Should You "Invest" in NFTs?

Non-Fungible Tokens, or NFTs, have been making waves in the world of cryptocurrencies.

You’ve probably heard of people becoming overnight millionaires from the sale of NFTs, or you might even have some friends who flip NFTs with crazy returns (I’m talking five to twenty times profit).

On the flip side, you’ve also heard of numerous NFT hacks/scams, one of which saw a hacker stealing US$625 million from the largest NFT game, Axie Infinity.

If you’re wondering whether you should even touch NFTs, much less “invest” in them…

Here are the arguments for and against owning an NFT.

TL;DR: Should you “invest” in NFTs?

There are plenty of reasons to own an NFT. However, investing in an NFT at present is still considered speculative.

For the average investor, only put in money that you can afford to lose or avoid it completely.

What are NFTs?

Before we dive in, we have to address the elephant in the room:

What exactly are NFTs?

For the textbook answer, Investopedia defines an NFT as

Cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other.

Think of them as unique digital fingerprints that certifies you as the owner of the digital asset they are tied to.

These assets can be:

• Images (JPEGs)
• Music
• Videos, etc.

Even if anyone can download and copy a JPEG for example, the NFT on the blockchain tells the world that you are the rightful owner of the asset.

For a more in-depth guide to NFTs, check out our beginner’s guide to NFTs.

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before buying any assets. The writer may have a vested interest in the assets mentioned.

For: Owning an NFT

NFTs Give Anyone a Chance to Generate Wealth

With NFT marketplaces such as OpenSea, anyone from the average joe to Justin Bieber has the means to buy, sell or mint an NFT.

According to NonFungible, a whopping US$5 billion in profit was recorded in NFT trading in 2021.

For those with an eye for spotting potentially popular NFTs, flipping NFTs for profit could make you a LOT richer.

So there’s definitely an incentive for NFT traders and creators there.

Unlike the market for collectibles and limited edition goods, NFT marketplaces don’t have to deal with shipping costs and have access to a global market.

Think queueing up for limited edition sneakers and then selling them for profit.

But instead of selling only to Singaporeans, you can sell your stuff to anyone in the world, and you won’t have to pay for mailing.

For creators, NFTs are perfect as a medium for you to monetise your work.

Aside from the initial profit, you can also opt to receive royalties whenever a transaction on your NFT is made.

NFTs Provide an Opportunity to Join Exclusive Communities and Clubs

What do Eminem, Paris Hilton, Steve Aoki and Post Malone have in common?

Aside from being stars in their own right, all of them own at least one Bored Ape Yacht Club (BAYC) NFT!

So if you happen to be the proud owner of a BAYC NFT, you will not only have the bragging rights to say that you own an ultra popular NFT…

But you also have the chance to rub shoulders with celebrities at in-person BAYC parties and events!

While not all of us are that rich to own a BAYC NFT (it costs a minimum of ~S$4200), owning other NFT projects gives you a great opportunity to make friends and network with people in the NFT space.

You Just Like NFTs

Some people buy NFTs simply based on the fact that they like it.

Currently, there are many NFT projects that feature awesome artworks that simply look cool to own.

Other projects are backed by celebrities, memes, or just plain hype could also be reasons why you would want to own an NFT.

Against: Owning an NFT

Vulnerable to Hacks and Scams

With such a huge sum of money in the industry, hackers and scammers are always finding new ways to steal your NFTs.

Just last February, US$1.7 million worth of NFTs were stolen from OpenSea users and before that, hackers stole US$2.2 million in NFTs from New York art collector, Todd Kramer.

As such, it is imperative to learn how to avoid NFT scams, and store your NFTs in cold wallets to reduce the risks of you losing them.

The Question of Value and Utility

Detractors may argue that NFTs are only as valuable as what someone else is willing to pay.

Unlike stocks investing, NFTs have generally no intrinsic value and the value of an NFT is usually based on how strong a brand it has.

Many successful NFT projects have grown so big because of marketing and hype surrounding it, much like the hype surrounding a limited edition drop of a sneaker model, which causes prices to skyrocket.

Utility wise, aside from joining a community, having ownership of the digital asset as certified by the blockchain and potentially earning profits…

It’s really similar to buying physical artworks where you can display it in your home for others to see.

Or in the case of an NFT tied to a JPEG, you can display it in your digital home page or collection for others to marvel at.

Are NFTs an Investment for the Average Investor?

The NFT world at present may seem like just a bunch of crypto bros flipping JPEGs online for money.

And I think it’s safe to say that right now, NFTs are clearly a speculative asset.

So unless you have the know-how or have experience flipping limited edition sneakers, trading cards, artworks and other collectibles…

It’s probably better to stay away completely or buy NFTs with money that you can afford to lose.

All in all, NFTs are not an investment and should not get in the way of other financial priorities like having an emergency fund or paying off debt.