NFTs: A Retirement Option or a Trend?

NFTs have been around for a few years now, but they became a pop culture obsession in 2021. What was originally a side hustle for many savvy blockchain and crypto investors turned into a mainstream conversation with countless individuals throwing their hat into the ring via both NFT mints and purchasing existing pieces of digital art.

While the popularity of NFTs is irrefutable, there’s one question that clearly needs an answer: are they really worth investing in?

The Rise of NFTs

NFTs — or “non-fungible tokens” — have had a brief yet dramatic history. Visionary Kevin McCoy created the first NFT back in 2014 — and yes, the “visionary” moniker is appropriate here, as the digital piece of pulsing light sold for $1.4 million in mid-2021.

Since then, countless NFTs have been minted, often in batches of thousands at a time with various “airdrops” to follow for those who own existing art. The Ethereum network has been a popular option for NFT artists, although rising costs have led to a migration to other crypto networks in recent years, such as the Solana blockchain.

In 2021, NFTs hit a new all-time high in popularity. They were both given away and auctioned off during the Macy’s Thanksgiving Day Parade. First-time purchasers of movie tickets to Spider-Man: No Way Home received NFTs for their purchase. The term “NFT” was even named the Collins Dictionary word of the year for 2021.

With NFTs continuing to rise in popularity, the question that persistently remains is whether or not they’re a good investment.

NFTs as a Smart Investment?

Before digging into the technical potential of NFT investing, it’s worth pointing something out. NFTs are very trendy at the moment. In other words, there are many people who are diving into the NFT world with reckless abandon. They don’t have a strategy and are simply looking for a get-rich-quick scheme.

This is both a good way to dampen enthusiasm and lose money at the same time. Following investing trends without training or knowledge is dangerous.

The truth is, NFTs have made many people rich. However, there are also many who have invested in tokens only to watch their initial investment melt away.

In contrast to these trend-followers, there are others who have taken the time to study the investment potential. They watch the NFT market on a macro scale. At the same time, they study individual projects to ensure that they’re legitimate and have a solid roadmap for the future.

In these cases, it’s possible to make significant money on NFTs. However, the question of whether or not that income can be replicated on a retirement account level is much more nuanced.

NFTs as a Retirement Option

When it comes to retirement investing, the goal is to balance risk and security. A case can be made for NFTs in both of these areas.

On the one hand, NFTs are very safe as far as ownership of a functioning asset class goes. They operate as a digital asset on blockchain technology. That means ownership can be traced throughout their existence, and there’s no question that the NFT belongs to its owner.

On the other hand, the volatility of NFTs has proven itself multiple times since their inception. Many projects, even those with serious surface-level value, end up struggling once they go live. This can make them unreliable as an investment opportunity.

Reliable is the keyword here. Adam Bergman of the Forbes Finance Council points out that NFT value is “largely based on speculation” and can be risky. The investment experts at the Motley Fool say that “hype takes away common sense.” They also add that most profitable NFTs are too expensive for common investors to afford. This leaves copycat options, with the Fool adding that “99% of NFTs will go to zero because of this.”

With all that said, if you buy the right NFTs, you still could end up enjoying a lush retirement. As billionaire and crypto-enthusiast Mark Cuban says, “What is a store of value? It’s something that some number of people assign value to and are willing to pay for and then hold on to, hoping that circumstances increase the value of that item.” If you happen to invest in the right NFTs and then hold them for your retirement, you could end up sitting on a fortune …or a bunch of valueless digital art.

The question really does boil down to what risks you’re willing to take. As long as NFTs are a part of a very well-balanced portfolio, though, there doesn’t seem to be much risk in adding a few pieces of digital art into the mix. Just make sure that you do your homework first. And, as always, don’t use money that you can’t afford to lose.

This is a Contributed Article.