automatically a ticket to wealth – which, sadly, can’t always be the case.
We’re not being negative nellies here – there are galaxies of opportunity in this young space. We’re just getting started, but it’s important not to lose our heads (yet!).
Will NFTs go up in value?
We’re going to the moon! For anyone who has been involved in NFT communities or observed brand communications around NFT projects, you’ve likely heard this phrase. It means a project that starts seeing rapid success, with its “floor price” (meaning the token value) shooting so high that it metaphorically “reaches the moon”. So yes, lots of projects have rocketed in value, although often temporarily.
“To the moon” is uttered so often that of course, someone had to literally do it. In March 2022, renowned sculptor Jeff Koons announced an intergalactic NFT series – digital moon phase artworks that come with corresponding physical structures that will travel to the actual moon (!). The sculptures are set to be launched from the Kennedy Space Center later this year. With NFT-powered lunar expeditions in the works, we can’t help but get a little giddy – but let’s come back down to earth with a bang.
Currently, investors and NFT holders alike are bruised, bracing for hibernation during “crypto winter”. The news is dominated by market crashes and job losses as cryptocurrencies begin to reflect global market trends. It’s difficult to predict exactly how long the current market downturn will last.
Again – this doesn’t mean there won’t be winners, Goblintown NFTs, for instance, capitalised on market conditions with a free-to-mint project launched in May – which made $22.85 million seemingly from nowhere. The most expensive NFT sold for $136k within days of its original owner getting it for free. Eeek.
While there will always be projects that flip the curve, in the long term, it’s the smart contracts and blockchain technology behind NFT projects that offer the real value in NFTs. It’s about seeing the forest for the trees – particularly for VCs and huge brands, who are still betting that the time to bet on blockchain is now: while the Metaverse is in construction, and decentralized technologies are incorporated ever further into our social and economic fabrics.
The long-term potential of blockchain and tokenization
Sticking with the point about long-term potential, it’s clear that one of the biggest breakthroughs of Web 3.0 is tokenization. But what does this mean? Well, anyone can create a token to represent something of value, and then trade it with another asset on an open network. This creates huge possibilities for innovation – all because of blockchain technology. But it does also offer a smokescreen of sorts, allowing many Web 3.0 projects to gain the illusion of traction in the short term, without a long-term sustainable business plan behind them.
This double-edged sword is partly why it’s important to be incredibly careful when looking into projects. It’s why consumers looking to buy NFTs are considering what has personal value to them (art they love, virtual merchandise from a favorite film, utility tokens offering real-life perks like exclusive concert tickets) – as opposed to investing for financial reasons.
“I bought the Kings of Leon NFT when it came out because I love crypto and I love Kings of Leon,” Laura Shin, a crypto podcast host and author, told Time Magazine. “I just wanted to buy it the way I want to buy anything else. It wasn’t an investment. It was like an emotional thing. And that’s what a lot of NFTs are.”
Are there similarities here with the early days of Web 2.0 and the dot-com bubble, where some emerged stronger but many didn’t? Do the 2020s in this sense feel a bit like the 2000s? Maybe. Are we cautiously pumped for the ride? Absolutely. And if this area is of interest – we’ve got you covered. Check out our blog for more of our thoughts and how-tos on everything related to NFTs and investment.
Featured image by Mohammed_Hassan on Pixabay
