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NFT collectibles are exploding, but are they a bubble waiting to burst or a revolt about to erupt?
Unique pieces have long attracted collectors eager to pay top dollar for them. In the past, collectors paid exorbitant prices for paintings, baseball cards, stickers, antique cards, and rare coins. These products are now making their way into the digital world, due to the use of blockchain technologies.
These objects are now described as “unique” crypto assets known as nonfungible tokens on many separate blockchain networks. Because of the use of blockchain technology, identity and ownership are easily verifiable, which is especially important in a world where scarcity plays a significant role in asset valuation.
A piece of art originally made by famed street artist Banksy was transformed into an NFT replica of the physical artwork that was intentionally demolished — which was later sold for nearly $400,000. According to Anita Moore, CEO of Blind Boxes, an NFT forum for visual artwork, “By decentralizing the concepts of provenance and authenticity, NFTs are revolutionizing the way we think about ownership and value.”
What are NFT trading cards?
NFT trading cards are virtual representations of their physical underlying asset. By being represented on the blockchain, these cards are granted immutability and public verification of ownership. Even if the physical version is lost or destroyed, the NFT will endure and live on the blockchain for as long as the latter exists.
People can create a virtual representation of these cards by creating a token on Ethereum or other smart contract blockchains. These tokens are non-fungible and contain metadata about the card, especially its image. These can be stored, viewed and transferred via an NFT-enabled wallet.
There are many platforms where people can create, buy and sell these items. Some of the biggest are currently OpenSea and Hoard.exchange, among others.
Collectibles are growing as an investment
Trading cards, much like artwork, are unique items, and their move into the digital realm is growing at a pace where collectibles as a whole are becoming an investment class. Outside of the cryptocurrency space, trading card sales have been taking off.
Nick Rose, founder and CEO of the NFT platform Ethernity Chain, believes that by backing these tokens themselves, celebrities and influencers are delivering the realness-value to the assets, telling Cointelegraph,
“It is clear that authenticated NFTs from actual real world sports and entertainment figures are the only real future for NFT collectibles. When we launch a drop with Tony Hawk, Muhammad Ali or the legendary footballer Pele – These are all authenticed, endorsed and backed by these people – thus creating an actual underlying value for them.”
There are numerous examples of profitable projects in the collectable NFT space. From a year back, the price of mint condition cards on the exchange site StockX has risen from $280 to an average of $775. A special Tom Brady rookie card sold for $1.3 million on the platform recently, as it is one of only 100 of its kind.
Many conventional investors have begun to shift their focus to riskier asset groups such as cryptocurrency and blockchain firms. When asked about this new development, Radek Zagórowicz, CEO of Hoard Exchange, a blockchain gaming site, cautioned against blindly chasing “hype trains.”
“NFT is a new digital revolution, but as with every new technology, it is very often misused. There’s a lot of projects that want to use it only as a promotion tactic, as opposed to a real valuable purpose. Investors have to be very careful and not to invest in every project which mentions NFTs as it was with blockchain a couple years ago.”
These events unfold as millions are laid off over the lockdowns issued in an attempt to curb the growth of the COVID-19. As the economy tumbled, countries like the United States, Brazil, Germany and Japan slashed interest rates and bought government bonds, making them less attractive for investors.
At the same time, quantitative easing has also led to hyperinflation fears, leading traditional investors away from stocks and fiat currencies, and into the precious metals and cryptocurrencies; with the newest interest being NFTs.
Mainstream artists, organizations dive into NFTs
Over 230,000 NBA fans have joined NBA Top Shot to own moments in NBA history as NFTs, and MLB and its players have now announced the release of new NFT trading cards in collaboration with Topps, the largest trading card manufacturer in the United States.
Dapper Labs, the firm behind the iconic NBA NFT trading cards, has raised $305 million in a single round of investment by offering tokens of sports icons. Michael Jordan, Alex Caruso, and Kevin Durant are among the NBA players who have contributed to the funding round.
Logan Paul, a YouTube celebrity, has also joined the NFT craze, selling 3,000 NFTs, including Pokemon cards, for more than $5 million. Demand for the NFTs was fueled in part by a contest in which customers won three first-edition packs of Pokémon cards worth $40,000.
Renowned singers, actors, and big sporting leagues may be leaping into the NFT trading card craze in order to attract new markets, but many agree that NFTs are just just getting started. According to John Wu, President of Ava Labs, the DApp growth platform that also supports Avalanche (AVAX),
“We’re still just scratching the surface of NFTs potential, but the excitement from global, household brand names is very real. The brands we’ve been speaking with about launching NFT projects on Avalanche cover the full spectrum of art to sports to events, and see the vast potential of adapting collectibles to the internet economy.”
True asset ownership is not the end
Finally, the trading and collectable card business has been around for a long time, but the authentication and preservation models, which prioritise mint condition, have become a burden. Blockchain technology could be able to solve these problems. However, since the lack of mint condition cards is where the appeal derives from, this affects the whole dynamic of the collector market.
While some have made fortunes by investing in this emerging industry, NFTs are fraught with risk. In 2020, the conventional sports card and memorabilia industry is expected to be worth more than $5.4 billion. Dapper Labs, on the other hand, is currently estimated at $2.6 billion, with revenue of about $230 million as of the end of February.
As a result, while NFTs are not quite there yet, they do contain a critical commodity that can propel the market forwards. Furthermore, possessing an NFT does not imply that a physical edition of the card does not exist. A physical version of the coin, similar to Bitcoin, can exist to show ownership of the wallet containing the holdings.
People will now be their own bank and own their own money thanks to Bitcoin and other cryptocurrency and tokens. NFTs are now doing the same with other asset types, but their use isn’t limited to that. Cointelegraph spoke with James Hakim, CEO of Curate, an all-in-one NFT marketplace app:
“We’re moving towards NFTs with utilities, not just tokenized digital art. Soon we’ll be do a lot more with our NFTs, such as use them for staking, pay for goods, authentication and loyalty rewards”