NFTs: the next big investment trend or a passing fad?
Investors who rebuff NFTs are naïve in thinking they are a passing craze.
The new digital asset class is taking the art, fashion, music and sports worlds by storm.
NFTs are one-off digital assets verified through blockchain tech, providing owners with authenticity and ownership certificates. They generate unique, non-interchangeable digital tokens, and are able to be bought and sold just like other assets or property, without having a quantifiable physical form.
We’re now seeing more and more established brands getting involved in the NFT market, such as the National Basketball Association (NBA) and Sotheby’s.
Only a fortnight ago, Sotheby’s held a three-day auction of NFTs by an anonymous artist. In addition, Christie’s sold a digital artwork in JPEG form by an artist called Beeple, entitled “Everydays – The First 5000 Days” last month. This is the third most expensive artwork that has even been sold by a living artist.
The hype surrounding NFTs is here and it’s real. And traditionalist investors who snub them as a passing fad are, in my view, fooling themselves.
Although they may currently be deemed a novelty, the value of digital assets will only go upwards considering the lightning pace of the digitalisation of our world.
Moreover, demographics are also in favour of NFTs. Particularly Millennials and Gen Z who lead digital lives. The natural progression is to take digital representations of luxury brands, music and art into their lives, and now they can.
Another factor to consider is the so-called Great Wealth Transfer. Estimates suggest that $68 trillion in wealth is to be passed down from baby boomers to their children and other heirs within the next couple of decades.
Additionally, NFTs are positively changing business models, especially within the creative industries.
As an example, artists and musicians can offer enhanced virtual experiences for buyers and collectors, they can prove if the works are forgeries and can also include certain criteria to receive royalties each time their works are re-sold.
Nevertheless, although NFTs are the hottest new digital asset, it’s essential that investors remain cautious.
In terms of investing, this market is still the Wild West. I would urge investors to wait until the dust settles.
Having said that, those who completely snub NFTs would likely be those who previously dismissed digital currencies like Bitcoin or online retailers such as Amazon.