The world of digital investing offers a near-constant level of innovation, and lately blockchain technology has come together with art investing to create a pretty hot market.
Non-fungible tokens, commonly known as NFTs, are the digital assets at the center of the latest investment trend. They have caught the attention of tech-savvy investors and could usher in a new highly speculative digital age of art investing.
As NFTs and their variants become more popular among both crypto enthusiasts and other investors, an intense debate is growing about the impact of NFTs and whether or not the market is in a bubble.
Here, Investing News Network (INN) takes a closer look at the NFT craze and the almost unthinkable amounts of money being made by some early market entrants.
What is an NFT?
NFTs are created around a specific item, be it digital or physical, and the ability to buy an NFT is based on blockchain technology.
Among the most popular NFTs are works of art such as images, videos or GIFs. The flexibility of NFTs has enabled some outlandish decisions, such as when Jack Dorsey, the co-founder of Twitter (NYSE:TWTR), sold his first tweet for $2.9 million.
These digital assets are not new, but the recent explosion of interest can be attributed to a growing understanding of blockchain technology and how it can interact with established objects or events.
Thanks to their unique status, NFTs appeal to collectors – authentication mechanisms allow a buyer to be the sole owner. These and other factors have led to a burst of NFT activity, with buyers willing to pay large sums to acquire these limited digital assets.
As previously mentioned, the NFT craze is deeply connected to the art world. In March, digital artist Mike Winkelmann, known as Beeple, sold an NFT for $69 million through UK art auction house Christie’s.
Noah Davis, post-war and contemporary art specialist at Christie’s, told The Verge Beeple’s artwork helped him see the potential of NFTs.
“He showed us this collage, and that was my aha moment when I knew it was going to be extremely important,” Davis said. “It was just so monumental and so representative of what NFTs can do.”
Christie’s is proud to offer Everydays – The First 5000 Days by @beeple the first purely digital work of art ever offered by a major auction house. The call for applications is open from February 25th to March 11th.
Learn more here https://t.co/srx95HCE0o | NFT issued in partnership with @makersplacecopic.twitter.com/zymq2DSjy7
— Christies (@ChristiesInc) February 16, 2021
In the NFT market, investors should be ready for anything to gain significant value – things can go from seemingly absurd to outright triumph in no time.
For example, earlier this year, an NFT of the Shiba Inu dog made famous by the Doge meme sold for $4 million. One of the heads of NFT buying group “Doge”, known as PleasrDAO, explained that actual ownership interest in the digital asset will be offered to people through fractional shares.
“It’s quite as if the Louvre decided to dismember the Mona Lisa and give part of it to the public. However, unlike the Louvre, collective ownership of art is really only possible with crypto art,” said Jamis Johnson, Chief PleasrDAO, according to a report by CNBC.
Pablo Rodriguez-Fraile, an art collector in the US, told Business Insider that myriad factors — including Bitcoin’s price, the ongoing impact of the COVID-19 pandemic, and distrust of the US dollar — all contributed to the excitement boom around him to fuel NFTs.
Expert voices support greater NFT opportunities
Abhishek Sinha, a partner at EY and the company’s open banking and blockchain head, previously told INN he supports the idea of NFTs, which he believes will bring blockchain technology into the limelight.
However, he expressed reservations about the notion that there is a 100 percent clear understanding of the NFT market, even considering the recent surge.
“I’m not sure that everyone who suddenly got really interested in NFTs really understood what they were getting into and what the NFTs represented,” he said.
The expert anticipates that NFTs will play a bigger role in the overall blockchain market.
“Do we think NFTs are here to stay and will be a valid medium for value exchange? Absolutely. I think they’re just going to be a little more ordinary, a little more mundane, a little more boring, but a lot more essential,” Sinha said.
Arry Yu, chairman of the Washington Technology Industry Association Cascadia Blockchain Council and executive director of Yellow Umbrella Ventures, told Forbes that many people still don’t know about the investment proposition of NFTs. “NFTs are risky because their future is uncertain and we don’t have much history to judge their performance yet,” Yu said. “Because NFTs are so new, it can be worth investing small amounts to try for the time being.”
Evan Cohen, co-founder of Vincent, an alternative asset investment search engine, wrote that investors need to be aware of the highly speculative nature of art investments, especially digital assets.
“When investing in collectibles, it’s best to have a long time horizon as long-term appreciation tends to be more certain,” commented Cohen.
The NBA is entering the NFT market and increasing interest
In 2021, the National Basketball Association (NBA) entered the NFT fray with the launch of NBA Top Shot, an NFT marketplace powered by digital assets linked to basketball game highlights.
“In plain language, think about the future of the sports trading card market mixed with similar cryptocurrency principles, but they are virtual cards that contain individual NBA highlights,” the NBA stated.
The attention these highlights have received has led to both a surge in interest and a scarcity of digital assets. The online marketplace allows users to follow highlights of their favorite players or try to complete a specific streak.
Dapper Labs CEO Roham Gharegozlou told Action Network that the concept is based on the idea that people are interested in owning a memento of their favorite athletes, even if they don’t have a physical item.
“A lot of people believe in what we offer and we have people who don’t get it. That’s okay. We can’t please everyone,” Gharegozlou said.
In February, NBA personality and presenter Ros Gold-Onwude told SportsNation that she’s seen the growth of NBA top shots resulted in a clear investment angle in the space. “At first it was all about getting in and having fun and building that community, but there’s absolutely an investor aspect to that, and so you’re trying to choose wisely, maybe build a portfolio that’s worth something,” Gold-Onwude said.
She has become an advocate for NBA Top Shots and the general NFT space through social media.
investor take-away
The quest for innovation in investment methods never ends, and thanks to the blockchain opportunity, NFTs have now captured the imagination of investors looking for a new marketplace.
The versatility of NFTs offers a wide range of opportunities for those looking to expand their exposure to digital assets. Time will reveal the status of this marketplace and its long-term viability.
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Securities Disclosures: I, Bryan McGovern, have no direct interest in any of the companies mentioned in this article.
Editorial Disclosure: Investing News Network does not guarantee the accuracy or completeness of any information reported in interviews it conducts. The opinions expressed in these interviews do not represent the opinions of Investing News Network and do not constitute investment advice. All readers are encouraged to do their own due diligence.
