NFTs: Urgent Questions, Shocking Answers
I’ve gotten so many questions about NFTs in recent days, it’s driving me bananas. 😃
But I love answering them. So, I don’t really mind.
Nor am I surprised by the flood of inquiries.
After all, select NFTs (non-fungible token assets) have risen more rapidly than nearly all other investments on the planet.
So, let me do my best to address some of the most urgent questions here, and then I’ll leave the rest for another time and place.
First, though, a word of warning: All markets are subject to ups and downs, and that’s also true for NFTs. And since their history is short, cyclical patterns are not yet clear.
Still, recent gains have been mind-boggling, and that alone has generated a flood of questions:
Q: Are NFTs cryptocurrencies? If so, how do they fit into crypto history?
A: The Bitcoin revolution challenged government-controlled money. Decentralized finance (DeFi) came next and has disrupted banking.
And now, NFTs have launched a new kind of revolution: In just a short period of time, they have utterly transformed the way assets could be owned.
All three of these revolutions have one thing in common: They’re based on blockchain technology, which provides a unique combination of transparency and security.
But we believe calling NFTs “cryptocurrencies” is a stretch. Narrowly defined, a cryptocurrency is a medium of exchange. But NFTs are almost never used for that purpose.
Q: What was the single biggest NFT sale so far?
A: The Beeple NFT sale for $69 million in 2021.
Q: How do NFTs differ from common stocks?
A: Common stocks are fungible. In other words, they’re issued in large quantities, and every share is identical to every other in the same class.
In contrast, as the name implies, non-fungible tokens (NFTs) are primarily unique assets that are not exchangeable.
They’re more akin to unique real estate properties or collectibles.
Q: If each NFT is unique, how can more than one person buy it?
A: First of all, not all NFTs are unique. Often, many identical NFTs are issued.
Second, one NFT may represent a fractional share in an asset.
Most important, NFTs are almost invariably issued as part of a collection. And that collection could include thousands of similar NFTs.
Typically, all — or nearly all — NFTs in a particular collection appreciate in tandem. This is the main factor that allows for participation by an exclusive community of investors.
Q: Is the NFT world limited mostly to digital art?
A: That’s how it got started. But all the signs we see point to even bigger opportunities ahead in industries that go far beyond art, including not only music and film but also high-tech industries, medical science, real estate and more.
Q: Can you lose money in NFTs?
A: Of course. Like any asset, if you buy high and sell low, you can lose money. However, if you take this sector seriously and do the research, you can pick up inexpensive-but-promising NFTs and accumulate them with the goal of building generational wealth.
Q: How might NFTs affect our daily life in the future?
A: NFTs are already affecting our daily life in the present. They enable nearly anyone — whether experts or laymen, rich or poor, adults or children — to digitize assets or create new ones, lock down their ownership rights in those assets and then offer them for sale in a global marketplace.
They enable corporations and organizations of all kinds to do the same.
And they enable nearly everyone — investors, savers, collectors or anyone with a bit of money in their wallet — to buy those assets.
Q: Have any large investors or companies gotten involved in NFTs?
A: For sure. Among wealth investors, Mark Cuban says the upside is “truly unlimited.” He’s revealed that he’s “betting big.”
Andreessen Horowitz, a venture capital (VC) firm that was an early backer of the internet, has staked $100 million on NFTs, saying it’s like “the early internet days all over.”
The CEO of Coinbase declares it’s “bigger than Bitcoin and cryptos.”
Twitter has jumped into the NFT world by issuing 140 different NFTs and giving them away to its users. Now, many of those have sold for $200,000 or more.
The NBA, NFL, NASCAR and nearly all major sports associations are also starting to jump on the NFT train.
Q: Is the birth of NFTs comparable to the birth of Bitcoin years ago?
A: In terms of their wealth-building power, we believe so. We see some examples of similar, or even better, gains than those made in Bitcoin. And in terms of the technology, they also have something in common: blockchain.
But that’s where we believe the similarities end. Here are some critical differences:
1. Bitcoin is fungible. In other words, all the Bitcoin ever minted — or to be minted — is identical. NFTs, by definition, are non-fungible tokens.
2. In its early days, Bitcoin was an esoteric asset, difficult for average people to buy. Even to this day, Bitcoin is off the radar for most people. NFTs, in contrast, have quickly gained widespread popularity, driven not only by art, but by popular celebrities and athletes.
3. Bitcoin’s primary use case today is a store of value, similar to gold. That’s why it’s often called “digital gold” or “gold 2.0.” But NFTs have the potential to impact almost any kind of asset or property.
4. Early Bitcoin investors had a big advantage over new Bitcoin investors today. They were pioneers. Long before most people knew what Bitcoin was, they saw its potential. Today, the evidence we see in the world of NFTs tells us there’s a more level playing field.
Instead of existing in a murky universe that few can fathom, NFTs are hiding in plain sight. Instead of an esoteric asset that’s difficult to access, NFTs are almost as easy to buy as an item on Amazon or eBay.
5. There is only one Bitcoin. But there are hundreds of thousands, if not millions, of different NFTs available for purchase. Many of them can be bought for a few hundred dollars each. Many more can be bought for only $5 to $10, or even for pennies. And there are countless examples of NFTs that were free at birth but are now worth tens of thousands of dollars and sometimes much more.
Q: What is the best investment strategy for NFTs?
A: The NFT marketplace has grown quickly into a diverse and actively traded arena where various trading tactics are possible.
However, our experience tells us the best strategy is to use money you can afford to lose. Then aim for generational wealth building — in other words, to hold for the long term and even build a store of wealth that could transcend generations.
Q: Most NFTs are strictly computer codes. They don’t even exist in the physical world. How could they possibly have so much value?
A: That’s what people said about Bitcoin, Ethereum and every one of the nearly 100 cryptos that now have $1 billion or more in market cap.
And that’s what they also said about NFTs, which can be even more valuable.
For example, one single NFT recently sold for $69 million. That’s more than the total market cap of some of the most famous cryptos, such as Dogecoin ($23 million market cap), Polkadot ($26 million), Ripple’s XRP ($38 million) and even Cardano ($43 million).
Q: How much money have people actually made in NFTs?
A: Like any kind of investment, making money in NFTs is not a sure bet. But there are also many success stories.
Consider Nathan, for example, a 27-year-old artist who had only $2,000 in his bank account. Now he’s a millionaire in just one year’s time.
And 21-year-old Jonathan Wolfe is another example. He had no discernible income. But in just five months, he earned $1.3 million with NFTs.
But if you think that’s a lot of money for a young person, look at Victor Langlois, age 18. Esquire reports that he sold $18 million worth of NFTs in just one year.
Nyla Hayes is even younger. But Business Insider reports that she made about $6 million in NFTs in eight months. And she’s just 12 years old.
These are young artists. They created the NFTs. And then they sold them. But to make money in NFTs, you don’t have to be an artist, and you definitely don’t have to be young.
These are just a small fraction of the great questions from readers we’ve received. And I have to assume that you have some as well.
So, I suggest you watch our just-released NFT Investor Summit.
I think it addresses nearly all your most pressing questions.
Good luck and God bless!
Martin
