Should Investors Buy Into the NFT Hype Today?

What are NFTs, and should investors gamble on these assets? Here’s the low-down on what investors need to know.

| More on:
Man holding magnifying glass over a document

Image source: Getty Images.

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The market for non-fungible tokens (NFTs) remains hot. However, it appears this market has cooled down a bit since its February/March red-hot state.

There’s been a lot of chatter about what NFTs could fetch over the long haul. If recent sales are any indication, expectations are rather incredible right now. The sale of Beeple’s digital artwork, “Everydays: The First 5,000 days,” for an incredible US$69.3 million highlights this.

However, questions remain about just what NFTs are, and whether they’re a decent investment right now. Buying into an acronym one doesn’t understand isn’t a good thing. So, let’s dive into what these are and how investors can potentially invest in this growth sector.

The ABCs of NFTs

A non-fungible token is essentially a unique token created on the blockchain. Users on the Ethereum blockchain can turn any image, video, or digital file into an NFT. These one-of-a-kind assets that can be bought and sold readily like any piece of physical property that is believed to have value.

The uniqueness of these assets separates NFTs from Bitcoin or other popular cryptocurrencies that are fungible in nature. Fungible means each Bitcoin is identical in nature. Trading one for another won’t have any value discrepancy. Non-fungible denotes the uniqueness of these digital tokens representing a moment in time, or a specific file that there is only one of.

One popular example of how NFTs are being used is to convert tweets into NFTs. Perhaps the best example of this is the recent charity sale of Jack Dorsey’s first tweet for nearly $3 million. Needless to say, the value of NFT exists because of their scarce nature. That said, the value these NFTs hold is also directly proportional to the supply and demand of NFTs in general. Accordingly, this makes NFTs a highly speculative bet, similar in many ways to the ultra-high-end art market.

So, how do you invest in NFT?

For sophisticated investors with the know-how to invest in NFTs directly, holding these in a digital wallet is the primary means of investing in NFTs today.

However, there are other options.

Investors looking to invest in the broader NFT trade have targeted companies in the NFT space. One Canadian company listed on the venture exchange that has become increasingly popular is CurrencyWorks (TSXV:CWRK).

This financial tech blockchain company has been a key player in this domain of late. Indeed, CurrencyWorks’s stock price has more than doubled since the beginning of the year, as NFTs have taken off. That said, investors can now pick up shares of CWRK for a more than 50% discount to this year’s peak just a couple months ago.

Bottom line

NFTs are an extremely nascent investment right now. Accordingly, this is a highly speculative place to invest, and is not one I’d recommend conservative investors broach today.

However, very long-term investors looking to invest a small amount of capital in a company with lottery-ticket-like returns like CurrencyWorks may indeed want to do so. Where this sector will ultimately go is anyone’s guess. However, the NFT space is certainly an intriguing one today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned.

More on Investing

funds, money, nest egg
Dividend Stocks

TFSA Passive Income: 2 Great Canadian Dividend Stocks for Retirees to Buy Now

Retirees seeking reliable passive income can now buy top TSX dividend stocks at cheap prices.

Read more »

man window buildings
Stocks for Beginners

Foolish Beginners: 1 Stock Pick to Buy Now for a $6,000 TFSA

Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) stock looks cheap as shares regain their footing.

Read more »

data analyze research
Dividend Stocks

Earn Monthly Passive Income: 2 Hot Dividend Stocks in Canada to Buy Now and Hold Forever

These two hot dividend stocks could help you to earn stable monthly passive income in Canada.

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Be a Landlord: Top 2 REITs (With Monthly Dividends) I’d Buy and Forget

You can be a landlord and earn monthly dividends for the rest of your life. All you need is the…

Read more »

Target. Stand out from the crowd

3 Canadian Stocks to Buy That Beat Their Earnings Expectations This Week

If you're looking for top Canadian stocks to buy, here are three impressive companies that continue to perform well in…

Read more »

A stock price graph showing declines
Energy Stocks

2 Cheap Canadian Stocks That Likely Won’t Be on Sale For Much Longer

These two Canadian stocks are close to returning to all-time highs. Don’t miss your chance to take advantage of these…

Read more »

A worker gives a business presentation.
Dividend Stocks

Got $5,000? 3 Stocks to Hold for the Next 20 Years

New investors don’t need tens of thousands to start a portfolio. Here are three stocks to hold for the next…

Read more »

canadian energy oil
Energy Stocks

3 Rising Energy Stocks to Buy as Oil Hits 6-Month Low

Three rising energy stocks are strong buys today as their upward momentum is likely to continue due to the tight…

Read more »