Why Does The NFT Craze Actually Make Sense?

Each and every day more and more artists of various industries are cashing in on the non-fungible token craze and though skeptics are quick to judge the world's new-found appreciation for digital work, NFT mania does make sense.


Gambling is more than just quick gains. Sometimes it’s about playing the long game. Collectibles is a regular feature that showcases the “gamble” around sought after digital & physical collections.

While the analog art world remains chock full of starving artists, creators who embraced and adapted to the digital realm early on are currently feasting on a NFT buffet.  Critics and social media pundits may scoff at the mere thought of a digital work of art selling for seven figures. And they would be right because digital art guru Beeple’s non-fungible token piece featured in the marquee image above didn’t retail for $1,000,000, ‘Everydays – The First 5000 Days’ NFT sold at Christie’s iconic auction house for $69,000,000. Keep in a mind that the NFT industry space was unknown to most just two months ago. This Google trends chart notes that searches for “NFT” remain near all-time highs.

So, if you are able to drown out the background noise and hecklers from the cheap seats, the NFT craze does make sense if you’re willing to keep an open mind about its future potential.

What Is A NFT – Non-Fungible Token?

So much attention has been drawn to the NFT industry over the past month that it’s easy to get sucked down a rabbit hole and suffer from analysis paralysis. For example, a simple Google search of “What is a NFT” returned 57.9-million results. Think about that. May I suggest leaning on the K.I.S.S. method when first learning about non-fungies.

Let’s break down the term non-fungible token. The non-fungible means it’s unique and can’t be replicated. Why can’t it be replicated? Ah, the token is shorthand for a digital asset supported by blockchain technologies. Most NFT’s are synced with the Ethereum blockchain. Ethereum is also a cryptocurrency, like Bitcoin or Ripple, but their blockchain network can also store one-of-a-kind digital assets like NFTs.

From art like Beeple’s mosaic to NBA Top Shot’s video moments, non-fungible tokens are digital pieces of work that can be sold with the owner’s digital signature living on the blockchain and can never to be replicated or forged.

Beauty Is In the Eye of the NFT Investor

One of the, if not thee, big knocks on non-fungible tokens is that you aren’t purchasing a tangible asset. Buyers of art at a local craft show or gallery exhibit or even the kid picking up a pack of baseball cards at his local hobby shop get to physically hold their purchase in their hand before displaying it. NFT’s only exist in the digital space where a snippet of code is baked into a blockchain ledger to prove ownership, but not copyright.

Van Gogh rare painting auction NFT investors

However, is the lack of the physical all that uncommon in collectible assets? Take for instance this story of a Vincent Van Gogh painting that was out of the public eye for more than a century, stashed in a family’s private collection. Though it was out of sight for so long, it sold for $15.4-millions at auction. The scarcity and uniqueness of the item holds the value. The same can be true of NFTs depending on the popularity of the creator.

In fact, think about some of the most valuable tangible assets in the world. Many are locked away in vaults or safety deposit boxes to keep them protected. In that moment, they are valuable, but not tangible just like non-fungible tokens.

Sports memorabilia is also experiencing a surge in popularity with prices soaring to all-time highs this year. New companies, like Dibbs, are popping up where collectors can own a share of a rare trading card, jersey, basketball shoe or bat just like stocks. Odds are these collectors will never get to physically hold or possess the item and, yet, they invested real money.

Exclusivity & Scarcity As Store of Value

Back in 2014, hip-hop group Wu-Tang Clan pressed a one-of-a-kind two-CD album titled “Once Upon a Time in Shaolin.” The only album copy in existence sold for a record $2-million at auction the following year. The scarcity and popularity of the artists drove the value of the collectible to seven figures. And while it’s a tangible album, the music is not. Wu-Tang Clan’s talents are not tangible, but possessing the exclusivity of those skills are evidently worth millions.

Super Bowl halftime performer and pop sensation The Weeknd is following in Wu-Tang’s footsteps by placing an NFT up on the auction block this weekend that includes a previously unreleased song that won’t be available anywhere else plus some visual art. And if you caught Weeknd’s halftime performance or are familiar with his work, he’s an artist who believes just as much in the visual as the aural.

Rock band Kings of Leon were the first band to release an album in the form of a NFT that came with exclusive incentives such as limited edition vinyl record. They’ve made millions in sales since it dropped on March 5.

Pandemic-Infused Alternate Investing

When the pandemic hit in the spring of 2020, most of the world shut down for weeks, if not months. While all that time inside caused an intense case of cabin fever, it also forced capitalism to slow to a crawl. Billions if not trillions of dollars were not spent on gas, travel, eating out at restaurants or drinking at bars. All that money had to go somewhere and for many, they decided to gamble on alternative assets. Precious metals, like gold and silver, were passed over in favor of sports collectibles, nostalgic toys of one’s youth, a strong belief in cryptocurrencies like Bitcoin and Dogecoin, and – of course – non-fungible tokens.

Without knowing it at the time, the pandemic has created a new-age investor that won’t be limited to the New York Stock Exchange or bond market. This younger generation grew up fully engrossed in the digital world. So, it should come as no surprise their interests and investments will exist there, too.

Waning Strength of the U.S. Dollar

Aside from a burger at a local fast food joint, one U.S. dollar doesn’t buy you a lot these days and many believe the old greenback will continue to weaken in the years ahead. This is why so many people invest in precious metals, to protect the value of their hard earned cash. In other words, what you could buy with $50,000 in cash in 1975 is a lot more than what $50k gets you in 2021. However, if you purchased $50,000 in gold in 1975, a nice return on investment would be realized in the current market.

The same philosophy is being applied to NFTs. The gentleman, Metakovan, who purchased Beeple’s digital art for $69,000,000 believes the future value of the piece is going to soar.

“This is going to be a billion-dollar piece someday,” Metakovan told Artnet News.

NBA Top Shot NFT investment

NBA Top Shot Moment

And though his purchase is a macro example of the NFT belief structure, thousands of – call them what you will – investors, collectors, gamblers are making micro NFT transactions daily. The NBA Top Shot NFT packs start as low as $9. The return on them can be substantially higher because each is unique and tied to a specific serial number.

Bitcoin is another example of a hedge against the U.S. dollar. There’s a reason the value of one BTC has skyrocketed to all-time highs in recent months. And though its pricing remains volatile, it’s starting to earn respect in various marketplaces. Elon Musk’s Tesla as well as Paypal are now accepting Bitcoin as forms of payment. Investment banks like Goldman Sachs are close to offering the crypto to their “wealth management clients,” a.k.a. rich people.

The tide is turning to a multi-faceted, decentralized form of capitalism and investment and NFT’s are leading the charge.

Not Your Parents’ Collectibles

The New York Times recently published an article titled “Here’s How Bored Rich People Are Spending Their Extra Cash.” From six-figure coffee tables to Mickey Mantle’s rookie card to NFT art, the elite 1% are also dipping their toe into modern day collectibles.

Every era has some sort of fad or trend. Some experience cyclical success, like sports trading cards’ current resurgence, while some are best forgotten like the 1990’s Beanie Babies craze. Non-fungible tokens are in their infancy and time will tell if 21st century investors bit off more than they can chew, but for now it’s all you can eat.

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