Read Time: 8 minutes
Since the birth of the digital age, we have seen how currency has begun to transition to become less and less material. Cryptocurrencies are on the rise now with bitcoin sitting at about 50k and many other coins are following in suit.
In light of all that, there is another form of investment which has suddenly made its debut in the recent months as crypto has become more prevalent. It is called an NFT, and it seems to be on the brink of something even greater than anyone could have ever imagined.
Because of it’s sudden interest on the internet, it is important to be able to fully understand what this concept is and what is actually classified as an NFT. Although it can be confusing at first, once understood, it is easy to conceptualize why this might be one of the most defining creations of the digital era.
What is an NFT?
One of the most beautiful things about investing is that its not limited to just stocks and bonds. There are other forms of investments which people can devote their time to and find themselves in a successful situation.
Art for example, is one of the most sought after investments, as it not only appreciates in value over time, but it also has the potential to create cashflow if rented out to an art exhibition. People will pay enormous amounts of money for these LIMITED products created by some of the most influential people of the human race. Now what if you could digitalize that?
Enter the NFT
NFT stands for Non Fungible Token. Now before you ask, I can already hear you initial thought, “what does fungible mean”? The word fungible basically describes that a good is able to be replaced, so a Non Fungible Token would naturally be something that would NOT be able to be replaced.
Here’s where things begin to get a little confusing. NFTs aren’t limited to one object. They include a wide array of limited digitalized products which can be sold to the common investor in order to create both urgency as well as rarity.
Some examples of NFTs include…
- Digital Art
- Specific Cryptocurrencies
- Video Game Items
- Basketball Moments
- Digital Kittens (yes this is real you can thank the internet for this one)
Although some of these are very outlandish and can be hardly thought of as a practical investment, there are some which stand out. It is important now to realize which NFTs are actually worth your time and the others that have yet to gain traction.
Why should you even care about NFTs?
Let’s go back to our art example. In the physical world, an artist would pour his or her creativity into a piece of art and then eventually release it to the public. That artwork may be highly sought after due to the fact that it was either produced by a famous artist or maybe it resided in someone very profoundly.
Through an NFT, it is the same idea, however this time, the artwork is digitalized. Imagine a famous graphics designer who makes amazing artwork online. Or even an animator who is able to create a beautiful animation. Although some would regard this worthless, others have a closer relationship to these types of creations and are willing to pay top dollar in order to gain access to these artworks.
As I said earlier however, NFTs aren’t just limited to artwork. Many of the most important people of today have poured millions of dollars into NFTs because they realize the limitedness of the products.
Mark Cuban, billionaire entrepreneur, has been hoarding NFTs for the last couple of years as he believes that they are the world’s next greatest investments. He prides himself in owning some of the world’s rarest basketball moments that NFTs have to offer. His collection is rising fast and becoming more and more sought after as people realize that these “moments” are limited.
NBA Top Shot, an officially licensed digital moment transaction website, has seen this sudden spike in moment interest in recent years. Depending on their rarity, some packs will sell for as much as $230, if you can even get your hands on one.
The demand for this product has shot through the roof as many are trying to get their hands on what they believe to be the early moments which will be highly pursued in later years.
As you can see, urgency is rising and even some of the most prevalent people of today are starting to pour their money into this amazing creation as it begins to gain more and more traction. It becomes easier to conceptualize that with two things combined, anything can really become a sound investment.
If there is high demand to get your hands on a product, urgency can become one of the biggest catalysts to create value. It acts as a magnet to the common investor, seeking to make a profit.
It has become obvious that anything that people care about that is limited can gain traction. Rarity is one of the only things that allows people to have confidence in their purchase. More of that good cannot be produced and they control a tiny section of the internet which others may desire.
All of this information can be very exciting and the potential seems to be endless for what this new market could hold. The trick now becomes, how do you accurately predict where NFTs are going to gain the most urgency and rarity?
Where Are NFTs Going?
As I described earlier, billionaire entrepreneur Mark Cuban has invested millions of dollars into this NFT, and he’s not the only one. Chamath Palihapitiya, another billionaire investor has spoken out on what he believes is the next digital frontier.
On Bloomberg, Chamath had an interview speaking about his sizeable portfolio where he is beginning to collect digital art as well as trading cards. Chamath voices his own opinion and says, “I do think that that’s the new frontier of digital currency and digital assets.”
Gary Vaynerchuk, a man who is known for making accurate business predictions has also sided on the NFT wave and has recognized this new beginning that has started to stir up the internet.
This holds large significance as some of the most influential businessmen of our time are beginning to realize the importance of NFTs and the potential that they all hold.
It is crucial to notice that some of the best investors of our time have gotten to where they are today because of the fact that they are able to make accurate economic predictions. They recognized the potential behind something and invest what they have in order to get the most out of it. When the time comes, they are able to fully capitalize off of the gains that they have prepared for.
Many say that NFTs are exactly that, the next investing opportunity that has made its appearance onto the internet and is now about to gain extreme relevance. Which NFTs will gain the most traction is definitely a wild card, however it is obvious that some are beginning to gain in popularity more than others.
Going forward, it seems as if the trading card world will see a huge group of supporters. As we have seen collectors rising in the physical card market, it is entirely possible that the same thing may occur in this digital space.
So where can you go to buy NFTs and track this brand new corner of the internet?
OpenSea seems to be the largest NFT marketplace at this moment in time. It holds a wide array of NFTs like…
- Domain Names
- Virtual Worlds
- Trading Cards
- Sports Moments
There are a lot of other examples of the potential that this website holds, however this is just a few from the selection.
I highly suggest watching this new phenomenon as time goes on and keep a close eye on how these marketplaces adapt. I will be coming out with more content discussing this topic in further depth as NFTs begin to unfold and start to reveal their potential.
As always if you have any questions don’t hesitate to reach out as I am always eager to discuss these topics with you the reader! Also if you liked what you read, share this post with a friend! It is highly appreciated.
Sign up to be the first to know when new financial tips and tricks are released!
Andrew Martinez, owner and writer of Minerva Money