The crypto community is responsible for another trend that swept up the mainstream media – NFTs and their skyrocketing value. Even though most regular online users have a rough idea of what NFT is, many are just aware that it has become, in less than five years (NFTs were initially launched in 2015), a valuable aspect of the crypto market.
For many online users, the right NFT can be worth a fortune; for example, if you purchased a CryptoPunks 7804 back in the day, you will be sitting on a fortune worth around $7.57 million. The money-making potential of the NFT market is a huge reason for its fast growth, but beyond that, NFT as a tech innovation could potentially transform multiple sectors, including finance, music, fine art collection, and real estate.
But, again, the real reason why NFTs gained traction is the opportunities for high ROI. In fact, the global NFTs market was valued at $15.70 billion in 2021, and it is expected that its value to reach $122.43 billion by 2028. Below, we will explore the main factors that boosted the growth of NFTs.
Understanding NFTs
NFT is a non-fungible token designed to authenticate the ownership of certain assets. It was created essentially as a digital signature that proves that an artwork that you have bought is genuine and it belongs to you.
This is why NFTs can be issued for objects in the real world and facilitate sales of real estate. They’ve even been used to facilitate house sales, for example, but apart from that, they are currently mainly used for digital objects, GIFs, stickers, videos, art, and songs.
NFTs are recorded on blockchain networks (Ethereum’sblockchain network), and as innovative digital assets, it is not possible to exchange them with other blockchain-based assets. This is actually the primary difference between cryptocurrencies and NFTs, but, at the same time, NFTs and cryptocurrencies share one commonality.
They are available on a distributed marketplace, which means that they are bought and sold on different NFT trading platform. There isn’t any regulatory body that impacts the supply or restricts the supply of NFTs; actually, the value of NFT is fully impacted by the relationship between market demand and supply.
In other words, the market is quite volatile, and if you decide to stand behind certain NFT projects, you definitely need to do your research and learn as much as you can before you make your purchase. The same applies to NFT trading platforms. It’s advisable to do your due diligence and create an account on reputable trading sites and find the best NFT to buy online.
On NFT marketplaces, you are able to invest in NFTs, and also many platforms have the option to safely store your NFTs. In addition to Ethereum, there are other blockchain networks that support their development, like Solana, and Flow. In some blockchain networks, you are even allowed to create your own NFTs, so needless to say; there are plenty of opportunities online to find NFT trading sites that align with your goals.
NFT Value and Marketplace
Since NFTs are sold on a decentralized marketplace, there is a direct connection between the buyers and the sellers. So, you can quickly act and purchase an NFT at the right time. The main advantage of being an owner of an NFT is that the price of their NFT can surge in the future. For instance, the artist Mike “Beeple” Winkelmann sold the ‘Everyday: The First 5000 Days’ college for $69.3 million. Another very successful NFT sale was the first NFT by Ross Ulbricht sold for $6.12 million.
The main factor behind the fast growth of NFTs is their scarcity. Since each NFT is unique, it creates an intrinsic value of the NFTs, while the demand for an NFT follows the perceived scarcity. As we know, when the demand exceeds the supply, the price of that asset increases. NFTs are in such a position that each is one-of-a-kind, like a unique song, article, tweet, or video game.
The second factor is the utility of NFT projects. NFTs are used for the tokenization of virtual objects, game assets, as well as objects in the real world, and other securities. So, its value is also impacted by its main purpose and another factor, social proof.
When artists and buyers express their support for certain NFT projects, the social proof boosts the demand for that NFT because investors feel there is great demand for NFTS, which will result in a higher price in the future.
So, social media buzz can have a positive impact on certain NFTs, and in the world of Twitter and Instagram influencers, that is actually not a rare occurrence. For instance, when Elon Musk, a well-established influencer in the crypto space, decided to sell one of his Tweets on March 15, 2021, the price of the NFT spiked to $1.1 million in just one day.