NFTs, or Non Fungible Tokens in English, are a new type of crypto assets that will experience significant success in 2021. According to CoinMarketCap, the NFT market will represent the equivalent of more than 12 billion in the middle. in 2022 dollars and more than 2 million NFTs are believed to have been sold at the time of writing. The Crypto NFT market, which represents at least 1% of the total cryptocurrency market, remains a fast -paced market with many opportunities for profit or loss.
Even if NFTs are primarily centered around the art market, their application goes beyond the artistic realm. Today, more and more institutions, individuals and companies are using NFTs as part of their business.
Decryption is how NFT Crypto works and the best ways to invest in crypto currency.
NFT Crypto: how does it work?
An NFT can be considered an indivisible cryptocurrency, unlike classic cryptocurrencies like Bitcoin, Ethereum, and others. In this way, the NFTs cannot be replaced, as they are not interchangeable.
NFTs are often associated with a song, a video, works of art or even books… So we can describe an NFT as a digital file associated with a document that is actually guaranteed by the Blockchain. So an NFT can be seen as a digital property contract.
Technically, the first recorded NFT was made… in 2014! Even if the term NFT was not used at the time, the technology was leveraged by actor Kevin McCoy in collaboration with entrepreneur Anil Dash on his work “Quantum” representing an animated colored octagon. NFT was sold in 2021 for nearly $ 1.5 million to Sotheby’s.
An NFT is made by “minting”. It is said to have been made in France. Mining makes it possible to create a crypto-graphic token that is associated with a link to a digital file in the Blockchain. The crypto-graphic token may contain a lot of information related to the author of the NFT, and so on.
Crypto NFTs are thus made from existing Blockchains. The most popular is the Ethereum Blockchain, but others can also be used, such as Solana or Binance for example. Once the NFT is made or produced, it can be bought or sold on exchanges.
Where to buy NFT Crypto?
The most popular markets for buying NFTs are OpenSea, Rarible, SuperRare, Nifty Gateway and Binance NFT.
While some specialize in certain types of Crypto NFTs such as SuperRare in the digital art market, others are more common such as OpenSea and Rarible.
Thus it is possible to get NFTs on these trading platforms through their applications or their websites. To do this, you must first connect your crypto wallet held by financial intermediaries such as Coinhouse to the platform in order to cash or settle your NFT Crypto transactions.
However, there are transaction fees that vary depending on the Blockchain where the NFT is made, the crypto currency you pay for with your NFT Crypto or the exchange platform you use. In some cases, the creator of a Crypto NFT may also decide to apply a fee for each sale to be shared between the creator and the platform.
It is also possible to create your own NFTs directly in some popular NFT Crypto markets.
Buying Crypto NFTs: in what cryptocurrency?
To date, the most popular Blockchain for creating and exchanging NFTs remains the Ethereum Blockchain. Most NFT Crypto payments are made through Ethereum (ETH).
However, transactions can also be made with Binance USD (Binance’s stablecoin), with BNB (Binance Coin, Binance’s crypto-currency) or with SOL (Solana) for example.
Therefore, purchasing an NFT on an exchange platform often requires keeping these crypto currencies in his or her digital wallet.
Also, the fact that most NFT Crypto purchases are made in cryptocurrencies like Ethereum adds to the price volatility in this market.
Ethereum, which cost just over € 4,000 in December 2021, was worth € 1,700 at the time of writing this article (June 2022): a loss of 60% in 6 months!
It is therefore necessary for the NFT enthusiast to consider the price change of the cryptocurrencies in which Crypto NFTs are sold.
For example, the purchase of an NFT in December 2021 costing 0.5 ETH (approximately € 2,000), and whose value could double to 1 ETH in June 2022 (€ 1,700), may still see the investment being expressed the euro to have melted by 15% (-€ 300) despite the increase in the price of NFT.
This exchange rate phenomenon is important to consider when buying NFT Crypto. In fact, an up or down movement of the cryptocurrency used for the purchase of NFTs could increase the losses or gains expressed in the fiat currency.
To significantly limit exchange risk, you can use stablecoins when you purchase NFT Crypto. With the Binance NFT platform, for example, you can buy NFTs with USD stablecoins.
What are the differences between NFT and crypto currencies?
As we explained, NFTs can be considered special tokens. In a simplified way, we can consider that each NFT is a unique indicator that is unusable and that guarantees the authenticity and moral integrity of the work in which it is involved. On the other hand, cryptocurrencies, such as Ethereum or Bitcoin, can be divided into an infinite number of decimals.
In other words, traditional cryptocurrencies are more fungible (divisible), while NFT is not.
The indivisible nature of traditional crypto currencies in theory allows an infinite number of users to hold these cryptos. In the case of NFTs, uniqueness does not allow many people to own the same trait, which explains the basic property of NFTs: “disadvantage”.
Finally, NFTs and cryptocurrencies differ in their use.
NFTs are a way to guarantee the reliability of a document, photograph, work, and so on. Thus, NFTs are associated with a more or less concrete work or object and have a visual and unique identity in many fields (artistic, literary or even sometimes scientific with NFTs in images taken from of microscopes, etc.).
Finally, the two categories are distinguished by their democratization. NFTs represent only 1% of the total cryptocurrency market and require the initial use of cryptocurrencies to be made and sold.
Why Invest in Crypto NFTs?
Clearly, one of the main motivations for NFT Crypto investors remains the promise of possible huge profits through speculation.
However, the first major market correction in 2022 seems to allow for a change in the market and to some extent limit the constant excessive speculation.
To date, the two most popular NFT collections are the CryptoPunks and Bored Ape Yacht Club collections.
The Bored Ape Yacht Club collection includes 10,000 NFTs depicting monkeys. The average historical value of a Bored Ape NFT is estimated at 22.5 ETH for an estimated capitalization of more than $ 900 million. On the other hand, the CryptoPunks collection, which consists of 10,000 units representing character profiles, will have an average price of 45 ETH by mid -2022.
Despite this important assumption, many investors may be interested in NFTs solely for artistic reasons by acting as collectors.
In addition, some unique projects aimed at linking NFTs and works of art through a museum, for example, have recently been developed. This is the case of the Private Museum project which offers an offering of works of art from various artists in the form of NFT and accessible on the Metaverse. NFTs may also have a more uninteresting dimension and a purpose close to the traditional art market.
Investing in Crypto NFTs Is Not Safe
However, NFTs are risk -free!
The main risk is the partial or total loss of your investments. In fact, the NFT market is a very volatile market with risks of many sudden fluctuations in the price of NFTs and the price of the cryptocurrencies used to exchange them. In addition, the NFT market has experienced a significant slowdown since the start of 2022.
Another significant risk is the presence of fakes or imitations. The risk of copyright theft remains high in the creation of NFTs and many “creators” become famous artists. For NFTs backed by real works, there may be a decorrelation between the price of the real work and the NFT that represents it.
Finally, Crypto NFTs can be linked to scams and price manipulation. Some cases of “wash trading” in NFT Crypto are well known. In this situation, the creator of the NFT artificially inflates the price of the NFT by successively selling his NFT between his own accounts, prompting other agents to buy the NFT at a price other than his price. market.
Photo source: Freepik
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