A RISE IN NFT ACTIVITY
The year 2021 brought a new wave of sales of NFTs. An NFT can offer proof of ownership of, for instance, digital art in the same way a physical canvas can offer proof of ownership of a Vincent Van Gogh painting.
Although NFTs began as a way to formalise ownership of digital art, they have since expanded to include other types of digital property, including digital real estate.
Sales of NFTs are setting new records — a recent one raised US$17.1 million at Sotheby’s. As a result, the auction house launched Metaverse, an NFT-only marketplace to facilitate sales of digital works.
As new NFT applications emerge, this space will likely continue to grow in 2022.
BUYER BEWARE
Despite these investment opportunities, we urge crypto investors to be skeptical of claims they read in online communities. At a minimum, crypto enthusiasts must do their due diligence before investing.
What is sure to emerge in 2022 are new frauds and schemes. Take, for instance, the SquidGame crypto that capitalised on the popular Netflix show but was a fraud. Or the fake Banksy NFT that sold for £244,000.
Research on the behaviour of retail investors has found some are highly susceptible to the “fear of missing out.”
Therefore, it may be difficult to turn down a tip from your hair stylist or your best friend’s cousin on the next hot crypto opportunity.
However, crypto investors should educate themselves on the technology and the basics of financial markets if they want to prudently get involved.
Crypto, after all, remains speculative and is not for everyone.
Erica Pimental, Bertrand Malsch and Nathaniel Loh are associate professors and research fellows at Queen’s University, Ontario. This commentary first appeared on The Conversation.