Is NFT Investment Worthwhile?
The cryptocurrency community has been blown away by the hype surrounding non-fungible tokens (NFTs) and NFT investment. Developers using NFT technology can create collectibles on the blockchain that can be traded by anyone around the world. Several of these projects have even been dubbed “blue chips”, much like big tech stocks in the past.
Markets like OpenSea, a decentralised NFT marketplace, are among the most popular applications on Ethereum. Traders interested in NFTs are more focused on the technology aspect of the process, leaving people fascinated by what they call the ‘next great medium of art’. Many investors, however, seem only concerned with the profit potential. This will come as no surprise to many, with fantastic evidence of their potential investment value already being recorded for some investors.
What is an NFT?
For the most part, most people are confused by NFTs when they hear about them for the first time. Even when they find out what the acronym stands for – non-fungible token – that doesn’t help. Nonetheless, once you know what fungible means, it’s quite simple. The term fungible refers to things that are interchangeable, such as a dollar bill or a bar of gold. Something that is non-fungible is unique and cannot be easily replaced with something similar. For example, houses, used cars, and CryptoPunks are non-fungible items. Thus, a non-fungible token is nothing more than a unique, irreplaceable placeholder on a blockchain that leads to a work of art or a profile picture. The top NFT collections are primarily on the Ethereum blockchain, but competitors like Solana have rapidly growing ecosystems as well.
NFT’s top collections consist mainly of profile pictures or art, but a few projects are pushing the boundaries. Recently, an NFT-based game called Axie Infinity exploded onto the crypto scene and has tens of thousands of players every month. To many industry experts, the gaming industry is a key market for NFTs which could see rapid growth over the coming years. As pay-to-earn games like Axie Infinity gain traction, they may soon eclipse many of the collecting-focused products in the NFT space. NFT developers are continuously building new features in this space, which is tremendously exciting and only goes to show the true scope that NFTs have within this landscape.
Examples of NFT Investment Collections
There are a few dozen NFTs that attract most of the attention, with a few standing out from the rest. Among all the NFT investment collections, CryptoPunks is by far the most valuable. The project was released in 2017 and was one of the first cryptocurrency collectibles. The collection was developed by Larva Labs, a two-person software development team that pioneered the standard most NFTs use today.
CryptoPunks were available for free to anyone who wanted one of the 9,000 released by Cryptopunk (out of 10,000). All were generated randomly using a few dozen characteristics, many of which are incredibly rare. At that time, no one knew what the project would become; presently, some of the rarest Punks sell for millions of dollars each and this value could potentially reach even further if projections are correct.
Like CryptoPunks, many of the top NFT projects make excellent profile pictures for social media accounts. These projects are ideal for investors who want to display their collection and wealth. Among the most popular collections is the Bored Ape Yacht Club, made up of randomly generated apes that have a fun and unique style. In response to this trend, developers and artists developed collections with almost every animal you can think of. Among the many successful projects influenced by the profile picture hysteria, Pudgy Penguins and Cool Cats are among the most popular and valuable, but there are many other collections that are still in the process of launching that could eclipse the growth of those that came before.
NFT Prices: What Will it Cost?
NFTs can range in price from basically nothing to tens of millions of dollars depending on their condition and the collection that they are a part of. New collections from lesser-known creators will often sell for a lower price because the artist is somewhat unknown and does not have the notoriety to be able to charge larger fees in the same way that the most popular collections can.
Among CryptoPunks, the rarest Punks have sold for as much as $7.58 million, because they are the most sought-after collection. Since this sale, it appears that prices have risen dramatically as well, and Punk now has an offer for more than $111 million. However, the current owner has not chosen to accept this offer, as they believe that the NFT investment project will soon be worth far more than the $111 million quoted.
Floor price is one of the most important concepts to understand when trading NFTs, even though it is sometimes misinterpreted. Simply put, the floor price of a project is its cheapest NFT on sale. An average or below-average rarity item is usually valued by this method to get a general idea of its base value. Investors, however, can manipulate this by snapping up the cheapest NFTs. Also, it may be misleading if one item is priced much lower than the others, as this will change the floor price for the collection. Before committing to any NFT purchase, it’s important to ensure that you’ve spent the time researching the collection so that you’re sure your investment is one that will see promising growth.
