NFT or Non-Fungible Tokens could become the panacea of the investment world … or a speculation bubble about to burst. This is our verdict.
NFT is the acronym for the new investment trend . In the last few weeks, you may have seen some news about the sale of digital files related to NFT: Non-Fungible Tokens or Non-Fungible Tokens (NFT), in English. In March alone, a virtual sticker by Cristiano Ronaldo was sold for $ 289,920 on the Sorare platform and a digital painting by artist Beeple for $ 69 million. Each file has a NFT that verifies its authenticity.
We were used to seeing huge amounts for tangible collectibles , like Paul Newman’s Rolex Daytona or four suits worn by the Beatles. However, it is surprising to see these prices for digital files that can be copied and played endless times.
Beeple’s monumental painting, called Every Day: The First 5,000 Days , can be viewed on Google, or the same goes for the NFT- certified video of the song about NFT that Elon Musk posted on Twitter . A bidder gave him $ 1 million, but he rejected the offer.
Using the blockchain , NFT records the entire life of the file including when it was created, by whom, and the name of the current owner. Thus, an element of scarcity is added that increases the value of a ‘non-fungible’ document, that is, it cannot be replaced by a similar one, but by a different one.
In other words, a bitcoin is fungible because it can be replaced by another bitcoin, but a Cristiano Ronaldo digital trading card in Sorare’s fantasy league is not fungible because there is only one, not two. There is only one original file of the song composed by Musk or Beeple’s painting. It’s like the reproduction of some famous work: anyone can have a copy, but only one owns the original.
You can search for Las Meninas on the internet and print it on a sheet, but it will never have the value of the Velázquez original. NFT technology works in a similar way by making original content unique , which is great for digital artists because they can authenticate their work in the endless copy-paste world of the internet. The use of the blockchain , in addition, offers a high degree of transparency because it allows reviewing the history of the file and identifying the owner, according to the defenders of this technology.
NFT: facing a new bubble?
Are we facing a bubble or on the verge of a new technology that will revolutionize the creation of online content? It is very difficult to know when a market is in a bubble process . And even if we identify it, it is even more difficult to know when it will explode. “The market can remain irrational longer than you can remain solvent,” says one of the most famous phrases of the influential British economist John Maynard Keynes.
Is it logical that suddenly there are people paying up to $ 115,000 to collect a virtual kitten for the game CryptoKitties or offering $ 2.5 million for the first tweet in history? Seen from the outside, many analysts would say that we are facing a speculative bubble , as is the case of James Surowiecki, financial columnist for The New Yorker.
In a recent article, he argues that we are facing a bubble about to burst because the demand for these digital files is being driven by money and speculation , rather than by the desire to collect. “There is a big difference between the fashion for collecting NFT and others of the past: the frenzy to collect NFT is driven mainly by money and the hope of getting rich, ” says Surowiecki.
People have always had an interest in collecting objects , such as Star Wars figurines , Magic cards or Lego toys . But this process of collecting and preserving objects is – generally – motivated by the desire to collect and not to speculate. “With NFTs, however, it is impossible to separate the boom in collecting from the boom in speculation, ” writes Surowiecki.
NFT for early adopters
Meanwhile, there are a lot of people who are making money from NFTs. There are academic studies that suggest that collecting can be a very profitable investment if it is entered early. And NFTs are a perfect technology for early adopters of growing platforms like Sorare, a kind of Comunio in which players like Piqué or Griezmann have invested . If you are one of the first to start using Sorare, you probably have player cards that can now be sold in bulk with a NFT, for example.
NFT is proving very useful for content creators as well . Until now, if someone created a video or an image that went viral, it was very difficult to prove the authorship and legal ownership of the work. Thanks to this technology, ‘crypto artists’ can develop their creations and put them on sale in online stores such as OpenSea or Makersplace , among others.
One of the most sought-after artists on Makersplace is the Spanish Javier Arrés, whose creations are sold at auctions for thousands of dollars. There is also the Cent platform , where tweets with NFT are sold. Among other historical messages is that tweet with the photo of the food served at Fyre Festival , that ill-fated 2017 festival in the Caribbean that turned out to be a scam. The tweet is being auctioned and there is an offer to purchase it for $ 450,000.
Speculative bubble or opportunity to get rich?
The answer will depend on the conclusions that each one draws with their own analysis. In any case, we take the opportunity to rescue five of GQ’s nineteen tips to invest successfully that can help you in your decision:
- Invest in businesses that you understand.
- ‘Cold mind’: Investment opportunities are always going to appear where you warm up and think ‘it’s now or never’. Control your emotions.
- Don’t follow the flock: Don’t follow what others are doing and look for opportunities that are flying under the radar.
- Beware of cryptocurrencies: It is an unregulated market in most countries. The interesting thing about cryptocurrencies is the technology: the blockchain .
- There is no safe investment .