If you have been paying attention to the cryptocurrency market the last few weeks; there is a trend that is becoming so popular that it may have shocked you. This trend is the surge in popularity of NFT's; specifically Crypto Punks. If you're not familiar with Crypto Punks; they are considered the OG of all NFT's, the thing that started all of this. Recently their value has been skyrocketing. In fact, there is a crypto punk that has a bid of over 2,200 ETH, valued at a little higher than $7 million dollars. This is an incredible amount of money, that very few people can afford to pay. But this begs to ask the question; which would you rather have? A crypto punk NFT, or the equal value in cryptocurrency?
There is a lot of potential upside in the NFT market. With it being a market that is literally just getting started, and this means that there is a lot of opportunity to get in early, find great gems, and make huge profits. This has been happening over and over with the famous Crypto Punk NFT's. They are currently so hot in popularity that people have been able to buy them, and instantly re-sell them for a great profit. There have been constant stories of people paying 150 ETH if not more for one of the punks, and then being able to sell them for double what they paid a week later. There is a lot of money being made in this market right now. We haven't even began to see some of the use-cases that will come with these in the future. The possibilities are endless. Through use in games, licensing out to people, use in the Metaverse, collecting, and many more. Imagine getting into bitcoin during 2011, or getting into ethereum in 2016. Getting into the correct NFT's could have that same potential as well. Children growing up today often actually prefer digitally rather than physically, which means that this is the future that we are heading towards.
But there is risk. NFT's are not as liquid as cryptocurrency, where you can literally sell or buy anytime you wish. You must find a buyer for your product before you can make any money. Right now that has been relatively easy, but that may not remain the case in the future. Crypto Punks may always have a tremendous reselling market available. As I mentioned, it is the original NFT. But, a majority of other NFT's will not share that same fate. At the rate that the NFT market is increasing, and how expensive items are becoming; it is easy to see that this could be a bubble that will soon pop. Many people will lose a significant amount of money, being unable to find a buyer for their NFT. This is the risk that comes with NFT's. What is hot today, may not be tomorrow. Think about all the trends that you have seen come and go throughout your life. While I am still relatively young, several of these trends still come to my mind. For example Beanie Babies, Trolls, Pogs, and the list goes on and on. When buying an NFT with the hope of making a profit, you are taking the risk that you either will never be able to sell it, or that you will do so at a large loss. Meaning that it is an illiquid asset.
Now let's talk about cryptocurrency. One could argue that there is also a lot of risk that comes along with investing into cryptocurrency and I would mostly agree with that. But there are options that are available that many would consider much safer such as bitcoin or ethereum. It is generally agreed upon that bitcoin will be around ten years later and will be worth much more than it is today. The same can be said for ethereum. The great thing about choosing to invest into one of these options over NFT's is just how liquid this market is. Meaning how easy it is to buy in, and sell out of the market. You can sell anytime you wish to. Not only are these liquid but there are ways to use these assets and gain an extra yield. My personal favorites are lending out my bitcoin and ethereum for around 5-6% annually. With the way that crypto has been appreciating in value each year, this interest gained can quickly turn into a much larger amount. Just like with NFT's, there are a lot of cryptocurrencies out there that are pure junk and will trend towards zero over-time.
But which option is better? Let's say you were able to find an absolute steal of a price for a crypto punk at around 35 ETH, valued at about $112,000 currently. Today that is already a lot of money. My expectations could be wrong, but I am expecting Ethereum to hit a price of $10k before the year comes to an end. This would make that crypto punk purchase now $350,000. And that is only this year. With a few years of lending or staking, and even more appreciation in value you could quickly be looking at a cost opportunity of $500k - $1,000,000. All for a JPEG. With that money you could potentially buy your dream home, and have a nice cornerstone for your retirement fund. When you start thinking of it in this way, that crypto punk becomes even more expensive. But we do need to mention again that this NFT market is really taking off. Just this week Visa officially bought a punk as well. This will only lead to more accumulation and more appreciation in value. As far as crypto punks go; this is quickly turning into a market that only the elite can participate in. Yes, there will always be less expensive NFT's available, and you may get lucky and pick one that appreciates greatly in value. But in comparison of the blue chip of NFT's, Crypto Punks, and the blue chips of crypto, bitcoin and ethereum. Which one would you rather have?
For me personally, I would rather have bitcoin or ethereum. I think that crypto punks will probably always have value, but I'm not yet convinced that this isn't a bubble, and how far they could retrace to. I have much more confidence in bitcoin and ethereum and prefer to hold those. I find comfort in it being much more liquid, and also being able to leverage it to earn even more additional income. I view investing into cryptocurrency already risky enough, and investing heavily into NFT's and even crypto punks, is multiplying that risk by twenty times at least. And so I choose the safer path, the one that I feel more confidence in. All that knowing that I could be missing out on potentially massive profits.
How about you? Which would you rather have? A highly valued NFT, or your favorite cryptocurrency?! And why!?
As always, thank you for reading!