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Should I invest in non-fungible tokens?

29/06/2021

In the world of investing, cryptocurrency is one of the current hot topics. However, in 2020 – and in early 2021 – non-fungible tokens, or NFTs, have proven popular. In 2020, they accounted for a market worth $250 million, while February this year saw a spike in interest, with $19.9 million NFTs in volume sold on February 19th alone. 

But what exactly are NFTs, and are they an opportunity worth considering, or merely a passing fad? 

What are non-fungible tokens? 

A fungible asset is something tangible that can easily be interchanged – swapping a £10 note for two £5 notes, for example. A non-fungible asset, on the other hand, is unique, and can’t be interchanged with anything else. A tangible non-fungible asset could be a painting, for example: while prints or photographs of the painting can be made, there will only ever be one original. 

NFTs are digital tokens which can be used to represent the ownership of items that are unique. Each NFT can only have one owner at a time, and can include anything from digital artwork to Jack Dorsey’s first ever tweet on the Twitter platform. 

Are NFTs a good investment?

Recent sales show that there are NFTs commanding huge sales values – and they are certainly not a new creation. However, these blockchain-based assets have only recently truly come to the fore – and with mixed views amongst investors and industry experts. 

Former Christie’s auctioneer, Charles Allsopp, went as far as to say, “I think people who invest in it are slight mugs”, while Kim Caughey Forrest, Chief Investment Officer at Bokeh Capital Partners, says, “Right now, I don’t think anybody should invest in NFTs. It’s too new”. 

However, there is also some positivity amongst industry experts. Sylvia Jablonski writes for Forbes, “Time will tell, but with investments and use cases in the space booming and buyers clamoring for access, I believe we can expect to see NFT growth in the coming years”. She believes that the promise of true uniqueness that NFTs offer will be key to their success.

For many, buying NFTs will be like buying artwork or collectibles: investing in unique assets that hold some meaning to that individual. However, experts warn that interested parties should research thoroughly before they buy. With future resale values linked to demand rather than market indices, recouping that investment down the line could prove challenging.

 

“Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.”

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