Non-fungible tokens took over digital marketplaces in 2021. According to DappRadar in an article by Reuters, the total sales of NFT’s last year was $25 billion. NFTs have been sold in the multimillion dollar range, and big corporations are buying these digital assets as well. But what makes them so special? The answer is nothing.
To give more explanation, NFTs are digital assets which include digital art, audio files and videos that use the same technology as a blockchain, where it can record transactions and show ownership of your NFTs. It took a while for NFTs to become what they are today, in 2020 only $95 million worth of NFTs were sold, with the market exploding into the multibillion industry it is now.
Notable people like Justin Bieber, Mark Cuban, Neymar Jr. and Tyrese Haliburton have posted about their digital assets or use them as profile pictures on social media platforms. This has led many companies and other organizations to either invest or create their own.
For example, every attendee of Super Bowl 56 this past February received an NFT version of their ticket from the NFL. It’s not the only sports league that has created their own NFT line, the NBA and MLB both have platforms where fans can buy highlights of the top players in the league. They are not special either. For NBA Top Shot, all the highlights available are serial numbered, but all of them are the same video.
Many investors are looking to buy NFTs as an investment and asset to add to their portfolio. It just seems difficult to wrap my head around it. For the people that make these NFTs whether it being an audio, video or art file, I have the utmost respect for them and their talent. But how does it make sense for a person to view it as an investment?
During 2020, one similar craze that comes to mind is when sports cards had a massive market where people were buying cards of their favorite modern players such as Luka Doncic, Shohei Ohtani and Patrick Mahomes. The problem that a lot of people began to notice was the sheer amount of cards that were produced by Topps and Panini.
The population of the staple Luka Doncic rookie card (2018 Panini Prizm base card), there are roughly 18,500 Professional Sports Authenticator that gave a 10 grade, meaning the card was in “perfect” condition and was to be labeled as such. This card during the pandemic was selling up to $2,400 according to Starstock. But as of 2022, this card goes for roughly $445 on eBay.
I’m also not saying that there isn’t any money to be made in sports cards, because there are people that are willing to spend millions of dollars on just one card, such as someone paying $4.6 million on the best Luka Doncic rookie card made, and the famous Honus Wagner baseball card that sold for $6 million.
But the sports card market has glaring similarities to what NFTs sales are showing, with the highest paid NFT selling for roughly $70 million dollars in 2021, sales of NFTs seem to be regressing.
According to the market tracker by NonFungible, the average sale price of an NFT is currently $4,000 lower than January’s sales price of $6,800.
If that doesn’t alarm someone that is looking into buying NFTs as a way to invest, I don’t know what will. Vitalik Buterin, the creator of Ethereum, shared his thoughts on the topic in an interview with Time Magazine.
“The peril is you have these $3 million monkeys and it becomes a different kind of gambling,” Buterin said.
Buterin references the Bored Ape Yacht Club collection on OpenSea. If the creator of the cryptocurrency believes that NFTs aren’t the best way to invest, then potential investors should be mindful at the very least.
Another thing to look out for while investing in NFTs — scams — know what you are going to buy into. According to Google Trends, NFT scams reached an all-time high. This is because people don’t do their research, potential buyers don’t use trusted websites or try to become an “early investor” in an upcoming project.
It’s human nature. People want to make money, they see a potential investment so they buy in, but can unknowingly lose it all because of not doing research or being too greedy.
Nonetheless, if you want to get into NFTs to collect the different types of files, do your research on what to buy. I do appreciate the artists and creators of this unique content, but if you are looking to make a profit just beware that the everyday person is who the market this is targeted for. As people slowly move away from this trend, you can be out of lots of money.
Alejandro Mejia Mejia can be reached at [email protected] or @MeijaMeijaAlex on Twitter.