The pros and cons of NFT investing in 2024

Non-fungible tokens (NFTs) are exploding in popularity, making headlines, with digital art and collectibles worth millions of dollars. But what exactly are NFTs? Like any investment, NFT investing has its pros and cons. This guide will explore both aspects to help you understand whether NFTs are right for you.

The market keeps rising: according to Crypto Grand Slamthe global NFT market has reached an astonishing $65.4 billion Total sales (as of this writing), analysts predict will continue to grow.

focus:

1. NFT (non-fungible token) Is a unique digital asset verified using blockchain technology, each NFT is unique and digitally signed.
2. The advantages of investing in NFTs are potentially high returns, clear record of ownership, accessibility, support for creators, and more.
3. Disadvantages of NFT investing are market volatility, legal and regulatory uncertainty, technology risks, lower liquidity, and higher transaction fees.

Advantages and Disadvantages of Investing in NFTs

Advantages of NFT investing explained

• Provable ownership and authenticity: Leveraging blockchain technology, NFTs provide a clear and indisputable record of ownership. This helps verify the authenticity and ownership of digital assets. For example, platforms like NBA Top Shot ensure that every highlight sold is original and cannot be copied, giving collectors verifiable ownership of unique digital moments. This clear record of ownership adds value and trust to the transaction, as buyers can be sure they are purchasing an authentic product. It is difficult for traditional digital assets to achieve this level of transparency and security. Copying and piracy are common problems with traditional digital assets.
• High return potential: NFTs can provide extremely high returns on investment. For example, a digital artwork by Beeple sold for a staggering $69 million in 2021, making global headlines. Likewise, CryptoPunks initially gave away free items, and now some of their NFTs are selling for over $1 million. Early investors in these NFTs have reaped huge gains, with returns many times their original investment. This potential for huge profits attracts many investors looking for huge gains. Additionally, high demand for popular NFTs can further drive up their value, creating opportunities for quick profits if you time your sale right.
• Exclusive benefits and community: Owning NFT is more than just owning digital assets. Some programs offer exclusive access to online communities, events, and even physical merchandise. This fosters a sense of belonging and adds value to the NFT ownership experience.
• Accessibility and Inclusion: Anyone with an internet connection and a digital wallet can access the entire NFT ecosystem. You don’t need to be a millionaire or live in a financial center to participate. Platforms such as OpenSea and Rarible allow users from around the world to buy, sell and trade NFTs, making them a more inclusive form of investment.
• democratize ownership: NFTs allow anyone to own a small portion of a valuable digital asset, even with limited resources. Fractional ownership allows individuals to purchase a portion of an NFT, making it easier to acquire high-value collectibles.
• Diversity: NFTs cover a wide range of assets, from digital art and music to virtual real estate and in-game items. This diversity allows investors to diversify their portfolios and invest in various sectors of the digital economy. For example, you could own a piece of virtual land in Decentraland or a rare piece of digital art created by a famous artist. You can also play games using NFTs on the Axie Infinity Marketplace.
• Support creators: Through NFT investing, you can directly support artists and creators. Platforms like Foundation and SuperRare allow artists to sell their work directly to collectors, often collecting royalties on secondary sales. This means that artists can earn more from their work than traditional methods, where middlemen such as galleries and record labels take a large portion of the profits.

Detailed Disadvantages of NFT Investing

• market fluctuations: The NFT market is highly volatile, and prices may fluctuate significantly in the short term. This can result in significant losses if the market moves against you. For example, NFT market sales dropped by nearly 70% from 2021 to the end of 2022, which illustrates the unpredictability of this market.

From 2021 to 2022, the NFT market fell by more than 70%.

• Legal and Regulatory Issues: NFT investment rules are still being developed, which leaves many questions unanswered. This applies especially to issues like who actually owns the stuff (intellectual property rights), how much tax you have to pay on it, and whether it counts as an investment (securities regulations). These legal gray areas can create risks for investors, as regulations can sometimes change, disrupting the value and even legality of NFTs. For example, if the government decides to classify certain NFTs as securities, they may be subject to strict regulations, affecting their marketability and value.
• High transaction fees: Transaction fees (called “gas fees”) can be prohibitively high, especially for Ethereum NFT minting. These fees can fluctuate based on network demand, resulting in high transaction costs. High fees can eat into profits, especially on smaller transactions. For example, during periods of high demand, gas fees can run into hundreds of dollars per transaction, making it costly to buy, sell, or transfer NFTs. This can be a significant hurdle for small investors or those looking to trade frequently.
• illiquidity: NFTs can be more difficult to sell than traditional assets like stocks or bonds. The market for a particular NFT may be limited, making it difficult to find a buyer at the price you want when you’re ready to cash out.
• technology risk: Finally, NFT investing involves technical risks, such as hacking and loss of access. For example, if you lose access to your digital wallet, you may lose your NFTs permanently. In addition, smart contract vulnerabilities may be exploited, resulting in financial losses. During this period NFT Bull Market In 2021, several high-profile hacks resulted in the theft of millions of dollars worth of NFTs.

