Welcome to Bulliscoming media. Recent happenings in the NFTs industry have begged the question, are NFTs still profitable? Are NFTs dead? These are questions we’ll be addressing in this article.
The year 2022 has been a very rough one for the entire cryptocurrency industry. This is much more visible because the previous year, 2021, was a very busy year for all cryptocurrency enthusiasts.
The year was characterized by the sporadic bringing in of profits for most cryptocurrency enthusiasts, partly because of the bull run witnessed, thereby making almost everything yield massive profits.
The year also saw the birth of several cryptocurrency projects and newly launched blockchain solutions, most of which seemed viable at the time. One of those blockchain solutions that also set the year apart was the massive buzz of Non-fungible tokens (NFTs).
Non-fungible tokens are digital collectibles that are used to signify digital ownership of an asset on the blockchain. NFTs became the buzz in the cryptocurrency industry, especially with the bogus amounts they were sold for and also testimonies on social media of investors making huge profits from flipping NFTs, creating NFTs, and just simply being part of the NFT industry.
A peculiar occasion that also contributed to the great buzz around NFTs was the sale of the “Beeple Everyday: The First 5000 Days” NFT which was sold at a whopping $69.3 million (38525 ETH). This set the world into a frenzy and further increased the demand and attraction for NFTs.
However, the beginning of 2022 has been characterized as one of the lowest years in cryptocurrency history. Livemint.com describes the 2022 bear market as the worst crypto bear market in history. This is a result of the continuous downtrend in the cryptocurrency market, which is crashing everything in its path. Most of the projects that seemed viable just last year have greatly dropped in price at an alarming rate, while others may have been wiped out or lost liquidity.
The NFT industry is also not left out of this downtime. Most NFT collections have drastically fallen in price, while others have lost value because investors are no longer interested in them. As a result, a lot of NFT investors have lost huge capital due to this continuous fall in the value of NFTs. This continuous fall has become an issue because a lot of NFT traders are beginning to worry over the security of their holdings for fear of losing it all, birthing the question – are NFTs dead?
What are NFTs?
Non-fungible tokens, also called NFTs, are digital assets that cannot be changed or duplicated by others. It is because of this peculiar nature that NFTs hold that they are used to claim digital ownership of an asset since it cannot be replaced or duplicated with another. For instance, $1 can be exchanged for another $1 anywhere without any hindrance or difference. Likewise, 1 bitcoin can be exchanged for another bitcoin regardless.
However, in the case of NFTs, they cannot be replaced or swapped with another NFT. This is because they are non-fungible, hence are each uniquely different from the other, so there is no means for an exchange. This is why NFTs are significantly used to signify digital ownership of digital assets on the blockchain.
NFTs can be used to represent a vast number of assets, even in the physical world, including art, music, concert tickets, real estate, degrees, medical records, etc.
How do NFTs gain value?
Since these NFTs are non-fungible meaning they cannot be swapped one for another in the digital space, they are used to claim ownership over certain digital or physical assets. A prominent industry where NFTs are seen to have a great impact is the gaming industry, where NFTs are used to represent in-game avatars, gaming collectibles, weapons, level-up tickets, etc.
The gaming industry seems to be one of the most embracing NFTs as there have been several integrations of NFTs into their new gaming models. This makes it possible for gamers to have true ownership of gaming tools earned as well as make a profit from their gaming efforts through the sales of NFTs.
The truth is, just like most physical assets, NFTs gain value from the acceptance of people. Just like the valuation of physical art by an artist is based on the level of value attached to the piece of a painting by the people. In the same manner, NFTs gain value to the extent to which value is attached to them by the people.
However, since NFTs can be used to represent digital ownership of assets, the value attached to the assets is automatically translated to the value attached to the NFT. Some NFTs not only represent digital ownership of items but can also give access to the owner of that NFT to certain perks and exclusive privileges. For instance, in most musical artist NFTs, apart from their monetary value, the NFT holders are given exclusive access to concert tickets, giveaways, exclusive merch, become members of a community to interact directly with the artist, etc.
