Investing is no longer driven by just ticker symbols and traditional asset classes such as shares, properties and commodities. This has changed as there is now room for passion-aligned investing that extends from digital art to sports clips and cat cartoons.
A new trend that is baffling many is that of the investment in Non-Fungible Tokens (NFTs).
NFTs can really be anything digital (such as drawings, music and games) but a lot of the current excitement is around using the technology to sell digital art.
An NFT is a unit of data on a digital ledger or blockchain that can represent a unique digital item and provide proof of ownership.
NFTs are commonly created by uploading files, such as digital artwork to an auction market.
This creates an entry on the blockchain's digital ledger which includes a reference to the cryptographic hash of the digital file which the
NFT represents. The tokens can then be bought with cryptocurrency and resold. NFTs can also be thought of as “bitcoin for art”.
Just as bitcoin created the ability to spend and save a sort of digital money without any centralised authority, so too do
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NFTs allow for pictures, videos, music, or anything else that can be digitally represented, to be wrapped up in a format that can be traded, stored, or authenticated without needing to turn to a gatekeeper.
Once an NFT is created, it can be digitally traced forever.
Unlike a simple image file, for instance, an NFT cannot be duplicated, giving it a similar cachet to an original artwork.
NFTs are a new type of crypto asset that combines art with elements of blockchain and social networks.
The value of NFTs is derived from aesthetics, social proof, membership, network effects, rarity, and culture.
More recently, the Accelerate NFT Fund, an actively managed, pure-play
NFT investment vehicle announced that it acquired CryptoPunk 4091. CryptoPunks are some of the first Non-Fungible Token (NFTs) ever created, setting a historic precedent for digital art.
As millions of potential users are onboarded into Web3 over the coming years, demand for digital art is expected to grow at a significant rate.
In addition, CryptoPunks is owned by the premier Web3 company Yuga Labs, which has an excellent track record in NFT brand development and utility. CryptoPunks launched as a fixed set of 10000 items in mid-2017 and became one of the inspirations for the ERC-721 standard
The shift to alternative investments
Overall, a global trend that we are witnessing is that investors are looking at new categories of “things” or “valuable objects” that have had striking advances in market value over the years.
More and more investors are looking at collectibles as an alternative to traditional investment assets.
Collectibles are items that can be purchased or sold for much more than their original value.
Global wealth managers have reported that clients are asking for help with investments in collectibles and non-traditional asset classes such as art.
Unlike shares, bonds, and commodities, for instance, each work of art is a unique entity that cannot be replaced by another.
The rarity of a work of art is what gives it value.
The boom in NFTs is a good example of how investors are looking to other alternatives to store value and speculate on price trends.
Piggy contends that the increased focus on alternative investments amongst retail and institutional investors could potentially transform the investments space.
Overall, one may consider collecting “things” in anticipation of a shift in the universe of assets considered as alternative investments.
This may even entail collecting paintings, old records, cigar rings, marbles, coat hangers or better-still, an electronic version of this article.
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Matsika is the head of research at Morgan & Co and founder of piggybankadvisor.com. — batanai@morganzim.com/ batanai@piggybankadvisor.com or mobile: +263 783 584 745
