Will NFT go up in value? Understand why some are worth millions
The recent popularity and increased demand for NFTs or non-fungible tokens mean that the crypto world may be moving to a new unprecedented high.
Author:James PierceReviewer:Camilo WoodOct 16, 20219.2K Shares661.8K Views
The recent popularity and increased demand for NFTs or non-fungible tokens mean that the crypto world may be moving to a new unprecedented high.
Cryptocurrency enthusiasts are excited about the millions of dollars traded in this new market for digital products and assets, which has boosted the careers of some digital artists like Beeple's. Meanwhile, some critics and analysts warn of a possible bubble around the NFT craze and crypto art resale market that has caused prices to soar.
The surge in demand for NFTs has been driven by recent million-dollar sales, such as the first tweet that Twitter CEO and Co-founder Jack Dorsey sold for $2.9 million and the sale of digital artist Beeple's crypto art for $69.3 million.
On the other hand, brands and companies such as Taco Bell (fast food restaurant chain), NIKE (shoe, clothing, and accessories company), TIME magazine (news magazines), and The New York Times (daily newspaper) have also launched and are selling new products and services in the crypto space, especially in the NFT space.
Since most NFTs are issued on the Ethereum blockchain, many people have wondered if they will appreciate in value and increase the value of the Ether (ETH) cryptocurrency over time.
Brief Note About NFT
NFT or non-fungible token is a type of digital asset or crypto asset designed to create digital scarcity of a specific item and secure ownership of a unique virtual item such as digital art, image, photograph, music, GIF, online video, tweets, PDF documents or even simple text documents.
Is NFT Worth Anything?
In finance and economics, there is an interesting division between functional value and the intrinsic value of an asset, good, product or service.
You can do the following analysis: "How can I use this? How does this benefit me? Is this important to me?" versus "How much do I like this thing, product, or service on its own."
It is exactly the functional value of an NFT where there is most discussion, whether NFTs are worth anything or not, and why people buy NFTs.
The functional value of an NFT asset could be simply because you want to show people your cryptocurrency portfolio and your taste in art, or it could encompass other things like how much money you can make with a specific NFT in this speculative market.
The second way to look at the value of an NFT asset is through its intrinsic value.
For most people it doesn't make sense to spend money on digital things that can easily be downloaded and shared on the Internet.
On the other hand, there is another way to think about the value of NFTs, when it comes to supply and demand.
NFT is designed to create digital scarcity and provide a limited supply of a digital good. NFT does not guarantee demand for an asset. Demand is usually influenced by various factors, such as the stock market and stock exchanges.
How Does NFT Increase In Value?
Like every asset class, its value increases with the old law of supply and demand. And with NFTs it is exactly the same thing.
As more companies, brands, and celebrities launch digital versions of their products and services in the form of NFTs, the demand for these crypto assets will likely increase their prices in the short and long term.
Because NFTs create digital scarcity of digital files, and turn it into digital assets while guaranteeing proof of authenticity, their value increases over time because their usefulness cannot be challenged like any digital file available on the internet.
This is different from traditional assets such as the stock market or financial market that often suffer devaluation due to external and internal environments of a listed company and inflationary pressures, this devaluation does not happen with NFT assets.
The price of an NFT generally depends on demand, speculation, and other factors such as utility, the asset's transaction history, liquidity premium, a way to connect with a celebrity, or even get rewards, prizes, or discounts on a brand's products and services.
In addition, NFTs could completely change the art world, as this new technology allows direct, broker-less payment for an artwork, and provides royalties to digital artists on each future sale of their NFT artworks, meaning that for the first time, content creators and artists can directly benefit from the appreciation of their digital works and products over time.
Why Would Anyone Buy An NFT?
The truth is, it depends. NFT stands for non-fungible token, which means that you own a unique or exclusive collectible token. It's like having in your wallet a crypto asset or digital asset that has legal properties or even sentimental value. So when you look at it this way and from this perspective, you can collect or own anything and assign the value as you like.
So the best approach when it comes to investing in NFTs, is not to consider them as short-term or long-term investments, but to buy NFT tokens that are linked to your personal interests or hobbies.
If you are a big fan of for example the rock band Kings of Leon, buy one of the NFTs that the band has released, which offers a set of rewards, such as front row seats on every tour or discounts on band merchandising for the rest of your life.
Or the WePlay Collectibles, which are for people who want to be part of Esports events and show that they like players and talent in a different way, as well as merchandising. The WePlay Collectibles are part of a platform, where you can buy items with NFT technology - both digital and physical. They are rewards and items associated with a specific tournament.
