The Market Opportunities in NFT Investments: A Detailed Overview of the Industry & Developing Trends
The crypto ecosystem is perhaps the fastest-evolving niche in the emerging tech space. While Bitcoin remains the dominant crypto asset, this industry has given rise to other types of digital assets such as non-fungible tokens (NFTs). These digital collectibles are gradually defining the future of the Internet, with more people coming to terms with the possibility of existing in a metaverse.
Ideally, the metaverse is an Internet iteration where digital collectibles represent real-world items, allowing users to exist in a virtual world. This concept’s popularity has been fueled by the rise of NFTs, which are designed as indistinguishable digital assets. As such, NFTs have become a fundamental part of the metaverse, featuring notable integrations with the gaming and entertainment industries.
Today, the NFT market is among the most vibrant crypto niches. Beeple’s ‘Everydays – The First 5000 Days’ artwork was the first NFT collection to hit record-breaking sales following a $69 million bid in an auction hosted by Christie’s back in March. Since then, the NFT market has been a beehive of activities, with more digital collectibles being minted and sold across NFT marketplaces like OpenSea and Rarible.
So, how can one get a piece of the NFT cake? There are multiple angles to invest in this market; some are more lucrative than others, although they carry a significantly higher risk. The next section of this article will highlight the fundamental areas where investors can score big in the NFT market. However, it is noteworthy that crypto is generally a risky market, and so are NFTs.
1. Purchasing Famous Digital Collectibles
One of the ways to invest in the NFT market is by buying famous NFT works such as CryptoPunks or the Bored Ape Yacht Club (BAYC) monkeys. The former is a pioneer NFT collection that comprises 10,000 punks; these pixelated avatars were randomly generated on the Ethereum blockchain back in 2017 and have been going for a dime in recent months.
Visa is among the corporations that own a CryptoPunk, which it bought for 50 ETH (Roughly $165,000 at the time of purchase). As for the pricing, these NFT collectibles have a floor price that dictates their value. This means that prospective owners have to bid higher than the floor price to increase their chances of purchasing a digital punk or other collectibles.
Some of the NFT marketplaces where newbies and veterans can purchase digital collectibles include Rarible, OpenSea, Mintable and Nifty Gateway. One will require a digital wallet such as Metamask, given that these platforms are built on blockchain networks, primarily the Ethereum blockchain.
2. Play-to-Earn NFT Games
Play-to-earn games are another way to become part of the NFT ecosystem while earning a passive income. This new gaming paradigm has been the talk of the crypto community following the debut of popular NFT games such as Axie Infinity. The game hit record highs in Q3, surpassing 1.5 million users, according to a report by DappRadar. Additionally, Axie Infinity recorded over $776 million in transaction volume to challenge major blockchain networks, including Bitcoin and Binance Smart Chain (BSC).
So, what’s the play for prospective investors? NFT games such as Axie Infinity feature a digital metaverse where the in-game items can be traded for other collectibles, crypto assets or fiat currencies. For instance, the Axie Infinity game gained much traction across the Philippines and Thailand, where some players are making a living just by gaming.
The concept is pretty straightforward; players collect, raise and battle fantasy creatures dubbed Axies. These fantasy creatures can be traded across various NFT marketplaces, depending on the underlying value proposition in the metaverse. Axie Infinity gamers are also rewarded with Smooth Love Portion (SLP) tokens, currently listed on popular crypto exchanges, including Binance and Crypto.com.
3. NFT Lending
Besides purchasing or playing NFT games, metaverse users have an opportunity to lend out their digital collectibles in return for interest. This NFT investment model is one of the latest trends in the market, having come about to solve the current liquidity issues. Contrary to the previous NFT market structure, investors in this space can now put their idle digital collectibles to use by borrowing or providing loans on NFT lending platforms such as Drops.
The Drops NFT lending ecosystem allows NFT owners to leverage their digital collectibles by placing them as loan collateral. Instead of holding an idle NFT, Drops provides an avenue for owners to earn up to 7% interest for supplying their NFTs to be used as collateral for USDC stablecoin loans. On the other hand, Drops users can also borrow a USDC stablecoin loan, with the current APY set at 12.23%.
Notably, the Drops NFT lending ecosystem is governed through the platform’s native token DOP. NFT owners can stake this token to enhance the platform’s security and operations in return for network rewards. With traditional bank saving accounts offering close to zero returns, NFT lending platforms such as Drops present a significant opportunity to grow wealth while earning a passive income in the NFT industry.
4. Investing in Fractionalized NFTs
Fractionalized NFTs have also emerged as an alternative way of gaining exposure to the NFT market. With most CryptoPunks or BAYC NFTs being too expensive for retail investors, stakeholders in the crypto community are forming Decentralized Autonomous Organizations (DAOs) to purchase NFTs. One such group is BeetsDAO, which comprises 54 Euler beats fans; the group came together to raise over $500,000 in ETH and bought four Euler Beat NFTs.
Swarm Markets Co-Founder Philipp Pieper has previously told crypto news site Decrypt that fractionalized NFTs will expose more people to the market:
“Fractionalization enables more people to have a piece of the investment pie.”
Following this trend, newbies and veterans interested in the NFT market can get a piece of the piece by joining forces. However, this may also come with substantial regulatory implications, especially for companies that offer fractional NFTs to investors.
NFTs have attracted more people into the crypto industry than ever before as far as crypto trends go. The possibility of existing in a digital is not only an idea but a reality for those that have embraced the NFT ecosystem. It is not surprising that billionaires such as Mark Cuban have gone the extra mile to build an online gallery for NFT artworks.
The Dallas Mavericks owner has previously echoed on the value proposition of NFTs, noting the potential of building a metaverse:
“The most powerful energy in the world is when multiple people come together for a like-minded idea. It’s very easy to be on that same frequency, and we’re seeing the magnetism to it right now. Artists want to know how they can get in on some of that positivity.”
Going by these developments and growing interest, the NFT hype is only beginning. In future, more people will likely fancy the idea of existing in the metaverse, leave alone the hundreds of opportunities to invest.