NFT stocks are backed by blockchain technology and called Non-Fungible Tokens. They’ve become the new focus of social media trading. And we’ve seen how that can affect stocks. So are these NFT stocks one that you want to invest in? Or are they a flash in the pan sort of social media trend?
If you’ve been hanging out on Fintwit, Discord, or Reddit to figure out the hottest new investments out there, you’ve undoubtedly come across the acronym NFT. You’ve probably also quickly realized that these aren’t traditional stocks or investment vehicles that you can find on your traditional equities brokerage.
But what is an NFT stock? And why should you consider this as the next big thing to invest in? NFT stands for Non-Fungible Token. So, unless you’re into cryptocurrencies you probably still don’t really know what that means.
A fungible token is something like Bitcoin. It can be exchanged for another Bitcoin or fiat currency; without any discrimination or differentiation. In layman’s terms, a fungible token is ubiquitous.
Fungible tokens aren’t strictly a blockchain thing either. A hundred-dollar bill is a fungible form of currency in that two people can swap bills. And each bill still retains the same value. Starting to make some sense?
Non Fungible Tokens are completely unique. Each one has a specific identity that is built into the Blockchain; verifying its status. In other words, every non-fungible token is like a fingerprint; one of a kind and uniquely created.
In this way, NFTs can be seen as digital certificates of ownership that cannot be refuted or compromised. When you’re able to wrap your head around that, you can quickly begin to realize why this would be such an intriguing way to authenticate things in our increasingly digital world.
Over the past year, NFT stocks have exploded in popularity alongside the physical collectibles market. And of course cryptocurrencies. It’s not just sports collectibles or artwork that’ve jump-started the NFT craze, but non-conventional things like videos, tweets, and even pixelated images of characters. Here are some of the most popular things that have hit the NFT market this year.
Ask any sports collectible fan what the hottest product is and they’ll each tell you without a doubt: NBA Top Shots. What are they? NBA Top Shots are made by Vancouver-based Dapper Labs.
They’re a Blockchain-based NBA licensed collectibles that fans can collect, trade, or sell on the NBA Top Shots marketplace. Each NBA Top Shot Moment is a several second video clip of a specific play made by that player.
At first glance, they resemble digital NBA trading cards, but each specific moment is built into the Ethereum Blockchain and certified to be completely unique from one another. So are these valuable?
It depends on how you feel about NFT stocks. There are some moments that are ultra rare and serial numbered to low double digits. One such Lebron James Moment sold for $200,000 USD in February. Depending on your NFT outlook, this could be a colossal waste of money or an incredible value for the future.
Several world renowned artists have jumped aboard and made some of their works of art into digital NFTs to auction off. Most famously, the digital artist Beeple recently auctioned off some of his work as NFTs and made millions of dollars for digital JPEG files encrypted on the Blockchain.
In fact, his most recent piece sold for a record $69 million which catapulted him into the top three most valuable living artists. According to the site NonFungibles.com, art NFTs account for nearly 25% of total NFT sales so far, and it is a true testament to how this technology can help begin to solve the problem of art fraud.
That’s right, even musicians are getting in on the fun as the rock group Kings of Leon just released their latest album as an NFT, meaning each digital copy of their album is certified to be encrypted on the Blockchain.
The music industry is already buzzing about how utilizing NFT technology for album releases can help artists finally receive true payments for their work. Aphex Twin, an electronic music artist, also sold an NFT with both an audio and visual component for 72 Ethereum Coins, or approximately $126,000 USD at the time of this writing.
Tweets? Seriously? Yes! When we said anything can be made into an NFT, we truly meant anything! The CEO of Twitter, Jack Dorsey, recently put up his first ever tweet for auction, and the current bid is a cool $2.5 million. For a tweet? You bet. It’s not what the product is, it is the scarcity and demand for that exclusivity of being digitally unique.
Well, yes and no. If you mean buying shares of an NFT, then no, that is not really the way in which they work as an investment vehicle. NFTs are often sold or auctioned off on their own websites and are not for trading on the stock market or any other equity exchange. In fact, NFT Stock is kind of an oxymoron as stocks are fungible assets, so NFT Stock is definitely a misleading and slightly paradoxical phrase.
Now savvy investors may want to target some companies that are working alongside the NFT industry, specifically in the crypto market. Keep in mind that just as with investing in cryptocurrencies directly, buying the actual NFTs rather than the companies who manage them or sell them, will always be a more valuable long-term investment. Here are some stocks that are available today that could potentially be a way to invest in the NFT market down the road.
The most obvious play in the NFT stocks industry right now is the fintech company Square. We already spoke about Jack Dorsey and what he’s doing with Twitter.
But he’s also CEO of Square and is already making moves to capitalize on NFTs. Dorsey has always been a fan of cryptocurrencies and Blockchain technology.
This past year, Square became one of the first fintech companies to allow the trading of cryptocurrencies through its Cash App platform. More recently, Square bought the music streaming platform Tidal.
In fact, many believe is the first step towards allowing musicians to create NFTs that can be purchased and owned within the Square ecosystem.
This can go for any crypto miner, but Riot does specifically mine Ethereum as well as Bitcoin. Why’s that important? Like most crypto mining companies, Riot will rise and fall alongside the prices of cryptocurrencies.
If you’re bullish on Ethereum and its utility as a technology and not a currency, then you may want to grab some shares of Ethereum miners before it’s too late. With the mainstream focus on Bitcoin as the crypto of choice, Ethereum has lagged behind in terms of price. But the incredibly vast usage of its Blockchain makes Ethereum a potentially more valuable commodity for our future.
Can’t both be true? There is a fierce demand right now for NFTs as they’re the latest and hottest collectible asset. The popularity of cryptocurrencies and investing has definitely fueled the fire.
But so far NFTs are justifying their legitimacy with some massive price tags compared to their physical counterparts. Whether anything is a bubble or not is simple economics.
If the demand is there, then there will continue to be a supply until the demand disappears. People will continue to make NFTs until their perceived value begins to regress to a mean.
In other words, will NFTs continue to be worth millions of dollars? Probably not. But the inherent value in a certified and truly unique asset is difficult to quantify in real-life terms. The technology itself is valuable enough a vehicle to continue to make NFTs a part of our investing culture for the foreseeable future.
Rarity and authentication are always going to be two things that factor into how something is actually valued. The Ethereum Blockchain and the NFT stocks technology accomplish both of these characteristics. This is why it’s so appealing to both artists and collectors.
Is a three-second clip of an NBA slam dunk more valuable than pulling an autographed rookie card of your favorite player? Probably not, but the digital version can never be stolen, can never be damaged, and can never be counterfeited.
Maybe NBA Top Shots are not the best example, but legitimate pieces of art and music are being sold every day around the internet. Art fraud is a multi-billion dollar global industry. And artists may have just found their way of defending their work. Even if you don’t believe that NFTs will be a legitimate investment in the future, there’s no denying that the technology of the Blockchain is changing the way we view authenticity in everyday objects.