NFT's; there is so much to say about these. The last few months they have taken over the crypto markets and been the talk of the town. Some people are even considering that they may be the thing that attracts regular people to venture into the cryptocurrency market. And why shouldn't it? We have seen news story after news story of people turning a small investment that was put into a NFT that was cheap at the time, into something very valuable. Being able to turn an incredible profit in a vey short term. It is something that most people dream about. But the NFT market isn't all roses and you need to be aware of that. The cryptocurrency industry in of itself is quite risky. But the NFT market is like adding a 100x to that risk factor. There are some things that you need to be aware of before investing. Let's talk about this and decide if we should be investing into NFT's.
Before we get any further into this discussion, it is important that you know my thinking and biases towards NFT's. I try to be fair always, but as humans we have our own biases. Knowledge is power after all. I will admit that initially I was against NFT's. Actually the story is very similar to how I first got into crypto in general. Upon first discovering and hearing about NFT's, I was very skeptical. I will admit that I was one of those people that thought; "It's just a GIF." Why would I pay money when I could just, "right click and save" for free. I have since changed my viewpoint on them after putting in a significant amount of research and time. There are an extraordinary amount of use cases that NFT's can present, and today we have only just begun to scratch the surface. Because of that fact and the high risk factor; that is why the reward has a chance to be incredibly high as well.
To know your future, you need to know your past as well. The same goes for the cryptocurrency market. If NFT's are the future, what was in the past? Some would argue that the previous crypto hype market were ICO's. While some would consider these two categories as completely different and impossible to compare; similar to comparing apples and oranges. On the other hand, I believe they can be compared. Since NFT's are the current craze, it is important to look at past hype movements. What made them so excited, what made them appeal to the general market, and what did they fizzle out? Making money motivates everyone and is definitely a key factor in both ICO's and also NFT's. What was so exciting about ICOs was that it was supposed to level the playing field and give everyone the chance to be a venture capitalist. Allowing anyone and everyone to get into projects early at a low price and hopefully benefit from it. The reason why ICOs fizzled out was that a huge majority of these projects would either never see the light of day, or never came anywhere close to fulfilling the promise of their Whitepaper, let alone make profits. There were many, many pump and dumps.
So now that you know why ICOs eventually fell off in popularity, we should explore possible reasons why NFT's are high risk investments. The first concern that I have always had with NFT's is that they are illiquid, which means that they can be more difficult to sell. Unlike bitcoin where you can sell instantly at anytime you want. With NFT's you have to find a buyer. But this would be the same for any physical collectable item in the real world. The second concern I have is that the market is full of copycats. If you look at most of the NFT market right now, they are all portraits. Of characters, punks, animals, aliens and the list goes on. This trend was started by crypto punks and after those became a hit, everyone else has tried to copy that formula. A lot of those projects have found success, but many will not. And there is a high likelihood that what is popular today, will not be tomorrow. And then you will be stuck holding that NFT forever. This isn't a problem if it is truly a collectable that you're a fan of and want to own, but it may be a problem if you looked at this as an investment.
Another concern that may prevent people from buying in is the sheer cost or fees associated with NFT's. While the fees are becoming less of an issue due to NFT's being minted on chains other than ethereum. But the fact remains that ethereum is the "king" of the NFT realm and a good percentage of the most coveted projects are found on this blockchain. If it isn't the fees that get to you, then it's the initial purchase cost. An initial floor price of 0.05 ETH was once cheap, but now is over $200. An amount that is quite a bit of money for most people. Especially considering how we really are in the wild, Wild West of this market. There's a good chance that you may just be throwing that money down the drain, but there is still a chance that you will hit the lottery. Because of that, people may feel more comfortable just putting that money into crypto coins themselves.
One thing to remember is that this new sector of the market is incredibly young and we have a chance to be some of the first pioneers to invest in it. Imagine being one of the first people to buy land in Manhattan. This is the type of opportunity that we are looking at. Another similar situation may be comparing it to the Dot.com early years. There will be amazing opportunities like Amazon out there, but there will be busts out there like Pets.com. The difficult part is filtering through all the noise and finding the gems. While I may sound hesitant about this; I think that is an important trait of a smart investor. But an even more important trait is always having an open-mind. When you have an open-mind and devote the time and research, that is when you will find success. If you are stubborn and have a closed-mind, you will continue to miss opportunities.
As for me, I have not heavily invested into NFTs yet, but I am heavily researching and trying to learn as much as I can. Exploring new opportunities, new trends and picking the perfect project that I want to invest into. I am convinced that NFTs are here to stay, and we haven't even seen a glimpse yet of what they will become. We will all wish that we had gotten in earlier.
How about you? How do you feel about investing into NFTs? Would you rather buy crypto or NFTs?
As always, thank you for reading!