NFTs as an Alternative Investment
There have been lots of hype on NFTs recently. It is not surprising given that the Beeple NFT digital art piece, " The First 5000 Days" was sold for a whopping 69 million dollars. It was purchased by a Singaporean, Vignesh Sundaresan (Metakovan), who have the conviction that it would be worth a billion dollars in the future. Fun Fact: Beeple has not sold any of his digital art for more than $100 before this auction.
The origin of NFTs could be dated back to 2014 where bitcoin minted the coloured coins. In 2017, Cryptopunks and Cryptokitties was the impetus to pivot the NFTs market.
To have a feel of the prices in the digital NFTs market, you could check out the 10 most expensive digital art to date.
Considering that CryptoPunks was a project by Larva Labs to create 10000 uniquely generated characters using the Ethereum network through an algorithm. Ethereum is the second most popular blockchain after Bitcoin and has been used for commercial contracts.
They gave out all the characters for free at its launch in 2017- in the NFT world, it is called an NFT drop. Now some of them are worth millions of dollars- what a joy to be one of the frontrunners and get a character of the Cryptopunks to call our own.
Source: Pexels
So what exactly is NFT?
The term for it is non-fungible tokens and they are unique by themselves, that is backed by a multimedia file. It could be digital art, video, music tune, sound recording, a tweet (Jack Dorsey first tweet sold for $2.9 million) or even a blog post, etc.
The difference between an NFT and a bitcoin would be bitcoin is fungible. There is no difference between one from the other and that makes it exchangeable; Bitcoin is like digital gold. As for NFT, most of them are currently minted in the Ethereum network, it is an original token or one of its kind.
Therefore, once we buy an NFT token, it is similar to owning a baseball card or being an owner of an original painting. Scarcity brings demand and hence possibly higher prices in the future if we choose the right NFT- must have an eye to find the next Monet, Miro or Dali of the digital art world.
Source: Pexels- Mona Lisa is now under Public Domain
But it is important to note that the copyright still belongs to the original artist or creator. According to copyright laws, the creator would still hold the rights 70 years after his death, after which the rights belong to the public domain- everyone can use it. From a company's aspect, the copyright lasts 120 years from creation or 95 years from publication
So you could be the owner of the Picasso masterpiece- Guernica (1937)- but there could be others able to get an art print of it. There is no restriction on people downloading and printing the masterpiece. Any rights of use for commercial purposes would be attributed to the artist or creator; unless you have an agreement with the original creator with a share of the commercial rights.
Latest NFT Craze
The latest craze in the NFT market would be the Bored Ape Yacht Club (BAYC) by Yuga Labs- it is not related to the Bathing Ape brand. They came up with 10000 ape designs with some smoking a cigar or munching on a pizza and other creative whacky designs.
It was first launched on the 29th of April 2021, they were selling at 0.08 Ethereum a piece (Was around 180 USD then based on Ethereum conversion rate).
The owners of the ape not only have access to the commercial rights to their ape (BAYC owners still own the master rights) but they have access to their discord server to mingle and hang out which includes celebrities such as Stephen Curry.
It is akin to you buying into a special membership club.
Current prices in just 6 months are hovering around the floor of $100,000 to the higher end of 3.4 million dollars. These are stratospheric returns by any measure.
Is NFT a possible Alternative Investment for me?
This is currently a wild wild west environment and the sector is just kicking off which have not reached mainstream status. Thus, you are not too late into the NFTs investment arena. However, gas fees and admin fees are kind of sky-high at this juncture- 10% to 15% or higher from the total value of the NFTs.
NFTs would qualify as a speculative investment as it is not tested through time. Nonetheless, it has pivoted the digital art market where previously it is tough to sell digital art as provenance was an issue- not many collectors would pay good money for digital art.
There are still many concerns we have given the nascent state of this market:
How safe is my digital art in the crypto wallet?
What are the NFTs worth investing in as there are many potential lemons out there?
What are the NFTs worth investing in as there are many potential lemons out there?
Have I missed the boat given the huge surge in recent times?
How easy is it to offload the NFTs when I have liquidity issues?
To counter most of the issues on hand, we could look into established NFTs providers such as BAYC. They have come up with Bored Ape Kennel Club and Mutual Ape Yacht Club knowing that the initial apes are off the reach of normal collectors and investors.
Bored Ape Kennel is selling at less than $15000 (1-4 Ethereum) whereas Mutual Ape are selling at 3-6 Ethereum.
If we look into the apes, there are potential for companies such as APPLE, Samsung or Starbucks to buy some of the apes and use them in their marketing campaign and merchandise, as they have the commercial rights to the apes they bought.
So it would generate decent returns from a commercial point of view as compared to individual investors (We could have prints of t-shirts of our apes?), who have to hope for capital gains.
Also, Facebook is now going all-in for the metaverse, which is a virtual and augmented reality world by their name change to Meta. Digital assets could be really valuable in the future, where I could loan my digital art to the digital museum or hang my multi-million dollars digital art in my virtual office to impress my clients and friends.
Therefore, the possibilities are up to your imagination.
As with all investments, it comes with risks, and NFTs risks are much greater than the usual conventional financial instruments- Stocks, Bonds, Gold, etc.
So be prepared to lose it all would be a good mindset for this new frontier in alternative investment.
Therefore, the possibilities are up to your imagination.
As with all investments, it comes with risks, and NFTs risks are much greater than the usual conventional financial instruments- Stocks, Bonds, Gold, etc.
So be prepared to lose it all would be a good mindset for this new frontier in alternative investment.
Happy NFTing.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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搞经济 抄底 加仓 : that mona lisa Hilarious
lulrank : If Anyone have any good insights
Kroc : Give it 6 months to a year... NFTs will be a thing of the past.
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