The crypto world’s latest invention could be massively profitable… if you know how to play it.
But before we go into the details of investing in NFTs or non-fungible tokens, let’s clarify what we’re talking about.
Think of NFTs as unique digital objects. If you own it, nobody else has the exact same thing.
Your object will be accounted for and recorded on a digital ledger. This will make it easy to prove that it’s unique.
And this is how NFTs are different from cryptocurrencies.
Cryptocurrencies are fungible. You have two bitcoin or two ethereum, and they are exactly the same. That’s what makes them (some argue) function as money. Money needs to have fungibility; otherwise, it simply doesn’t work. Every dollar has to have the same value as any other dollar in circulation.
But NFTs are like works of art. There could be only one Mona Lisa. In the physical world, its uniqueness is established by experts. In the digital world, the public ledger takes care of proof of uniqueness.
What can be an NFT?
Anything. Text, images, music, tweets, bits of computer code…
For example, earlier this year, the inventor of the internet put the original code that produced the proto web on sale as an NFT.
Sir Tim Berners-Lee, who created the internet, offered the code he wrote back in 1989–1991 as an NFT and sold it for $5.4 million.
That’s not the highest price ever paid for an NFT. Among the top five highest-grossing NFTs ever sold were these ones.
This one was the number-one most expensive NFT ever sold. It’s a piece of art called EVERYDAYS: THE FIRST 5000 DAYS.
It sold in March 2021 for $69.3 million.
So you get the idea… it’s like an art collection for digital objects.
And people are interested in this area, both as a novelty and as a way to make money.
Take this chart. It shows how much search volume there is on Google for “NFT.”
It’s been exploding lately.
This tells us that NFTs are shaping up to be a key component of the crypto universe.
If you think about bitcoin or ethereum as alternative assets, NFTs are “alternative art.”
Before we talk about some of the ways you could purchase non-fungible tokens, let’s see how art as an asset performed in the past.
Art Outperformed Stocks
Here’s a chart that sums up the reason why there’s so much interest in art, including digital art like NFTs.
It has performed very well.
Masterworks, an online service that tracks the prices of art, created an index that shows how the art market compares to the broad S&P 500 index.
And it compares very well. While the S&P 500 earned a 9.5% return on average, the art market generated about 14% per year.
This is why art, including digital art, is such a hot area.
Investors are making serious money here.
And NFTs could be the next big thing in art.
High-profile auctions like Sotheby’s already work with digital artists and facilitate sales of NFTs.
…which leads us to the practical aspects of investing in NFTs.
How to Invest in NFTs
First thing first. We’re not making any investment recommendations here, in NFTs or otherwise.
Our goal here at The Financial Star is to show the most exciting opportunities that a lot of investors miss.
Investing in NFTs, or in any other asset, carries risk. Do your due diligence before putting your own money into any of these assets. Losing is always a possibility.
With that out of the way, though, here are some of the platforms that you could put on your radar if you’re interested in NFTs.
Auctions like Sotheby’s itself are a good place to start.
It is a 277-year-old auction house with a great reputation. It facilitated NFT sales in the past, and we would expect that it could have more NFT-specific auctions in the future.
In the meantime, you could add marketplaces like OpenSea and Rarible to your watchlist.
Both offer NFTs for sale, and both have getting-started guides for the investors new to the NFT game.
Art has been a recognized alternative investment for centuries. NFTs have all it takes to continue that tradition and take it into the virtual sphere.
Thank you for your loyal readership,
The Financial Star team