Are NFTs Really Worth Investing Your Hard Earned Money In?
Over the last year, non-fungible tokens, also known as NFTs have become a very popular topic. While most people don’t understand what they are, many others are excited about profiting with it.
Skeptics, however, believe that is a bubble that’s going to burst sooner or later. Only time will tell who is right.
For now, before you decide if NFTs are worth investing in, you need to understand what they are.
NFTs are digital assets which could be images, gifs, artwork, domain names, etc.
For a quick NFTs 101 which explains it very well, check out this post:Beginners guide to NFTs
When you purchase an NFT, nothing will be shipped to you.
What Are The Biggest Risks of Investing In NFTs?
You may be wondering, “But how do I use NFTs?”
The answer is, you don’t.
Generally, NFTs have no inherent value other than what people give to them. This makes NFTs a very risky investment because you could pay thousands for an NFT and depending on the trends, suddenly others may not think that it has any value.
You can only profit from an NFT by selling it (at a higher price) to someone who wants it… but what if no one wants it?
Now you’re left holding a digital asset that has no value.
Unlike gold, silver, cash or stocks, which are accepted by most people, NFTs seem to exist in some mysterious crypto ‘ecosystem’ that doesn’t seem logical to most people… and it isn’t really.
Most people struggle to wrap their heads around the fact that individuals are paying millions for literally useless digital assets, just based on the fact that others believe these NFTs have value.
Then Why Are Some NFTs Sold At Such a High Price?
The biggest selling point of an NFT is its scarcity. That’s what the term ‘non-fungible’ means. When you buy an NFT, there’s only one of it’s kind in existence, similar to a rare painting.
In fact, NFTs are very similar in concept to famous paintings. They’re unique and while they may be replicated, only the original has value. Just like non-fungible tokens, a painting’s value is determined by what people believe it’s worth.
Artists, musicians, etc. will be able to profit with NFTs more easily because their products do have value and can be considered rare – especially if the artist is famous and the asset is scarce.
Most people who try to create NFTs will never make a dime because they just don’t have that kind of pull in the marketplace.
For example, Jack Dorsey’s first tweet was sold as an NFT for close to 3 million dollars. His tweet could command such a price because he was the CEO of Twitter. There was an imputed value to his tweet in the marketplace.
Now imagine 34-year old Joe Nobody making an NFT of his tweet. Who would buy it? What significance or value does it have?
Most probably none…because no one really cares, except maybe Joe.
It’ll be immensely difficult to replicate Jack Dorsey’s success in selling a tweet as an NFT.
For every person who makes astronomical sums selling an NFT, there are thousands more who have wasted time and money, and failed.
Even if an NFT is a digital asset, success at selling it seems to depend on it having some imputed value. Like a rare stamp or painting.
One interesting example would be digital content company Creatd, announcing that it would sell NFTs of former President Donald Trump signing a model’s breast.
Of course these 3 NFTs are going to be popular. President Donald Trump has raving fans all over the world, and these images will be wanted by many.
Every NFT that’s sold has a digital certificate of authenticity, and the transaction is recorded in a public ledger. There’s full transparency here, and no middlemen (such as banks) to take a cut, though there’s a fee charged by the NFT marketplaces for transactions.
An NFT can retain its value and be sold at a higher price in future, especially if it’s deemed valuable. But usually these types of NFTs are so costly that they’re out of the reach of most individuals.
Who Is The Typical Investor Which Should Be Investing In NFTs?
This is a high stakes game and is best left to high net worth individuals who have lots of money to take the risk. The very nature of NFTs makes them a very speculative investment.
The average investor would do better off investing in traditional vehicles of investment such as stocks, bonds, funds, etc. It’s also easier to cash out with these investments rather than playing a waiting game to finally find someone who will buy your NFT.
Even buying crypto such as Litecoin, Ripple (XRP),Ethereum, Bitcoin or Bitcoin Black are a safer bet (because it’s fungible) rather than putting your money in NFTs. Of course, this point is debatable – but ultimately, it’s your choice.
There’s a famous quote by Warren Buffet, “Never invest in a business you cannot understand.”
If you don’t understand NFTs and can’t seem to see how it will work out in future, you’d be wise to steer clear of it.
However, if you’d like to know how exactly Non-Fungible-Tokens as an investment work, and how you can possibly make some serious money trading in them, then you should check out this free report which you can download here: NFTs Explained
One thing that is worth considering is the fact that Bitcoin was laughed about in the beginning as a fad that would disappear quickly – because most people didn’t understand how it worked, what cryptocurrencies are, and how one can profit from investing and trading them. Many missed the boat on a tremendous investment opportunity.
Rest assured that investing in the old, traditional ways still works and is sustainable. At the end of the day, it’s your call.
Just remember that if you do invest in NFTs, make sure it’s not more than 10% of your money – and it should be money that you can afford to lose. Don’t go into debt to invest in NFTs.