What is the primary reason for NFTs?
The world is currently digital, and as the years go by, the more we humans increase the amount of time spent on the internet. The internet has presented a new home for most individuals, with more businesses going digital, remote workers working from home, etc.
Even the covid 19 pandemic further quickened the process, enabling more people, corporate bodies, and businesses to realize that work can be done online with little need for physical or in-person meetings.
Live concerts with a large audience tuned in can be done virtually, bringing experiences that were thought to only be possible in the physical world into the virtual world. This is what the metaverse hopes to fully materialize once it is established.
A great combination of the physical world experiences into the digital world, making it all one global village with millions of people connected but only represented by their digital avatars.
Education completed and virtual degrees earned will only be represented in the form of NFTs, which will be recorded on the blockchain where they will be unalterable and decentralized.
Aside from their immediate monetary value, NFTs will play a major role in the realization of the metaverse, which would be made possible by Web 3.0. Several projects have already taken proactive steps towards creating such utilities, some of which include the popular Decentraland by Meta, the parent company of Facebook, Betuverse, etc.
Are NFTs still profitable?
The current downtime is not only peculiar to the NFT space but also the entire cryptocurrency ecosystem. However, NFTs can still be used to make huge profits through several strategies, such as
One NFT cannot be replaced with another or duplicated, but they can be leased out to someone else. Just like a real estate property can be leased out to another person, and then rent be paid back to the owner. In the same way, NFTs can be rented out for an agreed amount and paid to the original owner. The process is not very complicated as long as the lender and borrower can reach an agreement.
This is one of the most common ways of making money from NFTs. Traders buy NFTs for a lower price and wait for the perfect time for a price appreciation and sell off at a profit. This method has proven to be profitable for most NFT traders but is also considered very risky. NFTs appreciate value based on the value attached to them. Therefore, an NFT collection can lose value, resulting in huge losses for the investor.
However, it can also work the other way and produce massive profits for the NFT trader. Remaining profitable in NFT trading requires patience and a lot of research to be sure an undervalued NFT project may have future potential. Another important factor is to also understand the market to know the right time to buy and the right time to sell.
The concept of staking is more prominent in the defi and cryptocurrency space, but NFTs can also be staked for a reward. The integration of NFTs with Defi protocols is one of the newly developed structures to enable investors to earn off their NFT holdings. A few projects, such as NFTX, Only1, etc., also facilitate this type of NFT staking on their platforms.
In some projects, staking NFTs can be any NFT, but in others, only the native NFT of the project can be staked for a reward. Staking rewards are usually provided in the project’s governance token, which in turn gives holders voting rights in the decisions concerning the future development of the project.
For example, investors who provide liquidity on the Uniswap V3 are given an LP-NFT generated by the automatic market maker (AMM). The LP-NFT is an ERC-721 token that carries information like the total portion of the amount locked in the liquidity pool, the pool’s wallet address, and the currency pair inserted, amongst other details.
Will NFTs go up in value?
The future of non-fungible tokens is not yet certain, as it is with other financial instruments. However, NFTs have great potential in the blockchain industry and have been declared by some prominent journals to be an integral part of the future of the internet.
The integration of NFTs into digital ownership of intellectual property on the internet, such as music, art, etc., will be a game changer for artists. This is because, through the use of NFTs to claim digital ownership, artists can finally gain the recognition and compensation they deserve.
Whether or not NFTs will go up in value is not exactly known for sure right now. But the one certain thing is that a lot of wealthy people are investing in NFTs, and more industries are beginning to embrace the use of NFTs in their operations, so there is hope for the NFT industry.
Nonfungible tokens are speculated to be one of the most significant aspects of the digital revolution currently underway. Although there was major hype surrounding the use case of NFTs when they were first introduced, now their true value is being expressed. The NFT market is still very young, but there might still be hope for it to bounce back after the bear market.
Also Read: The Best NFT Games to Play Right Now