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Experts warn: NFT collectors can lose everything



The NFT hype has been going on since the beginning of the year. While the industry is still in its early stages, digital collectibles have reached over $ 6.2 billion in sales since 2017. This is shown by data from NonFungible - a website that tracks sales of NFTs. Digital art, on the other hand, generated sales of more than 1.9 billion US dollars.

Jon McCormack is a computer science professor at Monash University, Australia. He explains why the NFT sector is mostly made up of collectibles and works of art:

There can only be one copy of a particular work of art. However, digital art is easy to copy. For this reason, NFTs serve as additional certificates of authenticity and prevent counterfeiting.

While there are numerous success stories in this area, experts still do not believe that collecting NFTs is a good investment. Your biggest concern is that the timing is not ideal to get into the market. According to the researchers, the NFT market has moved too fast due to the massive hype and speculation.

Data from DappRadar supports these claims. Trading volume in NFTs grew 38,000% year over year, reaching $ 10.7 billion in the third quarter of 2021.

Collectors shouldn't buy NFTs because of the hype

Commenting on this rapid growth, Michael Every, Rabobank's director of financial research for the Asia-Pacific region, said the technology behind NFTs is useful. However, he does believe that current usage is just a series of crazy bubbles associated with ugly artwork.

That could be apotheosis, the culmination of the bubble paradigm. That worries me deeply. Even if I fully understand the dynamic that drives younger people in particular.

Vincent Co-Founder Evan Cohen said many new entrants in the NFT space are eager to make a profit. While he acknowledged that people can make a significant amount of money trading NFTs, Cohen believes that entering the NFT market in the hope of profit is risky.

He advised investors to:

Don't buy it just because it's an NFT. Buy it because you like art. Or because you think the collector's item is cool. Or because the community is cool. You should participate in the asset, not the underlying technology that powers it.

Volatility in the NFT industry is a big problem

Experts also pointed to the volatility that makes them skeptical about whether NFTs are ideal investments. Therefore, the volatility is because most of NFTs in cryptocurrencies are priced prone to wild price fluctuations.

To explain why he doesn't think NFTs are ideal investments, Every asked this question:

Who wants to put their pension in an asset that's worth $ 1,000 on Monday, $ 1,000,000 on Tuesday, and $ 1,000 on Wednesday?

It would be a challenge to retire on such an income. And because of such volatility, NFT investors can win or lose anything just as quickly.

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