Are NFTs a good investment?
- NFTs, or Non-Fungible Tokens, are defined by Forbes as, 'a digital asset that represents real-world objects like art, music, in-game items, and videos. They are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptos.'
- Digital artist, Kevin McCoy, created the first-known NFT, ‘Quantum,’ in May 2014, which sold for $1.4 million in November 2021.
- Tech writer Mitchell Clark states, 'NFTs can really be anything digital (such as drawings, music, your brain downloaded and turned into an AI), but a lot of the current excitement is around using the tech to sell digital art.'
- As of April 2022, 'the most expensive NFT to ever sell was Pak's 'The Merge.’ The $91.8m price tag was a record for an artwork sold publicly by a living artist. The NFT was sold on Nifty Gateway to 28,893 collectors who purchased 312,686 units of mass (which were single NFTs).
NFTs first appeared on the scene in 2014 and eventually, in 2021, became a common concept accepted in the modern vernacular and trade. NFTs—non-fungible tokens—are digital tokens that denote ownership of a unique asset and are held on a blockchain, where ownership and purchase history is tracked. While NFTs are often used for digital assets, they can also represent ownership of physical assets, such as real estate.
Even though NFTs can be used for any type of asset, the largest price tag on an NFT to date was $91.8 million for a piece of digital art called Merge. Investments into digital art NFTs are also increasingly popular with many celebrities. Big names, such as Jimmy Fallon and Madonna, have invested hundreds of thousands of dollars into the Bored Ape Yacht Club NFT alone. While the value of NFTs may seem subjective, it is important to note that modern fiat currency is inherently subjective, as it is not backed by gold, silver, or other physical assets.
As with any emerging technology, it can be risky to invest, but if that technology grows successful, those who invested early will naturally see the largest gains, such as early Bitcoin investors. Early investors also have the advantage of understanding emerging technology, which allows for better forecasting of the market's future.
NFTs are a worthwhile investment because of their usability for both real and digital assets–which have already garnered large investments from the general populace and celebrities–and because of the importance of early investment into emerging technology for potential future gains and to develop an understanding of the technology.
Non-Fungible Tokens, or NFTs, are not a good investment as they have not proven themselves to be an asset that increases in value over time. In fact, in many cases, they have shown the opposite, sometimes losing almost all value over a year. Unlike gold or physical art, NFTs have nothing of value behind them, only what people 'feel they are worth' at the time. As 90's kids learned from fad false economies, like Pogs and Magic Cards, skepticism in these cases can be healthy.
Such digital assets are, by nature, not physical assets; NFTs have no real value in the world and can be lost, corrupted, or copied easily. Additionally, there may be intellectual property and copyright issues on the horizon for many NFTs that can have both buyers and sellers seeing legal ramifications. In many cases, owning an NFT does not even give you the copyright to them, so really, it's not the same as if you purchased a painting or musical album. Nor is it similar to buying licensing rights to artistic works. The NFT market has a substantial impact on the environment and has shown itself to be full of con artists and scammers that behave much like a cult. For these reasons, many serious or skeptical investors avoid it.
Finally, unlike stocks, bonds, and real estate, there are few regulations around NFTs, and there is no recourse for investors who get scammed or lose everything in a bad transaction. NFTs only have the value the buyer and seller place on them. Buying them for one's enjoyment makes sense, but at this time, buying them as an investment is precarious.