Dumb money? Investing in collectibles has long drawn free spenders. How do NFTs compare? – USA TODAY



You might notice a new look on some of your favorite celebrities’ social media profiles. Icons including Steph Curry, Jimmy Fallon and Post Malone have updated their pages with an image of a Bored Ape. 

They’re all members of the Bored Ape Yacht Club – an avatar, an online social club and one of the latest virtual status symbols to emerge in 2021. 

One image of the primate is worth up to $3 million. The sticker price for a virtual asset might come as a shock, but experts say there is real potential for patient investors.

In April, four developers created a collection of 10,000 Bored Ape icons which sold for 0.08 ether which is about $190. Now, the cheapest you can invest is 49 ether or $231,000.

The idea of sinking real money into crypto-collectibles is still difficult for some to fathom, but it’s not far from prior generations who invested in physical art, home run baseballs (some artificially enhanced) or vintage Scotch: They’re all holding onto the items in the hopes that some combination of scarcity and status will drive up the value. 

►What’s an NFT: A guide to what they are and why someone spent $69 million for one

What’s the hype?

Money is fungible: $100 can be interchanged into five $20 bills or two $50 bills. A non-fungible item is a car or house, and in this case artwork. A non-fungible token is unique and cannot be directly exchanged for another.

NFTs are stored in a blockchain wallets which are digital decentralized ledgers tracking transactions of items or assets such as bitcoin or NFTs, says PwC. Essentially, you are not buying the artwork, but rather buying a token that connects your name with the artwork.

“People can buy stocks to support companies they are passionate about, but NFTs are unique in that they are visually appealing and one-of-a-kind. Only one person will own that NFT, whereas in the stock market, you’ll share a slice of the pie with other investors,” said Duncan Cock Foster, co-founder of NFT art-selling platform Nifty Gateway.

There are two types of NFTs, according to CNET, the first is one-off visual art which is the most comparable to real-world art. The second is an NFT collection or “projects” – a template that can be changed to produce hundreds of an asset.

NFTs, as with any work of art, are more valuable based on their rarity: the lower the percentage of shared properties, the higher the value of the NFT. Less than 1% of a shared property is considered rare. For example, the Bored Ape Yacht Club has a rare ape with gold fur that was purchased for 333 ether, or $1.36 million.

“What most people have seen is the extreme. We’ll call these your blue-chip collections like your Bored Apes, Crypto Punks and most popular examples that are selling for hundreds and millions of dollars depending on its rarity,” financial adviser Douglas Boneparth told USA TODAY.

Collecting NFTs can be easier and more accessible than traditional art and is particularly attractive for investors who are interested in supporting emerging digital artists.

►Tech trends: From NFTs to Apple and the metaverse: Here’s what you can expect in 2022

“The true promise of NFTs is giving autonomy to the artists to create and sell directly, as well as the accessibility it offers to collectors,” Foster said. “NFTs are also brand new and unique so there is also a feeling of wanting to be involved in such an exciting movement in the future of the Internet,” Foster said.

Despite their origination in a digital world, where speed and urgency are often synonymous with success, investing in NFTs requires some patience before there’s a payoff, Foster said. 

“This is an illiquid market, you won’t necessarily be able to sell an NFT that you have purchased in a hurry. Make sure to invest responsibly if you are planning to collect NFTs,” Foster continued.

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Generational gaps

The attraction of NFTs to collectors and investors isn’t that different from prior generations having an interest in collecting expensive bottles of booze or home run baseballs, Boneparth said.

The intention behind the investment is the same – hoping the item appreciates and you’ve got something cool to show your friends in the meantime.

But as NFTs continue to evolve, they’ll move from ornamental memes to other more familiar products, Boneparth said, so we should all get familiar with verifying authenticity on the blockchain. 

“This is the direction where a lot of applications and real-world things are going to be built on,” Boneparth said. “Whether it’s title insurance, verifying authenticity of handbags, the music you created or art you drew.”

In 2019, Nike patented “Cryptokicks” that will use blockchain technology to attach digital assets to their sneaker in hopes of alleviating issues of authenticity in sneaker reselling, according to Hypebeast. This will change the sneaker game as the shoes move from buyer to buyer. The brand is one of the first to get involved with this new technology even though there hasn’t been an official launch of “Cryptokicks.”

“It’s too easy to get caught up in jargon and lingo and say no I don’t want any part of this. I remember my mom laughing at me when I said DVDs would replace VHS tapes. The joke was not only was I right, I was also wrong. I didn’t see that streaming would replace all of that,” Boneparth explained.

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