READ: 4 Minutes
NFTs are continuing to be adopted by mainstream consumers. With this comes success and horror stories with booming prices for successful projects and thousands of projects that ‘go to zero’ when the founders take the money and run, leaving holders with worthless assets.
Understanding how NFTs function is critical if you are already operating or want to operate in that market. Knowing their advantages and disadvantages might make a difference between a profitable investment and a loss.
Current State of Cryptocurrency
NFTs (non-fungible tokens) are digital assets that exist in blockchains, representing objects that exist in the real world. Essentially, they are indestructible receipts that prove ownership of that object. Currently, people use them to buy and sell art, music, in-game objects, and videos.
Moreover, the cryptocurrency market faced a crash in Q1 2022, with many assets losing 90% of their value. Among affected currencies were well-known coins Bitcoin and Ethereum. Analysts point to the war in Ukraine, rising interest rates, and a lack of optimism toward cryptos as the potential causes of the crash.
NFT Projects on the Rise
Despite the current low sales, there are many projects in development, most of them related to metaverses. A few examples are Decentraland, Star Atlas, NFT Worlds, Axie Infinity, and Silks. As the metaverse progresses, more NFT projects will come up.
Innovations in the Space
Many people are seeing beyond the common uses of NFTs and have found new ways to apply them to real life. As a result, some projects are using them to raise money for foundations, show public support, and subscribe to a service, among other uses.
Furthermore, they are at the forefront of many metaverse projects, sold to represent virtual goods and lands. Virtual land prices will rise as the metaverse grows in maturity and popularity.
Scams are common in the NFT market, and fraudsters rely on social engineering techniques to make investors buy worthless assets. Unfortunately, there’s no way to verify the authenticity of a token, though several companies are working to address this.
In addition, as in the crypto market, scammers use pump-and-dump and rug pull techniques to hype projects up, ask for investment, and then abandon them after withdrawing the funds. You need to be careful when looking for worthwhile investments.
Despite the volatility, consulting firms expect the market’s size to grow by more than $140 billion from 2021 to 2026, reaching $211 billion by 2030. Most of its value will come from its application in the metaverse, which could achieve even higher numbers.
NFTs are an easy way to transfer ownership of assets reliably and securely. There are a lot of projects worthy of investment, but the volatility presents many risks. As with cryptos, NFTs can lose value very quickly.
That doesn’t mean you should avoid investing in NFTs. Instead, you should be mindful when researching different projects. If you have questions on how to invest securely or get insurance on your move, please don’t hesitate to contact an IMA Select representative when you can.
At IMA select, our mission is to change the way people think and feel about insurance. If you have any questions on more information on getting insurance, please contact an IMA Select representative in your area.
Have questions? Want to know more?
Reach out! At IMA, we’re here to help safeguard your future!