NFTs-explained-Investment-opportunity-and-the-hype

NFTs explained: Investment opportunity and the hype

NFTs explained: Investment opportunity and the hype

Imagine if the Mona Lisa sold for $860 million dollars today. It would certainly not come as a surprise for most people, as the Mona Lisa holds immense value for its fine art work. Although copies of the Mona Lisa do exist, there is a key reason why the original copy has more value. At the end, it all boils down to originality; the fact that the original copy is painted by Leonardo DaVinci himself.The same can be said about the digital files or units of data that are now selling for millions.

Yes, you read that right! In fact, the most an NFT has sold for is $69 million dollars. Now after reading this, you may be wondering what an NFT (Non-Fungible Token) is.

 In simple words, NFTs refer to non-fungible images, gifs or any unit of data that is stored on a digital ledger or blockchain. The word ‘fungible’, is important here, as it separates these tokens from any other units of data. Simply put, these tokens cannot be exchanged for an identical copy.

Now if you’re thinking that these NFTs are similar to artwork, you are a genius. If not, allow me to explain! Just like NFTs, original artwork such as the Mona Lisa painting cannot be traded for one of the billion copies that exist. This is exactly the reason why NFTs are sold for millions, even though their copies can be viewed on the internet for free.

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Are NFTs investments or just gambling?

I think it’s completely fair to call NFTs a bubble! All of the hype and speculation revolving around this digital asset makes it overvalued. The consequences of an NFT disaster could send a shockwave throughout the market if the hype and popularity skyrockets. If you’ve read our blog on the dot-com bubble, you definitely know what hype and speculation can do to the market. Another thing you should remember is that although you may make some profit out of NFTs, at the end they are still non-productive assets.

These digital tokens do not generate returns, and as said, only grow in value due to pure hype and speculation. Investing in a productive asset is a far better idea than indulging in non-productive assets because even if the value of the asset goes down, it would still be providing returns.

In this case, it refers to doing something dumb and hoping someone else would be dumb enough to buy the same asset for a higher price. This is because the asset has no intrinsic value whatsoever. The greater fool theory also applies to other assets such as bitcoin and other cryptos. This doesn’t necessarily make it a bad investment, but putting large sums of money into it is nothing but gambling. Many successful investors even call these assets worthless because of this very reason.

Take Charlie Munger for example, who called bitcoin nothing but worthless artificial gold!

In my humble opinion, I think that the average joe should not indulge in speculative markets such as NFTs, all because of the sheer volatility and risk involved. Always look for assets that have intrinsic value. Any market that you invest in, should provide value to its people and generate timely returns to its investors!

Conclusion

Whether you want to diversify your portfolio or just solely invest in NFTs, always remember that assets with intrinsic value are always a safer and reliable option.

What is an NFT?

In simple words, NFTs refer to non-fungible images, gifs or any unit of data that is stored on a digital ledger or blockchain. The word ‘fungible’, is important here, as it separates these tokens from any other units of data. Simply put, these tokens cannot be exchanged for an identical copy.

Should I invest in NFTs?

In my humble opinion, I think that the average joe should not indulge in speculative markets such as NFTs, all because of the sheer volatility and risk involved. Always look for assets that have intrinsic value. Any market that you invest in, should provide value to its people and generate timely returns to its investors!

What is the greater fool theory?

In this case, it refers to doing something dumb and hoping someone else would be dumb enough to buy the same asset for a higher price.

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