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Navigating NFTs: A Comprehensive Guide for Investors

Here’s a CryptoPunks NFT that someone probably paid a fortune to own. You’re getting it for free. Think about that.

Investor Takeaways:

Investing in NFTs today is like investing in collectibles (e.g., baseball cards or fine wines). Only invest if you really love NFTs and are willing to put in 10,000 hours to learn the market value of these unique, hard-to-price assets.

As intelligent crypto investors, we look for underlying value. Most NFTs today have very little underlying value.

But NFTs as a technology have a ton of potential value, especially if they are linked to underlying intellectual property (like earning future royalties on a pop song NFT).

The best long-term investment is likely buying and holding tokens in NFT platforms — don’t buy a collectible, buy the collectible company.

NFTs are Digital Collectibles

I have a friend who loves collecting baseball cards.

David has been collecting since he was a kid, and he’s now in his forties. He lives near Fenway Park, and has season tickets to the Red Sox. After most games, he goes over to the official Red Sox store to check out the current cards for sale, noting their prices and how quickly they sell.

Then he goes online and looks for the same cards via online marketplaces, scooping up good bargains. He tends to buy and hold for the long term, selling when the price is right.

One of his greatest trades was paying $700 for a 1910 Beals Becker, then selling it for $2,700 a few years later.

David has thousands of hours of baseball card knowledge, which gives him a mighty edge when it comes to appraising the value of cards. He intuitively knows when he sees a good bargain, because he’s seen so many cards.

If you want to successfully invest in NFTs, approach them like my friend David does baseball cards. Think of NFTs as digital collectibles.

Intelligent crypto investors need some principles for investing in digital collectibles, also known as non-fungible tokens (NFTs). In this guide, I’ll briefly explain whether and why NFTs are worth anything, and where they might fit in your investment portfolio.

What Was the First NFT?

The first NFTs were a project called CryptoKitties (we literally wrote the book on it). These were digital cats that you could buy, sell, and breed with each other, with proof of ownership stored on the Ethereum blockchain.

When they were introduced in 2017, CryptoKitties were such a phenomenon that they brought down the entire Ethereum network. I remember going to Meetups where blockchain geeks were livid that these silly cartoon cats were disrupting their Very Important Business.

Great art is disruptive. We forget that the masters – from van Gogh to Picasso, from Wagner to Kanye West – redefined what art “should be.” Great artists break the molds.

…But is this art?

Now millions of people are “investing” in these NFTs, just as quickly as creators can churn them out. It’s not limited to cat memes: you can buy all kinds of digital art, pop music, sports memorabilia, and even virtual real estate.

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