Non-Fungible Tokens, NFTs for short, have been on a tear lately. Digital art has recently sold for seven figures, and Christie’s is auctioning work by the digital artist Beeple from February 25 to March 11.
Non-fungible tokens are an investment instrument, which interest is growing day by day. Right now, NFTs are in high demand. A good example of this high demand is the recent auctions. Cristie’s is selling NFTs for seven-figure sums, and digital artists are constantly putting up their lots for connoisseurs of contemporary art.
NFT platforms are showing record engagement rates, and revenues are growing with incredible speed. Just a few weeks ago, 3Lau raised more than $11.7 million from the sale of 33 unique items, including a limited-edition NFT collection. If a new instrument begins to bring in a stable profit, it sparks interest among financial specialists and professional investors. Let’s talk about it in more detail.
The Big Bang of the NFT Market
We’ve talked many times before (and I’m sure you know it yourself) about how NFTs work and what they actually are. Explaining their basic value is not the goal of our team. But we will tell you why the 1MillionNFTs team believes that the current market boom is really important for financial advisors and the entire wealth management industry.
Some professionals are consciously cutting off NFT as an investment channel for themselves, believing the current market growth is a bubble that will burst or deflate.
Indeed, there is a possibility that active parabolic growth will cool off and become less dynamic. But this is an idea and a direction of investment that certainly won’t fade away or go away in the next few years.
It is important to understand that NFTs have some advantages even over Bitcoin and Ethereum. The idea behind them is somewhat esoteric, and many investors and advisors have a hard time understanding and explaining them. NFT art and collectibles, on the other hand, are relatively easy to understand.
NFT-art has its technological roots in blockchain and DeFi, but is a perfect example of the verifiable scarcity that bitcoin preaches.
Experienced investors realize this. The idea is that there is one or only a few of these items or collectibles — and you can own one of them. That’s why we talk about how every holder can Stake a Place in NFT-history.
Scarcity not only promotes understanding and acceptance of cryptocurrencies and digital assets in general. Investors are also learning how the deficit is tested and constrained, which promotes DeFi adoption.
That said, despite scarcity, the entry threshold into the NFT market is quite low. For example, each cell on our board is priced from 1MIL. Just look at the current rate and assess affordability.
Statistics show that Millennial and Generation X investors are interested in alternative investments such as art, real estate, and cryptocurrencies.
However, when they tried to invest in real estate, private equity, or hedge funds, they were rejected due to the need for accreditation or illiquidity.
The younger generation is tired of the restrictions associated with classic investing, and the crypto market has become an outlet for them, a new opportunity.
NFT makes it easy for them to choose to place some of their funds in an area in which they know just as much, if not more than their advisors.
And a more mature generation of advisors can diversify their portfolios with new assets and make their investment experience even more rewarding.
Both of these categories of professionals can invest in art and collectible NFTs, and more importantly, understand and manage the market. They do not need to be accredited, and such assets can be resold and even leased. By the way, we are currently developing such an opportunity for our marketplace.
Connection with a financial advisor
In the past, if a client had an investment in art or collectible postage stamps, valuing the asset was a challenge. Also, the ability to liquidate investments quickly and easily meant that they rarely made it into a financial plan. As a result, such investments were only effective in the very long term.
The consultant and the client could not always include collectibles in discussions about cash flow needs, emergency funds, etc.
Now, with the ability to work with the NFT market (which is more flexible), advisors will be able to act many times more efficiently, and investment portfolios with these collectibles will be easier to work through in the short term.
For example, if a client needs finances to buy a car, renovate a house or go to college, and the rest of the portfolio is in deficit, it makes sense to turn to valuable NFTs for cash. You can’t sell a Renoir painting or a collectible Hermes bag here and now without a loss. It will be a longer and more complicated process.
The NFT market is a magical opportunity to be an active investor who doesn’t depend on appraisers and auctions. You can be 100% free to invest and make a profit.
Going beyond art and collectibles
NFTs are going to go far beyond simply art and collectibles. They will represent real estate, music and movie royalties, cash flows and private investments. Investors who are looking for even more non-correlated assets can more easily add any NFT-based investment to a portfolio.
In addition, since the value is verifiable, advisors may more easily be able to include the value in AUM calculations.
The DeFi nature of NFTs also makes them available as collateral for borrowing. This frees up more cash flow options for investors, which advisors will need to understand as most investments do not provide a readily accessible borrowing option.
Again, when looking for cash flow, borrowing against NFTs — art, collectibles, real estate, or income streams — provides another avenue. It also potentially changes the risk profile of NFTs and alternatives, as there is a chance to derive cash from the investment.
While most in the financial services industry have been slow and reluctant to adopt and recommend digital assets, the market has shown that investors are interested in NFT art and collectibles.
As a result, advisors would be wise to look at this growth trend as much more than just a short-term speculative bubble, but more as a sign of a new asset class to learn and understand.
We sincerely hope that this material has helped our community and those who are still thinking about investing in NFT to make the right decision. The NFT market is a unique opportunity to combine art, investment, and maximum flexibility.
And don’t forget the most important thing: you can stake your place in NFT history!