You probably must have heard the story of someone spending hundreds of millions for a land or luxury yacht in the metaverse. What about the report of Sina Estavi, the Iranian investor who originally bought Jack Dorsey’s first tweet NFT at $2.9M, planned to sell it at $46M; but got the shock of his life when it got a highest bid of $277?
Unless you’ve decided to ignore it, you must, in one way or the other, have come across the concept of non-fungible tokens (NFTs). If you are conversant with social media platforms such Twitter, Instagram, or even Reddit, you may have come across some “crazy apes” or “crypto punk” profile pictures. It may interest you to know that the originals of those jpegs actually cost a fortune.
With the circumstances and figures mentioned above, you must be wondering what NFTs are and the factors that determine their prices.
NFTs are digital tokens that represent artwork, music, content, or real-world entities (such as land or real estate) on the blockchain. While cryptocurrencies can be replaced by another identical token, NFTs cannot be replaced by a duplicate token.
It’s important to understand that a central authority doesn’t determine the price of an NFT. Rather the speculative value of an asset is what plays a major role. In the case of real-world assets, the value of the physical property is what determines the price of the NFT.
As for the prices of NFTs, some of the factors that determine the prices of cryptocurrencies also apply. Some of these factors include demand and supply, speculation, and fear of missing out.
Let’s briefly look at how these factors, and more, affect the prices of NFTs.
It’s important to remember that just like crypto, the value of NFTs may just be driven by general market sentiment, hype, and FOMO. And these factors makes it challenging to understand the real value of an NFT.
If you intend to buy an NFT, remember the points such as utility and investment potentials discussed above plays a major role. Using these points to analyze whether to buy an NFT may given the best return on investment (ROI). As a seller, its the hype and speculation are two factors that may give you the best ROI.
Either way, whether as a buyer or seller of NFTs, always keep these price-determinants at the back of your mind. They are just what you might need to understand the value of your NFTs. This is besides the hype, FOMO and speculation.