When Collins Dictionary singled out the acronym ‘NFT’ as its word of the year earlier this week, it suddenly became very apparent that the hype surrounding non-fungible tokens had gone mainstream.
No longer the preserve of anonymous keyboard paladins, NFT artworks are being bought up in their droves by anyone with even the lightest of knowledge in the curious world of cryptocurrency.
As with the early days of Bitcoin, those keen to dismiss new and complex technology have been quick to criticise NFTs as a fad or bubble waiting to burst. However, as more genuine use cases become visible, it’s clear to understand why the principle of non-fungible tokens has a place in the future.
Yet, despite their impressive rise, Adam Morris – NFT expert at community platform NFT Club – urges caution over jumping headlong into the non-fungible deep end.
“Despite what some people may think, NFTs have mostly been a natural progression,” he explains.
“They were present in the 2017 crypto hype, but people were just starting to understand cryptocurrency, so NFTs were too advanced for that time. Within this recent crypto rally, there are more people who are experienced in the industry as they went through the 2017 cycle, so as a result, a lot of people who understood the ins and outs of crypto were looking for the next ‘thing’.”
Currently the top end of the NFT market is mostly made up of successful business people and those who did very well off the back of cryptocurrency. This is why the price tags on some are so eye-wateringly high – it’s simply because these people have the money to spend.
“But, just like any market, there will be a correction and because NFTs are new it’s more likely to be a very large correction,” the expert warns.
“Similar to how the crypto market was in 2017, people are just discovering NFTs and there is a lot of excitement. At some stage it will reach a tipping point and most NFTs will drop substantially in value.”
More than 95% of NFTs won’t make it
Mr Morris firmly believes that NFTs and the technology behind them are definitely here to stay and, particularly with the announcement of Facebook rebranding to Meta and the amount of effort they are putting into creating the Metaverse, NFTs have a large role to play in this futuristic setting.
“When considering what to buy, it’s similar to investing in cryptocurrencies – you need to identify what your main goal is. Are you focused on a long-term or short-term strategy?” he advises.
“Most NFTs right now won’t have value in a year, similar to the altcoin market in 2017, it’s very likely that 95%+ of these NFTs won’t make it.
“With this in mind, you have to identify what you think will hold value long-term, and unfortunately most of these assets already have huge buy-in prices like CryptoPunks.”