If you like cryptos, you have heard of NFTs by now. NFTs or non-fungible tokens are digital assets on a blockchain that only you have the authority to resell. Yes, others may “copy” your image, put it on their wall, frame it, or use it as wallpaper on their computer but it is not theirs. The ownership of these assets can be verified on the blockchain, and therefore if you’re trying to buy an artwork or a collectible, you can look up the official creator of the project, and verify the current owner of the item that you wish to buy!
Just like you’d go to an expert to authenticate a collectible rookie card or a pokemon collectible set, you do not any of that because the blockchain keeps a record of it all. Projects like Bored Ape Yacht Club, Animatas, Pudgy Penguins, etc have skyrocketed in recent days, and some of these computer-generated unique avatars are selling for hundreds of ether tokens (one ETH at the time of this writing is worth about 3000 USD). This is great for the NFT industry, and it makes both the buyer and the seller happy. Besides, you get own something that could have a significant resale value in the future. But, here’s what my hate…or skepticism comes from when it comes to NFTs. Ultimately, NFTs are inherently illiquid. You can sell 1ETH on an exchange in a few seconds, but you can’t do that with an NFT that you just bought. You will have to have a buyer for it who’s willing to pay the price you’re looking for.
Another problem is the current market supply. Hundreds of NFT projects are being released every single day, and people are picking up rare ones very quickly. If you look at the activity on Opeansea.io, you’d know that many of the new projects have hundreds of items that remain unsold, with the good one already being taken or listed for sale at price much higher than the average price for that project…or “the floor” as it is called! So, what happens to these unsold items? If they stay unsold in the market for too long, what happens to the hype behind the project?
Gary Vee mentioned something in one of his interviews a few days ago which I agree with. Basically, he believes that 95% of all NFTs right now are bad investments, and NFT creators’ real work should begin AFTER they list their artworks for sale at a marketplace. The project has to create a community and provide value. A gif or a jpeg file alone…on its own…without a community around it, will lose its value in the long term.
How do you stand out when there are thousands of other projects? How do you identify projects that the creators have built solely for the purpose of making money from the sale and existing out of it!? With all this massive sales news all over the internet, it is tempting to FOMO in, and spend some of your ETHs. But as with any investment, you must be able to separate your emotions from the hype, and really identify and evaluate the community around it.
Are the creators responsive? Do they have an active discord group? What “else” they are going through since they posted their NFTs for sale? Have they built other projects in the past? Were those projects successful? Remember you’d ask yourself similar questions if you were buying a stock or a house, or a used item with potential resale value? The difference being stocks and cryptos are liquid assets, mostly. NFTs are not!
I think this space will do very well in the next few years. Especially, with the gamification aspect of some projects. However, I also think that not all projects will do well. Do your due diligence before you make any investment in digital art!
You might be wondering if I own an NFT. Yes, I do. But it is money that I can afford to lose if the project does not go anywhere. I do see it as a risky investment, but it’s a managed risk. I’d not recommend doing something crazy with your existing assets to be able to buy NFTs that you “think” will do well…
I will share new NFT projects on this site. I will also share how I feel about the project. But this is an entertainment website, and I am not a financial advisor. Just because I own something does not mean that you must hop on the project. If I own it, it means that I simply like it. It does not mean, that I think I’ll sell it for a lot of ETHs in the future. Please please do your own research and make your own decision before buying NFTs!
Embrace new technology, educate yourself about this space….but think twice before you buy the first thing that you run into!