Are NFTs still alive in 2024?

Yes, NFTs still have significant value. However, the market is currently in bearish mode. According to CryptoSlam, NFT sales in June 2024 were approximately $450 million, which is very low compared to the monthly sales peak of around $6 billion in January 2022.

This decline indicates a market slowdown, but NFTs remain a relevant and active part of the digital asset space. Despite the decline in sales, the NFT market continues to attract artists, collectors, and investors and maintain its place in the cryptocurrency ecosystem.

How to invest in NFTs?

1. Set up digital wallet: To purchase NFT, you need a digital NFT wallet to store ETH or other digital assets. Popular wallets include MetamaskCoinbase Wallet and Trust Wallet.
2. Buy cryptocurrency: NFTs are typically purchased with cryptocurrencies such as Ethereum (ETH). Use a cryptocurrency exchange, e.g. Bybit, Binance or Coinbase to buy cryptocurrencies. Transfer cryptocurrencies to your digital wallet.
3. choose one NFT market: There are multiple NFT markets for buying and selling digital artwork. Some of the largest NFT marketplaces include OpenSea, Nifty Gateway, and Blur.io. Create your digital wallet and connect it to the market.
4. Explore and choose NFTs: Browse the market to find NFTs that interest you. Check out different NFT collections or categories, such as art, music, games, and virtual real estate. Research NFT creators, rarity, and communities.
5. Make a purchase: Once you find the NFT you want, click on it to see the price and details. Follow the prompts to complete your purchase using your digital wallet. Make sure you have enough cryptocurrency to pay for the price and gas.
6. Safely store your NFTs: After purchase, your NFT will be stored in your digital wallet. Secure your wallet with a strong password and enable two-factor authentication. You can sell it later.

The future of NFT investing

Despite the recent market downturn, the future of NFT investing looks promising. Innovations in blockchain technology continue to expand the potential uses and applications of NFTs. For example, the integration of NFTs in gaming, digital art, and virtual real estate has shown considerable growth.

according to a report politicianThe NFT market is expected to grow by 9.10% by 2028, driven by increased adoption and new use cases. In addition, more and more brands and celebrities are entering the NFT field, creating digital assets and experiences for their audiences. This trend is likely to continue, adding value and interest to the market.

in conclusion

NFT investing offers exciting opportunities and high potential returns, but it also comes with significant risks. From market volatility and low liquidity to legal uncertainty and high transaction fees, carefully weighing the pros and cons is crucial.

By understanding these factors, you can make a more informed decision about whether investing in NFTs meets your financial goals and risk tolerance.

Frequently Asked Questions

What are the risks of NFT investing?

Risks of investing in NFTs include market volatility, and prices may fluctuate significantly. Unlike stocks or bonds, NFTs are not highly liquid and rely heavily on market demand. Because the NFT market is relatively new and less regulated, there is also a risk of fraud or fraud. Finally, there are technical risks, such as the inability to access digital wallets or problems with the digital art smart contracts themselves.

Is investing in NFT profitable?

You can make a profit by investing in NFTs, but there is no guarantee of profit. Some NFTs sell for millions of dollars, such as Beeple’s digital artwork, which sold for $69 million. However, the market is highly speculative and many NFTs do not increase in value. Success depends on choosing the right NFT, timing and market trends. according to politicianThe average investment return for NFTs in 2024 is expected to be approximately $138.8, but it varies widely.

What is the best NFT investment strategy?

The best NFT investing strategies involve thorough research and diversification. Start by researching the different types of NFTs and understanding their value propositions. Diversify your investments into various NFT categories such as art, gaming, and virtual real estate to spread your risk. Follow market trends and join the NFT community to stay informed. Invest in NFTs from reputable creators or platforms to reduce the risk of fraud.