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There have been a series of headline-making investments in ‘non-fungible tokens’ (NFTs). In this new trend, in which even established auction houses have also joined in, astronomical sums have been paid for a JPG file, a video clip or a tweet. That can make sense as (speculative) investment as long as the object’s rarity is established. The trend is too young to say if it will emerge as a mature market, or if it will prove to be a mere bubble.
Mike Winkelmann ‘Beeple’, a digital artist, sold a JPG collage on Christie’s for $69.3 million this month (image above), followed by another for $6 million. Last week, Twitter boss Jack Dorsey sold his first tweet [“just setting up my twttr”, March 2006: https://twitter.com/jack/status/1367990471759306752] at a price equivalent of $2.9 million. Last month, an NBA Top Shot video clip of a LeBron James dunk sold for $208,000. A token based on a New York Times column about, well, NFTs went for equivalent of more than $500,000.
Latest NFT deals:
https://www.nytimes.com/2021/03/30/arts/design/nft-bubble.html
All these works are freely available in public domain, but on purchase the investor gets a blockchain-certified signature, giving them the unique right to sell it again (hoping it will gain in price). In a way, NFTs are like artworks of the digital age, and just as paintings do not have intrinsic monetary worth but gain market value given their rarity, so can these digital artefacts. Decades later, Dorsey’s first tweet may have a far higher value.
That, however, requires the market to sustain for that long. Experts suspect this is only a collective hysteria, and a fancy way of parking extra money. Enough investors or speculators have to participate in the NFT market for years to make it a feasible and long-term option. The risk factor is high as there is no regulation as yet of the market either (though such markets rarely boast of an authorized regulator). Moreover, such investments are often made in cryptocurrencies, and the two markets are likely to boom or bust together.
For information on other NFT sales and market analysis:
https://www.reuters.com/article/us-retail-trading-nfts-insight-idUSKCN2AT1HG?utm_source=pocket-newtab-intl-en
NFT explained:
https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq
https://www.npr.org/2021/03/05/974089381/whats-an-nft-and-why-are-people-paying-millions-to-buy-them
On risks:
https://seths.blog/2021/03/nfts-are-a-dangerous-trap/