NFTs (Non-fungible Tokens) are unarguably the most sought-after asset class of the decade and will transition into a standard feature of investment portfolios in the next five years. This aggressively confident prediction comes from Nigel Green of deVere Group. He is the chief executive of one of deVere Group, the largest management and fintech organizations in the world. Moreover, the bullish forecast is understandable given that international brands are making their forays into the growing Non-Fungible Token market.
Nike recently sued a sneaker and apparel exchange. The American multinational corporation is accusing the Detroit-based sneaker and apparel exchange of offering NFTs that commit a breach of its trademarks. Likewise, Hermès filed a lawsuit against a digital artist who was allegedly trying to make a lot of money by taking over the brand. Aside from that, the digital artist was reportedly playing a vital role in the exchange of NFTs, as per the complaint (via The Guardian).
What Is NFT and Why The Sudden Popularity?
NFT alludes to an image, GIF, or audio clip. Furthermore, a blockchain has a record of its ownership. For those who are unaware, blockchain is a tamper-proof digital ledger. “Over the last year, the NFTs market has exploded,” he notes. “With a digital-only piece of art selling for $69 million in 2021,” Nigel Green explains.
Moreover, he states that a considerable number of tech, sports, music, and fashion brands have been selling, buying, and even creating tokens since then. Aside from that, he goes on to reveal three main reasons why investors have been jumping in on the NFT bandwagon lately.
First off, the pace at which our world is been digitalized is increasing the value of this digital asset class. Especially, the lives of Gen Z and Millennials have become extremely digital. So, it is natural that they are keen on integrating digital representations of sports, music, luxury, and other brands into their worlds. NFTs facilitate this process.
Another reason for NFTs garnering skyrocketing popularity among investors is their capability of making business models more rewarding and profitable. This is particularly evident in the creative sector.
Other Ways NFTs Help?
For instance, artists and musicians can deliver a superior virtual experience for their buyers and avid collectors. In addition to that, they can verify if their work is fraudulently replicated and mention criteria for royalties when their works are re-sold. Lastly, Green claims that the asset class can serve as a notable diversifier as far as investment portfolios are concerned.
Furthermore, he insists that the aforesaid reason is probably the most important for a lot of investors. He goes on to say that proper diversification of portfolio across currency, region, sector, and the asset class is vital.
According to Green, this will enable investors to be in the best position to minimize risk. Also, it will enable them to seize available opportunities when they arise. Unlike stocks and bonds, NFTs have a considerably low correlation to other assets, he explains. Moreover, NFTs can bring the overall risk and volatility levels of the investors’ portfolio considerably down.
Aside from that, Green says he believes this will be a breakout year as far as NFTs are concerned. Also, the diversifier factor could play a major role. It could make what he deems as the “decade’s hottest emerging asset class” a regular feature of investment portfolios.