NFTs are the newest, hippest crypto kids on the block, signifying digital ownership of a wide range of irreplaceable intangibles.
Despite the fact that they’ve been around since 2014, 2021 was the first year that this revolutionary technology became widely accepted.
According to data collected by DappRadar, a decentralized app store, total NFT sales reached $25 billion in 2021, up from $94.9 million the year before.
They’ve caught the attention of celebrities and major corporations ranging from American Express to Gucci, and have erupted throughout the music, art, sports, and other industries.
Are NFTs a Good Investment?
Experts argue that NFTs aren’t quite ready for primetime investing and that there are certain facets of crypto that you’ll want to be well familiar with before investing in one.
For starters, buying an NFT is a difficult procedure, according to Doug Boneparth, a financial advisor and president of Bone Fide Wealth in New York.
To get started, you’ll need an Ethereum-compatible crypto wallet and some ether, as well as the ability to connect your wallet to an NFT marketplace – a lot of hoops to clear.
Crypto hacks and frauds, which have become increasingly popular and sophisticated, are also vulnerable to NFTs. A Google search for “NFT frauds” reveals just how easy it is to get into trouble.
Then there’s the issue of worth and utility. NFTs are not like stocks or bonds, where the underlying value of the investment is usually known.
According to Yang, a successful NFT is analogous to a great brand in that it is given a lot of value by others, therefore it is “only as valuable as someone else is prepared to pay for it.”
You’ll need to establish your amount of exposure to NFTs, which are hazardous, speculative assets like bitcoin.
Most long-term investors, according to experts, will be better served by dedicating a tiny amount of their portfolio to cryptocurrencies (less than 5%, and never at the expense of other financial goals) rather than an NFT.
More people buying ether for NFTs may be a very good thing for investors betting on a long-term increase in the value of Ethereum.
The fees for purchasing NFTs, however, are a significant disadvantage, according to Yang. He estimates that it may cost “upwards of a hundred or $200 just to make the transaction happen” on Ethereum.
“Gas fees,” or costs paid to miners for validating a transaction on the Ethereum network, are the term for these charges.
Gas prices have risen as the number of transactions on the Ethereum blockchain has increased, owing to broad usage.
If you wish to buy an NFT, do so for fun, like you would a concert or sporting event ticket, rather than as an investment.
Boneparth advises doing it in a somewhat risk-free manner by investing only what you’re willing to lose or avoiding it completely if it would interfere with other financial objectives such as emergency savings or debt repayment.
Again, make sure you’re not putting any amount of money in NFTs that you’re not OK with losing, whether it’s $5 or $500.