Is It Worth Adding NFTs To Your Investment Portfolio?
If you’ve heard about non-fungible tokens, you’re probably wondering what they are and how they work. NFTs are digital assets traded using blockchain technology, but you cannot trade them for something of equal value because they are not fungible. Unlike one Bitcoin, which equals a specific amount in dollars, NFTs are similar to original videos, paintings, photos, audios, and manuscripts. Data collected by NonFungible.com reveals that current NFT sales range between 15,000 and 50,000 every week, compared to 100 sales per week in 2017, according to Influencer Marketing Hub.
Generally, the value of NFTs depends on their originality, authenticity, and how rare they are. With this in mind, it’s natural to ask if it’s ideal to invest in NFTs. To ensure you make an informed decision about investing in NFTs, successful investors suggest learning everything about this new trend, including NFT marketing and promotion. Also, research why it’s worth adding NFTs to your investment portfolio. Read on to understand the reasons you should invest in non-fungible tokens.
Add Value For Tokenized Assets
One vital aspect of NFTs is that it creates an opportunity for individuals to tokenize their assets. This means you can transform your existing assets into NFTs and sell them at a high value. For example, artist Mike Winkelman, also known as Beeple, sold an NFT of his digital image collage at $69 million. While you may not be able to sell your assets at such a high price, you can tokenize them using blockchain technology to create a digital representation. Asset tokenization is ideal, as it eliminates duplication and creates a source of crowdfunding for artists. It also enables creators to have control over incoming payments from investors.
However, to enjoy the benefits of asset tokenization, you need to understand how to create digital tokens that represent real-world asset ownership. Since token creation relies on blockchain technology, you can store and trade digital items securely and freely like you would with cryptocurrencies. Once you tokenize your assets, you can choose to list them on NFT exchange platforms if you are willing to sell ownership.
NFTs Have A Decentralized Marketplace
As much as NFTs are unconventional investment options, they are a perfect choice for investors looking to trade without the interference of intermediaries. Typically, non-fungible tokens allow individuals to sell paintings, audio files, or manuscripts in a decentralized marketplace. The beauty of a decentralized market is that there are no middlemen, so you don’t have to worry about paying commission when purchasing or selling digital items. Not to mention, creators of original non-fungible tokens get to receive commissions every time their work exchanges hands in the marketplace. This decentralized market approach is one of the top aspects that separates NFTs from other investment options.
Provides More Liquidity
Another reason investing in non-fungible tokens is an excellent idea is because they increase asset liquidity. Remember, when you tokenize assets and store them in a digital ledger, you gain more liquidity whenever you need them. For example, let’s say you own virtual lands in a virtual world. You can choose to rent or lease virtual space to influencers or advertisers at a fee while you retain ownership rights. Ideally, when you liquify digital assets like virtual lands, they still belong to you and at the same time generate income in terms of rent.
Ability To Resell
Adding NFTs to your investment portfolio can be an excellent way of generating high returns within a short duration, and that’s because you can resell the digital assets you have invested in at a profitable rate. Given NFTs are rare collectables, other investors in the exchange market are always more than willing to spend extra money on them. With this in mind, always focus on buying the right NFTs to increase your chances of earning impressive returns on investment. Experts recommend looking for the authenticity and originality of music, paintings or drawings, manuscripts and videos sold as NFTs.
NFTs Provide A Medium For Passive Income
Aside from reselling NFTs, consider creating your art and selling it as a digital item on NFT exchange platforms. As a creator, you’ll gain royalties or rewards any time your NFT is resold. Interestingly, creating a non-fungible artwork isn’t as complex as it may sound. You don’t need any knowledge about cryptocurrencies or blockchain technology. All you need to do is determine the blockchain you wish to issue your non-fungible artwork. Then pick an NFT-centric platform to upload your art (file or an image) and connect your wallet.
For example, if you’re an artist with good knowledge of drawing the earth globe using a pencil, marker, colors, and a sheet of paper, you can convert your art into a digital token. Start by choosing the blockchain you want to use and comply with their standards. Depending on your preferences, you can use Binance smart chain, Polkadot or Ethereum. Next, pick a platform where you can upload the drawing you want to transform into an NFT. Some of the best NFT-based platforms are OpenSea, Rarible, and Mintable. Most sites allow you to convert your artwork for free, while others charge a fee. Nonetheless, you’ll have to pay gas fees to sell your NFT.
As an investor, you need to understand that ownership rights of non-fungible tokens belong to the author or creator. That’s why they are rare and tend to create a sense of scarcity among traders. In turn, traders become eager to purchase a specific NFT to gain exclusive digital asset ownership. For instance, let’s say you’re shopping for Nike shoes, and the salesperson tells you that there’s only one pair remaining. The sense of rarity will trigger you to purchase the shoes even if you don’t see the monetary value at that moment. So, by investing in NFTs, you can use their rarity or scarcity nature to resell your digital assets at high rates.
Uniqueness and Collectability
The scarcity of digital assets makes NFTs a unique option for investors to explore. It’s worth noting, the ownership of digital assets is limited to the creator only. This means you cannot duplicate non-fungible tokens, hence their rarity. Besides providing uniqueness, digital assets are collectable. In most cases, NFTs work as trading cards from the wealthy.
While NFTs lack an inherent value, besides what the market describes, they possess a fluctuating worth. This characteristic makes the collectability and trading of digital assets a high-risk gamble. On the bright side, comparing NFTs and the art market becomes easy. Compared to the art market, NFTs benefit artists in many ways, like eliminating the need to sell art in auctions and galleries only. This step cuts off the middleman, so artists can directly sell their artwork to clients, thus earning more profits.
NFTs have attracted the attention of investors as they provide a unique option for generating wealth from art, music, and videos converted into digital assets. While some claim non-fungible tokens are here to stay, others are unsure if it’s worth adding NFTs to your investment portfolio. Generally, investing in NFTs can be a great option if you enjoy collecting real-world artwork and other collectables. Also, you may want to tap into non-fungible digital assets because they provide room to make passive income. They are unique and collectable, resalable, add value to tokenized assets, and boost asset liquidity.