Blockchain remains among the most favored conversation pieces by many investors over the past few weeks, and chiefly due to the surging interest in crypto assets. Unsurprisingly, Bitcoin still draws the most attention but lately NFTs (non-fungible tokens) and Ethereum have been gaining ground and for compelling reasons.
The premise that NFTs and Ethereum will point to a mammoth windfall is underpinned by the increasingly robust outlook on the blockchain. Relatively new as it may, the technology is inspiring confidence in the financial world and so are the high-value assets it generates.
Understanding The Basics Of NFT
Twitter co-founder Jack Dorsey recently sold the first few words he posted on the microblogging site and the buyer forked out $2.9 million for such collectibles. Even more jaw-dropping was the digital artwork by Beeple that auction house Christie’s had cleared for $69 million.
To be clear, these NFTs are not tangible purchases. The buyers parted with their money for digital certificates of the “tokenized” assets – solid proofs that will be safely stored on a virtual ledger that is blockchain.
The beauty of NFT lies in the assurance of indelible ownership. That means a tokenized item can be resold in the future and the original creator will still get a significant portion of the sale. Again, thanks to blockchain, so-called smart contracts can be inserted into an NFT package for this unique privilege to take effect in perpetuity.
The value of a specific digital token greatly depends on scarcity, which explains why Dorsey’s initial Twitter musings are worth millions. Such an NFT will never be created again and the likelihood is high that the value will further appreciate.
Is The NFT Rush Another Bubble In The Making?
However, the thought of spending big on assets that don’t exist in the physical world will certainly not escape scrutiny. For critics of cryptocurrencies, and now NFTs, the investment is without the benefit of logic. Skeptics warn that crypto assets live in a bubble that will burst eventually.
Indeed, the fear expressed is within the realm of reality but for many institutional investors, NFTs could lead to greater opportunities. The raging interest in the tokens will soon wane but the potential for investment growth is not seen to dissipate totally.
Like last February, the exchanges involving NFTs amounted to nearly $20 million. Then there is the booming secondary market for the tokenized collectibles. As of April 2021, the recorded transactions amounted to over $9 million, a big leap from the $628,000 worth of deals registered in December 2020.
Yet the most thrilling scenario for many investors taking part in the burgeoning crypto market is the swelling potential of blockchain, which they view as “something that had to come about.” And it means that staying clear of crypto assets is not the wise thing to do.
Ethereum Climbs to Record Levels
This is especially true for those trading in Ethereum as the digital coin shot up to a record high on Wednesday. The value per unit was hovering between $2,706 and $2,714, and the incredible gains were attributed to the anticipated digital bond sale by the European Investment Bank (EIB).
The initiative is essentially a vote of confidence for the Ethereum blockchain environment, and in large part is a major boost for the cryptocurrency ecosystem. The EIB-backed digital bond will see the injection of €100 million into the Ethereum circulation and involves the participation of investment institutions such as Goldman Sachs and Banco Santander.
Likewise, it should serve as another sign of cryptocurrency inching closer to mainstream use as first evidenced by the widening patronage for Bitcoin. As a side note, the token now boasts an estimated market value of $1 trillion and its growing adoption by the likes of Goldman Sachs and JPMorgan Chase further bolstered the perception that crypto assets are fast winning institutional approval.
To know more about how cryptocurrencies and other investment assets can work in your favor, check out CM Tribe’s Finance and Investing page for a crystal-clear understanding of investment possibilities.
(Image Credit: Decrypt.co)