The non-fungible token (NFT) frenzy hit a high mark this week when a piece of digital artwork sold for $69.3 million at auction – but beyond it’s hard to argue that it’s madness when prices for just about every else are soaring too, Jeff Dorman, chief investment officer at Arca, a cryptocurrency investment management firm, wrote this week in his newsletter.
“Many investors are so concerned about inflation that they will invest in just about anything to eliminate holding cash on their balance sheets,” Dorman wrote. “When investors become too scared to hold cash even for a short-period of time, you know the world isn’t quite as it used to be.”
And the reach for yield could attract investor interest beyond just art and collectibles.
“NFTs will expand beyond current use cases such as collectibles, art and gaming into more traditional use cases like know your client (KYC), asset-backed loans (i.e. putting the value of your house/car on-chain to collateralize a loan), a fractional ownership of specific properties."
Jeff Dorman, chief investment officer, Arca
- From an investment standpoint, companies and projects that facilitate the growth and trading of NFTs could be big winners, according to Dorman.
- Tokens affiliated with NFT businesses have gained an average of 46% last week, and have now increased an average of 787% year-to-date, according to data from Messari.
- In-game assets (swords, skins, or characters) can turn into NFTs, allowing players to have ownership whether they continue to play the game or not.
- “Essentially, NFTs begin to quantify the time spent on playing games into equity,” says Dorman.
- "Whether a digitized tweet, a digitized moment of an NBA dunk or digital art is really worth tens to hundreds of thousands of dollars is entirely up to the buyer willing to pay this price. But conceptually, there’s nothing weird about non-fungible tokens."
So $69 million could end up being a mere pixel in a billion-dollar industry for digital assets.