NFTs Are the Trendy Asset of the Moment — But Are They Worth Your Money?

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So far in August, NFT sales have reached almost a billion dollars, coming in at around $900 million. This marks the largest month ever for the new — and very trendy — industry. NFT’s have become somewhat of a status symbol as of late, but what exactly are they? And are they worth your time and money?

See: NFT-Based Video Game Helps Gamers Earn Crypto While Playing Online
Find: Visa Buys a CryptoPunk NFT for $150,000 — What Does It Mean for the Future of Payments?

NFT 101

NFT stands for Non-fungible token. Fungible means tradeable in likeness — meaning trading one bitcoin for another bitcoin, or money for money. Think back to Pokémon cards — if you traded a Pikachu for a Sharzar, they were two completely different cards.

Technically, an NFT is a unit of data stored on a digital exchange (blockchain) that certifies that digital asset to be unique and unlike anything else. NFTs can be a photo, video, audio or — the trendiest of all — art.

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It might seem silly in the digital world that one can own any kind of image as it can be replicated within seconds, but that’s what the NFT essentially is — an ownership of a digital image. The artist can retain copyright and reproduction rights, but those who hold the NFT have physical ownership.

It sounds innocuous enough, but big bucks have recently been doled out for these digital files. Christie’s, the 255-year-old auction house that has sold real paintings by Monet and Da Vinci (to name a few), recently sold a digital collage by artist Beeple for $69 million. Yes, million. That beat out their other NFT “Crossroads” that sold for $66 million.

Related: The Buyer of Christie’s $69 Million Beeple NFT Was Ready To Bid Higher

Another way of thinking about NFTs is that they “create digital scarcity,” as Arry Yu, chair of the Washington Technology Industry Association Cascadia Blockchain Council and managing director of Yellow Umbrella Ventures, told Forbes. Contrasted against most other digital creations, which typically aren’t short on supply, their value is greater — given there is demand.

Perhaps the strangest aspect of the NFT world to date is that most NFTs are digital creations that already exist somewhere else on the internet. Anyone can view the individual image — so what’s the point of owning it?

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Where Is the Value?

NFTs are unique because their ownership can be verified and they can be traded across applications developed by different companies, and then traded through secondary markets. It can make selling and trading digital art faster, easier and increase the volume of a traditionally slow and stuffy industry by bounds yet unknown.

Learn: How To Make and Sell an NFT

Artists, for example, no longer have to rely on galleries to display their art. They can now display it in NFT form, sell it directly to a customer and pocket more of the profit. Should they sell the NFT, they can program in royalties in the data and receive money every time it is sold to a new owner.

For the Average Consumer?

If you want to start an NFT collection, it really boils down to this: do you feel the piece you are purchasing will bring you value in the future? As with all art, this is subjective. As an investment strategy, the NFT market is still fairly new. It is also certainly hyped — with celebrities like Snoop Dogg and Lindsay Lohan jumping into the NFT market. Tens of millions of dollars are being thrown around for digital art, easily making it the market of the moment.

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That said, it’s not for everyone. NFTs are much like purchasing a physical asset — for example, unless someone wants a Pokémon card in the future, your old collectible won’t have much value. For the right type of investor — perhaps someone with disposable income and an already responsible balanced portfolio — an NFT can be something to throw in the mix that might potentially earn money in the future.

Compare: Crypto vs. Gold: Is Either a Good Investment?
Discover: The 10 Wildest Things Selling as NFTs

The market for NFTs is still new, which means it is subject to volatility. If you don’t have the disposable income or risk tolerance for such an investment, at the moment, it’s probably best to stay away.

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Last updated: August 30, 2021

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 
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