Non-Fungible Tokens (NFTs) have been trading at record-setting prices in 2021. In the first six months, sales soared to US$2.5 billion. Even more surprising, NFT sales in the month of August, US$3.4 billion, eclipsed sales in the first half of the year.
NFT sales have been growing since late 2019. Their sales seem to follow the Bitcoin and Ether bull runs. Interestingly, when legacy coins’ market prices decline, the values of NFT sales decline too.
NFT-mania is a bubble destined to burst. When the cryptocurrency bull run ends, NFT-mania and its record-setting NFT sales will end with it.
NFT-mania is the logical outcome of people being under lockdown during the COVID-19 pandemic, and increased use of computers for business, school, entertainment, news updates, and socializing. Plus, the astronomical returns on investments in meme coins in 2021 have motivated more traditional investors to experiment with NFTs and cryptocurrency in general.
NFTs come with risks. They may lose their value over time. The proliferation of counterfeit NFTs and NFT scams are taking their toll on investors’ finances. Some buyers will never recover the outrageous fees that they are paying for NFTs. Also, there is the ever-present risk of having your NFTs stolen by a hacker.
They will not disappear from the marketplace. It is more likely that certain NFTs like CryptoKitties, Beeple’s art, and CryptoPunks will remain valuable to niche buyers. However, there will be massive depreciation of most NFTs’ valuations when the crypto bull run ends.
Speculators, crypto enthusiasts, and scammers are pushing NFT market prices to unsustainable levels. When the bubble bursts, there will be few market winners.
In short, flipping NFTs is bad as a short and long-term investment strategy for the average investor.