NFTs or non-fungible tokens are unique one of one digital assets that are primarily stored on the Ethereum blockchain; NFTs allow for verifiable ownership.
NFTexplained.info is a team of long term crypto investors who have blockchain experiance. In this article we will examine if NFTs are a fad.
As a general statement, the NFT market is extremely volatile; however, many long-term investors think the technology is groundbreaking and NFTs allow for an array of possibilities. While some NFT projects have gone to zero, others have broken over a billion in sales and provide support that NFTs are here to stay.
While some NFT projects are considered a rug pull (a quick cash grab before creators flee the project) others (e.g. CryptoPunks, Top Dog Beach Club, and Bored Ape Yacht Club) have shown to be good investments.
While the NFT market is extremely volatile, it has been drawn to NFTexplained.info’s attention that many of the world’s best investors and smartest people are believers in the technology that NFTs bring.
People such as Mark Cuban, who has a net worth estimated to be over $4 billions has invested in a number of different NFT companies. Jay-Z who famously invested in Uber pre IPO has also invested in NFT companies and currently owns a CryptoPunk (which is also his profile picture on Twitter).
Aside from the extreme volatility that NFT investors see when looking at the market, NFTexplained.info will explain why NFTs are likely here to stay.
The number of transactions that occur on large NFT marketplace like OpenSea continue to rise. In August of 2021, transaction volume on OpenSea rose 1,000% in just 30 days when looking at year-on-year comparisons.
NFTs are relatively new and many are unaware of the possibilities that NFTs provide. Projects that were launched towards the beginning of the NFT history (2017) like CryptoPunks have surpassed $1.2 billion in lifetime sales. Companies like Visa have even invested in the project and the floor price for a punk is currently (almost) half a million dollars.
Andreessen Horowitz is an esteemed venture capital firm that has US $19.2 billion in assets currently under management. The venture capital firm has highly intelligent general partners.
OpenSea recently had a Series B round of funding, in which they raised $100 million led by Andreessen Horowitz. This makes it pretty safe to assume that they were the primary investors and are believers in NFTs.
In this article NFTexplained.info will also cover how long the NFT bubble will last, if NFTs are good investments, and if the NFT market is dead.
How Long Will The NFT Bubble Last?
As NFTexplained.info previously stated, numerous projects within the NFT space have gone to zero and the majority of art from unknown artists will not be purchased on OpenSea. That being said, countless projects see millions in volume traded and some even billions.
NFTs are highly speculative and volatile investments. However NFTs are not in a bubble; they allow for countless implications and a new form of ownership. NFT prices skyrocket as hype builds and prices will maintain if there is long term incentive to hold. Strong NFT projects/artists are here to stay.
Aside from Andreessen Horowitz, billionaire investor Mark Cuban is an enormous supporter of NFTs. Entrepreneur Garvy Vaynerchuck is also an enormous supporter of NFTs and has a history of identifying trends correctly. The list of impressive names continues.
The largest, and most well known fine art acutionhouses like Christie’s and Sotheby’s have begun selling digital works of art. For example, Sotheby’s recently sold a bundle of NFTs from the Bored Ape Yacht Club for US $24.4 million.
Cuy Sheffield, who is the head of crypto for Visa stated, “We think NFTs will play an important role in the future of retail, social media, entertainment, and commerce.” As previously noted, the firm purchased a CryptoPunk. It is likely more retail and institutional investors will get into the NFT space as time goes on.
Beeple aka Michael Joseph Winkelmann, the creator of ‘Everydays, the First 5000 Days’ recently made history by selling the piece for $69 million. He was recently announced to be one of the ‘Men of the year 2021’ by GQ. The way art is being sold is changing and having Beeple be on the list is a testament to the growing NFT space.
The technology backing NFTs provides a new form of ownership that is unprecedented in an increasingly digital world. NFTs even allow artists to receive commission when the NFT exchanges hands which may even increase prices (which is an aspect of provenance and NFTexplained.info has covered that topic in depth).
While some NFTs are likely to go to zero, others will rise to thousands and even millions of dollars. NFTexplained.info will examine what makes an NFT project a worthy investment.
Are NFTs Good Investments?
Numerous aspects lead to the success of an NFT project including good utility, a strong community created by holders, and an incentive to hold. Projects that have these three aspects are likely to increase in value.
The vast majority of NFTs are volatile and speculative investments. The market works as all fluid markets do, on the basis of supply and demand economics. Investors are able to make a more educated investment by looking at a project’s community, the NFT itself, utility, and more.
NFTexplained.info is a team of long term crypto investors, we are not financial experts and in no way do we provide financial advice. As with any investment, make sure to complete your own due diligence before taking action.
Since the market is incredibly volatile it is possible to see huge returns as well as huge losses when investing in NFTs. Some NFTs will provide 100x while others will become nothing.
If there is enough awareness and hype built around the project it is likely to succeed if there is long term incentive to hold. Long term incentive to hold often comes from airdrops provided by the creators and real world utility.
An example of real world utility is that owners of an NFT project are able to receive a piece of free merchandise simply for owning the NFT. Another example would be the location of a real world beach party which the creators of the NFT project, Top Dog Beach Club have announced.
NFTs can be incredibly good investments that lead to enormous returns. NFTs can also be an investment that leads to a complete loss. Numerous factors should be considered before investing in an NFT.
This leads NFTexplained.info into our next section of the article which is: Is The NFT Market Dead? Where we will break down the aspects of the market and provide our analysis.
Is The NFT Market Dead?
Since NFTs are relatively new and the space is growing with new users, numerous misconceptions have arisen. Some may think the market is ‘dead’; NFTexplained.info will provide our analysis.
NFT sales continue to grow with more users on OpenSea (the largest NFT marketplace). Since the market works using supply and demand economics, artists creating NFTs without an audience are unlikely to see sales. That being said, the transaction volume on NFT marketplaces continues to grow.
Since OpenSea is considered the ‘eBay’ of NFTs, anyone has the ability to create NFTs and list them on the marketplace. Unknown artists are unlikely to see sales since there is no demand or hype built around the NFT.
More and more NFT projects are rising with more funding to promote and create the project or NFT line. NFT projects are starting to be promoted through an array of different ways including billboards, social media influencers, and more.
The market is growing however only projects with utility and media awareness are likely to see sales. If there is no demand for an NFT, it will never be purchased. With that being said, people are willing to pay enormous sums of money to say they own something from a person they admire or look up to.
For example a purchaser of Jack Dorsey’s (the CEO of Twitter) first tweet was willing to pay millions in order to be the owner. This sale is on NFTexplained.info list of top 10 most expensive NFT purchases; in the article we also explain why the NFTs are special.