NFT Investments Explained: NFTs vs. Cryptocurrencies

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Today, you have a wide range of investment opportunities that go far beyond stocks, bonds, and the like. Cryptocurrencies, non-fungible tokens (NFTs), and other choices are now available. Of course, what hasn’t changed is the need to make savvy decisions that protect your wealth while offering the potential for significant gains.

 

NFT investments have become very popular in recent years, but they can be challenging to understand. What is an NFT? Is an NFT a good investment? Which wins in the crypto vs. NFT argument? These are just some of the questions you’ll need to answer to make an informed investment decision.

 

What Is an NFT?

 

NFT stands for “non-fungible token”, but if that doesn’t really tell you very much, don’t feel discouraged. They’re a newer type of investment and have only been around for a few years, so there is still plenty of misunderstanding and ambiguity for most potential investors unless you’re on the bleeding edge of the tech world.

 

Let’s break things down a bit. NFTs are part of the Ethereum blockchain at a high level, just like Ether and other cryptocurrencies. However, where cryptos like Bitcoin are fungible, meaning that you can trade one bitcoin for another bitcoin and still have the same thing, NFTs are non-fungible, meaning that they are unique and cannot be traded. Think of one-of-a-kind trading cards and you have an idea of what we mean.

 

How Do NFTs Make Money for Beginners?

 

NFTs have made headlines for commanding immense price tags – think tens of millions of dollars in some cases. So, how do beginners get in on the act? There are a couple of options.

 

First, the best way to make money with an NFT is to create them yourself. When you create and sell NFTs, you’re not tied to the market in quite the same way that investors are, although you’re certainly still at the mercy of the overall market trends. What that means is if NFTs were to lose all demand, then there would be no demand for what you make.

 

If you’re not interested in creating and selling NFTs, you can still make money from them. For instance, you can buy and trade NFTs just like you do cryptocurrencies like Bitcoin, although you cannot trade like for like. It’s also possible to buy and sell them just like an art dealer does with works of fine art. You can also rent them out to create a stream of passive income. Finally, you can stake NFTs, which involves storing them in a “stake”, or De-Fi protocol smart contract.

 

Is NFT the Same as Cryptocurrency?

 

While NFTs and cryptocurrencies share some similarities, they are not the same thing. Let’s go back to our original comparison. You can exchange like for like in crypto all day long and still have the same thing if you’re trading within the same currency. For instance, you can trade Ether for Ether and have no change to what you’re trading. However, because NFTs are completely unique, they are one of a kind. You cannot trade them in a like-for-like manner

 

Is NFT Crypto a Good Investment?

 

An NFT investment can be quite sound, but it does require that you know how the NFT is being used. It’s also important that you realize NFTs are not like conventional investment vehicles like stocks or bonds. They have no intrinsic value – their value is completely based on what the crypto community is willing to pay for them. That makes the best NFT investment one that’s popular and can be flipped quickly. However, there are options that do better when they’re held and sold after interest has spiked.

 

Can NFT Be Bought without Crypto?

 

No, you can only buy NFTs with cryptocurrency, and even then, only certain cryptocurrencies can be used. You can only use Ethereum-compatible crypto wallets and Ether for this purpose. Note that this is true in most cases, but a small fraction of NFTs is not based on Ethereum and has different rules.

 

Is NFT Better Than Crypto?

 

Wondering if an NFT investment fund is better than investing in cryptocurrency? It could be, but there is no hard and fast rule here. For some investors, NFTs might be better, particularly if you value exclusivity. However, if you want better ease of transactions and fungibility (the ability to trade like for like), then investing in cryptocurrency is the better option. Know your preferences, your risk appetite, and what method works best for you.

 

Can You Make Money with NFTs?

 

Yes, you can make money with NFTs, whether you choose to do so as a creator or as an investor. Whether you choose to create and sell, buy and hold, buy and flip, or trade NFTs, there are plenty of ways to create a stream of income.

 

Why Do People Buy NFTs?

 

People buy NFTs for a couple of reasons. First, they buy them for the same reasons that someone might invest in a painting by Monet, such as exclusivity and the ability to appreciate a beautiful work of art (many NFTs are artworks). However, other people buy NFTs because they want a store of value that has the potential to appreciate significantly.

Is NFT Safer Than Bitcoin?

 

Neither cryptocurrency nor NFTs should be considered “safe”. Both involve more risk than conventional investments, although even the stock market comes with very real risks. NFTs might be riskier than cryptocurrency because they lack intrinsic value of any kind and have limited liquidity.

 

However, when it comes to security, both NFTs and cryptocurrencies have similar risk levels. This is because there is very little difference between an NFT wallet and a crypto wallet. Both offer significant safeguards against hacking and theft. However, they can still be attacked, so it’s important that would-be investors go in with their eyes open.

 

In Conclusion

 

In the end, NFTs are interesting options that can provide some investors with a viable alternative to both conventional investments and cryptocurrencies. However, they are not the right option for all investors, and they do come with some drawbacks that investors should understand before getting involved.