Personal Finance

What Are Crypto NFTs?

NFTs, or Non Fungible Tokens, are a method of establishing ownership of a digital token. Typically the token is encoded in a way that represents a specific digital object, such as photo, video, or other file. Typically these are stored on a blockchain ledger. Non Fungible Tokens may also be referred to as ERC721 tokens.

How Do NFTs Work?

NFTs can be bought and sold on marketplaces. And while the tokens don’t really have any intrinsic value, the ownership and uniqueness can have a value of its own. It’s like having a guitar that was signed by your favorite musician. The ink that makes up the signature isn’t really worth anything. But the memory it represents could be very valuable to the right person.

If you like a unique perspective on investment topics, check out my article on Why The Gamestop Stock Price Does Not Help The Little Guy.

What Can You Do With NFTs?

You have three options on what you can do with NFTs. You can buy them, collect them, or sell them.

Bitcoin. Altcoins. ASIC resistance. Smart contracts. Ring signatures. Off-chain transactions. NFTs. Whenever one of the underlying technologies and innovations that make blockchain work bubbles up in to mainstream media, it really gets people’s attention. And whenever this happens, the price of Bitcoin goes up.

How The “Blockcoin” Hype Cycle Works

During the hype cycle, things get pretty silly. Every minuscule fluctuation is reported as if it’s some sort of significant change. It’s not. FOMO (Fear Of Missing Out) runs wild. Occasionally people make mistakes that cost them a lot of money. Occasionally people make a mistake that makes them rich.

Chances are you’re reading this article because NFTs, or some other blockchain technology, has entered the hype cycle. As of April 2021, NFTs are in their second hype cycle that I’m aware of. Although those were preceded by at least two previous hype cycles about similar methods of inserting data in the blockchain.

Will the hype cycles go on forever? My mother still has 60 Beanie Babies. Interpret that however you want.

Stuffed Animals
Fads don’t last forever. Remember when people bought stuffed animals as investments? Yeah.

How To Make Money With NFTs (buy Bitcoin instead)

I hate to be the bearer of bad news but the blockchain hype is so unpredictable that putting money into it is crazy. If you enjoy gambling, understand the risk, and know your limits, and by all means knock yourself out. However I’d like to propose an alternate way to get some exposure to crypto that is less stressful.

Bitcoin is the original cryptocurrency. Most consider it to be the “default”. Whenever a blockchain-related technology enters the hype cycle, it tends to affect the value of Bitcoin. So instead of investing in the newest fad, consider buying Bitcoin itself.

  • Instead of buying the latest fad, simply buy Bitcoin.
  • Buy Bitcoin when it’s NOT BEING HYPED.
  • Don’t buy more than you can afford to lose.

It’s not easy to buy crypto when it’s not being hyped. I certainly forget about it when it’s not in the news. It’s human nature. Consider putting a reminder on your calendar to periodically look into buying Bitcoin.

Don’t Buy Crypto During The Hype Cycle

When the time comes to look into buying, look at the news. Is Bitcoin or blocking chain being hyped? Then look at the price. Is the price abnormally high? If the answer is no to both of these questions, then you might be outside a blockchain hype cycle.

Or simply utilize one of the various services that lets you invest automatically over time. This is a low-stress and effective approach.

Some people try to predict the hype by monitoring Web forums, subreddits, and other sites where people gather to discuss blockchain technology. This is a tiring and thankless job. I don’t recommend spending the time unless you enjoy blockchain as a hobby.

Creepy Plushie Lady
Don’t invest too much money into toys unless you want to worry about toys all the time.

Consider Not Buying Cryptocurrency At All

The most important thing is to not buy more than you can afford to lose. It really is like a gamble. If you buy too much Bitcoin you will be exposed to a lot of risk. This could impact you financially. You will also worry about it all the time. Every single breathless news article about some insignificant fluctuation will have you concerned about your financial future. That is not fun.

Most guys would be better served by a normal investment portfolio than something based on a fad technology. And if you do have an appetite for high-risk investment, there are still better options. There are real people running real business that produce real-world goods and services that need funding.

Why Do People Buy NFTs?

Other nerds like me just can’t ignore a cool new technology. I certainly have a few dollars worth of Bitcoin in my portfolio. But it’s not more than I’m willing to lose. Just remember, you’ll get more enjoyment out of a couple of beers than you will out of some funny money.

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