The NFT hype train has swept many people off their feet and claims that the NFT market will change digital art forever can be heard more and more often. But at the same time, others tightly hold their suspicion that this is one big bubble ready to burst.
What is truly up with all this NFT talk? And if you’re looking to make money, should you consider dipping your toe into the NFT art world?
What Is NFT Art?
NFTs themselves are non-fungible tokens, which represent unique ownership of an item. This item can be anything, from a tweet, digital collectibles to a domain name. But when we’re talking about NFT artwork, we’re talking about the most common type of NFTs on the market – NFTs representing digital artworks.
Find Out More About NFTs & How They Work!
To better understand this, let’s take a JPEG file containing an illustration of a house on fire. Now, anybody can screenshot this picture or save the JPEG file to their computer, so the file itself is not an NFT at all. But if you own an NFT of this illustration, you own a unique verifiable version of this illustration which exists on a blockchain. It is this token that represents an ownership but not the illustration itself.
The Craze For NFT Art
From being just three random letters to most people before 2021, the word ‘NFT’ suddenly found itself in every corner of the Internet and conversations around the world. Celebrities like Jimmy Fallon would talk about it, musicians like Post Malone were getting involved in it, and even Twitter CEO Jack Dorsey managed to sell an NFT representing his first tweet for a “conservative” price of $2.9 million.
One thing is certain about the NFT boom – it’s not just about the art! Digital art has always been a thing and as such is nothing new. But the popularity of NFT art goes hand in hand with the new, ever-increasing interest in crypto assets and blockchain technology. 2021 is the year that the 2 pillars of cryptocurrencies – Ethereum and Bitcoin – experienced tremendous growth. And once people become interested in Ethereum, it’s just so convenient that they’ll explore Ethereum-related investments as well, namely NFTs.
Whatever the cause for the NFT craze may be, you can’t deny that the craze is there and is steaming hot. Well-known figures from the business community to the gaming and streaming community have publicly bought NFTs. These people influence their fans, their fans influence their friends, and so the circle keeps widening.
Is NFT Art a Good Investment?
The question of whether you should invest in NFT art mostly depends on how knowledgeable and involved you are with the crypto and NFT scene. On the one hand, the same principle dictating the value of all assets also applies to NFTs: supply and demand. And the demand for NFTs looks very promising: cryptocurrency is slowly breaking its way through mainstream culture, resulting in a big number of potential investors.
With how fast-paced the NFT art scene is transforming plus the volatility of Ethereum itself, there is potential for big profit gains for a relatively short period of time. For example, EthGirl – an NFT by Trevor Jones – was sold for about $10,000 in 2019; yet only 2 years later this digital artwork was valued at $8 million. This kind of growth is not apparent in the traditional art market data. In fact, many traditional art investors plan for a window of 10 years plus.
However, if you’re someone who is not particularly involved with the crypto scene nor has an interest in art, investing in NFT just because it’s hot might not be the best idea. It’s extremely risky for many reasons. Firstly, art itself is very subjective in value: you can’t measure its utility like many other assets but rather have to measure other people’s opinions of it.
This subjective, intangible value of art is magnified when it’s the digital art world. You can be at peace knowing that a DaVinci painting won’t plummet in value any time soon because DaVinci is a revered figure, a common opinion established for more than 500 years. There is no such reassurance in the NFT art space for every artist here, to an extent, is ‘up-and-coming’ when compared to the previous example.
With how young the NFT marketplace is, it’s advisable that you don’t invest any amount of money you’re not comfortable losing. If you’re an artist though, don’t hesitate to join in on the NFT hype: minting digital assets into NFTs is super easy and can be completely free so you’re not risking anything. Be warned, however, that gas fees on the blockchain can vary greatly and sometimes are prohibitively expensive! After all, art is already your means of livelihood so this is simply entering a second market for it.
There is no right answer to whether NFT art is a good investment; it can generate amazing short-term value but lacks security. The only thing certain is that it’s extremely risky and not for the faint of heart. If you do decide to dabble in it, remember to do your own research and beware of scams.