Breaking News
Black Friday SALE: Up to 54% off InvestingPro! Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Why I’d Never buy NFTs

Stock MarketsOct 13, 2021 18:15
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
Why I’d Never buy NFTs

Non-Fungible Tokens (NFTs) are all the rage these days.

Getting endless mentions on Twitter (NYSE:TWTR) and other social platforms, they have taken the world by storm.

For the uninitiated:

NFTs are the latest product of the blockchain universe. They are digital assets bought and sold on blockchains just like cryptocurrencies. They signify ownership in digital assets like images and Tweets. Ownership of an NFT doesn’t give you exclusive access to the asset the NFT signifies ownership of. However, it does give you a unique claim on the asset’s digital signature that nobody else in the world has.

Over the past year, we have seen NFTs sell for some extreme prices. Jack Dorsey’s NFT of his first-ever Tweet sold for $2.5 million; since then, other million-dollar NFTs have been sold, including one that went for $69.3 million.

These extreme prices being paid for NFTs have predictably set off a speculative frenzy. People on Twitter and other social platforms are creating and selling NFTs at a furious pace, trying to net one of the big million-dollar paydays. Some are also buying up NFTs trying to sell them to others at higher prices. It’s an interesting idea, but I’d never personally buy into this trend. Here’s why.

NFTs are illiquid The big problem with NFTs is that they aren’t liquid. You can’t just go on Coinbase (NASDAQ:COIN) and click “sell” and expect your NFT to sell. You have to actually find another individual who wants to buy it. Sure, there are platforms like OpenSea that allow you to buy and sell NFTs. But you have to hope that your auction goes well in order to turn a profit on an NFT. If nobody wants to buy it, your NFT will net you no profit.

Most big sales are from people with clout Another problem with NFTs is that you realistically need a large social media following to make big money selling them. Most NFTs that fetched huge sums of money have been associated with famous people like:

  • Jack Dorsey
  • Grimes.
  • CryptoPunks
  • Mike “Beepel” Winklemann.
All of these individuals and organizations are very well known with large social media followings. So it shouldn’t come as a surprise that they were able to sell NFTs for millions. They have audiences of millions to sell to, and some of the richest among their audience members are billionaires. This isn’t an advantage that just anybody has. If you aren’t a celebrity yourself, it would be unreasonable to think that you can replicate it.

What about crypto? Having established that I would never invest in NFTs, it’s time to talk about the closest asset that I would invest in:

Cryptocurrency.

I don’t own any crypto, but I’m not opposed to owning it in principle. If you look at the uses crypto is seeing in real- world businesses, in countries experiencing severe inflation, and elsewhere, it’s pretty clear that crypto is legit. So I’d probably buy some if I didn’t have stocks I was more interested in.

Another investment to consider is crypto mining stocks like HIVE Blockchain Technologies (TSXV:HIVE)(NASDAQ:HVBT). These are stocks that let you play crypto on the stock market. They mine and sell crypto for profit, rendering them effectively crypto pure-plays. In HIVE’s case, the currencies it mines are BTC and ETH, so its stock is like a bet on those coins. HIVE reportedly uses cold-climate data centres to reduce the cost of mining crypto.

Normally, crypto uses a lot of electricity. Part of that electricity cost is the cost of cooling the physical servers crypto is mined on. By housing its servers in places like Iceland and Sweden, HIVE aims to keep those costs to a minimum. Perhaps it’s one stock market play that crypto aficionados could consider if they wanted something more novel than crypto that’s less of a longshot than NFTs.

The post Why I’d Never buy NFTs appeared first on The Motley Fool Canada.

Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Twitter.

This Article Was First Published on The Motley Fool

Why I’d Never buy NFTs
 

Related Articles

My Top 4 Canadian Stock Picks for December 2021
My Top 4 Canadian Stock Picks for December 2021 By The Motley Fool - Nov 26, 2021

Canada reported its highest inflation in 18 years of 4.7% in October, as the world grapples with the energy crisis. The month of December could see energy prices peak as the United...

Canada Housing Is on Fire: 3 TSX Stocks to Buy Today
Canada Housing Is on Fire: 3 TSX Stocks to Buy Today By The Motley Fool - Nov 26, 2021

When this year started, I’d discussed why the Canada housing bull market was well positioned to press on due to strong fundamentals and favourable monetary policy. Canadian...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email