WePlay Collectibles work through Ethereum, a software platform that uses blockchain technology. Blockchain is like a distributed ledger - a system that allows parties to exchange products, services, or financial assets, while securely managing transaction records. They are encrypted, organized in a series of blocks available to all platform participants (actually, their computers, to be exact), but impossible to alter. So you can be sure that the transactions of non-fungible tokens are protected from fraud.
The blockchain network is controlled and regulated by smart contracts.
Buying unique digital art from WePlay Collectibles is easy, and you can do it through the Binance NFT market. If you already have a Binance account, you can use it to buy and sell digital art in the marketplace. If you are not yet a Binance user, register today and open your digital wallet to hold cryptocurrencies, collect digital artwork, and more.
To buy NFTs, you will need to have ETH, BNB, or BUSD in your Binance wallet. After crediting your wallet with any of these cryptocurrencies, you can bid on any non-fungible tokens available on the Binance NFT marketplace.
Find the NFT you want, place your bid, win the auction, and the token will be transferred directly to your wallet! With any of these cryptocurrencies, you can bid on any NFTs available in the Binance marketplace.
Find more information about the platform and NFTs at https://weplaycollectibles.com
If you love digital art and online gaming, go ahead and buy these crypto assets to participate in the new digital economy or else collect new and more interesting digital artworks.
Consider buying NFTs purely for pleasure or as a way to support the artists, or other content creators you want to continue to see their work published by.
Are NFTs Good Long-term Investments?
Does it make sense to buy Pokémon cards or any cards for your retirement fund? Maybe one of them could be worth thousands and thousands of dollars in the future, but it probably won't be worth noting.
As we have explained before, buying NFTs only makes sense if you do it as a hobby, support work by an artist or get rewards from a brand's products and services, or if that token has use on a specific platform, such as an NFT representing an active crypto within an online game you love to play.
For example, you can play a game, earn points, trade the points with other players, or trade that point in the form of NFT on NFT marketplaces like OpenSea. That is a real use case for a non-fungible token (NFT).
Now, predicting whether the value will increase in the medium to long term or in the future is impossible, just as it is also difficult to predict whether an NFT from a famous artist or internet celebrity will end up being the most valued.
However, you should only buy NFT art or crypto art as a matter of artistic value or because you love the art, not because of future profits or returns on investment. This does not mean that you will not be able to make a profit when you invest in crypto art, it just means that your main motivation should not be wanting to make a lot of money in the short term with NFT art.
What Are The Risks Of Investing In NFTs?
NFT is a new asset class, just like any established asset it has numerous risks. The main risks of investing in NFTs or non-fungible tokens are the inherent risks of investing in any file that can become useless overnight, meaning you can lose your money.
The other main risk is if Ethereum fails as a blockchain and cryptocurrency and NFTs become part of a different blockchain or centralized database.
Also, when investing in crypto assets like NFTs, you will need to "store" your NFT tokens in a secure digital wallet like Metamask, Trust Wallet or Coinbase Wallet. Therefore, you need to store your private key in a safe place, because you will need to enter your private key or seed phrase and a public address every time you want to trade NFTs.
Obviously, if you lose your access data, your NFT will also be lost forever.
On the other hand, these assets are part of a decentralized market which means that there is no central entity in control of the asset, and at the moment there are no rules and regulations about non-fungible tokens (NFTs), that said, you will have to make your own decisions about the good value or fair price of an NFT, and be willing to take these and other significant risks of this speculative market.
This is because many NFTs are tied to the reputation of their creators. For example, when the NBA in partnership with Dapper Labs - developers of the blockchain Flow, created and launched the NFT platform NBA Top Shot, normal people and NBA fans went crazy with the 'moments' or "highlights" of the American Major Basketball league that they could buy because it was new and interesting.
However, the owners or investors of the ''moment'' or ''highlights'' obviously get no copyright, and no commercial distribution rights to the file linked to the NFT token. Instead, they just get a copy of an exclusive video clip.
If you are still interested in investing in NFTs or trading crypto assets, do your research, understand the risks and the market, before proceeding with an investment strategy.
As an investor or buyer, if you are interested in art collections, you should buy an NFT with the goal of building your own virtual gallery.
Now, if you want to make money in the NFT art market, you need to understand the crypto art market, identify and analyze the supply and demand of a particular crypto collectible asset, and look for bullish signals in the secondary market. Therefore, avoid entering the scene during the speculative mania of the moment.
James Pierce
Author
Camilo Wood
Reviewer
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