Did you know?
- One digital art NFT has been sold for almost seventy million dollars
- A tweet sold as an NFT fetched close to three million dollars
- An NFT representing virtual plots of land in a video game was bought for 1.5 million dollars
Headlines like these have made Non Fungible Tokens all the rage – resulting in NFT sales topping $2 billion in the first quarter of 2021.
There is no doubt that some people are making a lot of money off of them. But this doesn’t make NFTs a prudent investment choice for your hard earned money.
Here are 7 reasons why you should absolutely avoid investing in Non Fungible Tokens.
1. The NFT asset could simply vanish
If the online location where the underlying digital asset is stored gets corrupted or destroyed, it could mean that the artwork or music or video that the NFT represents will be wiped out. This will result in the NFT completely losing its value.
Imagine paying millions of dollars for an NFT only to see it just randomly disappear!
2. Non Fungible Tokens can suddenly become worthless
Unlike tangible objects, NFTs have no real value other than what others are willing to pay for them.
For example, even if nobody wants to buy your used car, you can sell it for its parts and get some money.
But if people suddenly lose interest in a certain Non Fungible Token, it will become completely worthless.
3. You don’t really own anything
Usually, when an NFT is sold, the original owner retains the copyright. This means that the person who sold the NFT can create multiple copies of the asset and sell those as new Non Fungible Tokens – and the worst part is that all this is completely legal!
So other than bragging rights, there is no real value for Non Fungible Token that represent digital assets.
4. There is a high possibility of fraud
From minting NFTs by plagiarizing original work, to creating fake sites for swindling money out of your digital wallet, to artificially increasing the price and making unsuspecting buyers pay much more for the NFT than it is actually worth, there are all kinds of scam artists trying to make a quick buck from Non Fungible Tokens.
All this is outright illegal, but it might take years for the courts to catch up and take the offenders to task.
And even when they do, you still might not recover the money you lost!
5. There is a lot of volatility
Since the value of Non Fungible Tokens is perception based, NFT prices can go up or down very quickly in this highly speculative market.
And there is a good chance of losing a large portion – or all – of the money you invest in Non Fungible Tokens.
6. There is very little liquidity
The secondary or resale market for NFTs is not very active. Since each NFT token is unique, unless there is a ready buyer, it can be very difficult to resell.
So if you want to cash out and get money for your Non Fungible Token, it might not be quick or easy.
7. NFTs have a huge impact on the environment
A huge amount of energy is consumed for each NFT transaction due to the way blockchain technology works.
This means transactions related to even a single Non Fungible Token result in a lot of greenhouse gas emissions that hurt the environment significantly and expedite global warming.
For instance, some research shows that on average, the carbon footprint of one NFT is equivalent to the electricity consumed by an EU resident in over a month!
I hope you enjoyed this video on NFT / Non Fungible Tokens investment. Don’t forget to share it with your family and friends so they don’t fall into the trap of NFT investment.
And thanks for watching!
Download Transcript: Ideal for Use by Teachers in their Lesson Plan to Teach Kids and Teens
Podcast: 7 Reasons to Avoid Investing in NFTs (Non Fungible Tokens)
Fun, informative and concise episodes by a 10-year old, breaking down complex financial concepts in a way that kids and beginners can understand. Episodes cover personal finance topics like saving, investing, banking, credit cards, insurance, real estate, mortgage, retirement planning, 401k, stocks, bonds, income tax, and more, and are in the form of a conversation between a cowboy (a finance novice) and his friend, a stock broker. Making finance your friend, only at Easy Peasy Finance.
A little bit about me: I have been fascinated with the world of personal finance since I was 6! I love to read personal finance books, and keep myself updated on the latest by reading various personal finance magazines. My friends often ask me questions about finance because they find it complex and intimidating. That’s what inspired me to start my YouTube channel called Easy Peasy Finance when I was 8, and this podcast 2 years later.
7 Reasons to Avoid Investing in Non-Fungible Tokens (NFTs).
Show notes and transcript at: https://www.easypeasyfinance.com/why-avoid-invest-nft-non-fungible-token/