Should I buy some NFTs?

“I still haven’t found, what I’m looking for.”

– U2

A year ago, everyone was asking, “Should I buy bitcoin?” Or, “Which token should I buy?”  That now seems so 2020 and the new question on the blogs and discord servers is, “Should I buy some NFTs?”

First, an NFT is technically, and actually, a token.  That’s what the T stands for.

But, unpacking the question, there are actually two questions:

  • Should I buy NFTs?
  • Which NFTs should I buy?

Both of these are legitimate questions.  The easiest answer to the first question is, “If you have to ask if you should be buying NFTs, the answer is no!”  But, this is too general.  There are many investors and users who would find great value from either buying NFTs to use, or from investing in NFTs given their desire to be part of a whole new asset class.  And, just asking about it, is pretty common.  In fact, I think that most people who have an investment portfolio, and already have allocation to crypto, should definitely be buying NFTs.  Given their massive growth, it makes sense to allocate a portion of the crypto portfolio to NFTs.  In fact, as they represent a new vanguard in the crypto world, and a percent of GDP, it would even make sense to increase allocation to all crypto, just to get more allocation to NFTs.

Then, the question is, “Which NFTs to buy?”  This is hard question — even tougher than, “Which stock should I buy?” In fact, if you ask the question about stocks, there are only about 4000 publicly traded companies in the USA, so you already have a pretty small set to look at.

On the other hand, there are millions, and soon to be billions of NFTs that can be purchased, and most are of very little value.  In addition, there are questions around which L1 to use and which marketplace to use to purchase NFTs.  All of these possible choices make it very intimidating and difficult to someone coming in for the first time.

When faced with this problem, there are typically three answers:

  • Outsource to an expert (through a fund)
  • Become an expert
  • Buy the market

Your choice here depends on who you are.  If you have access to experts, it make sense to let someone else choose, and this is probably the right strategy.  On the other hand, if you want to become an expert, there is no time like the present.  Start joining discord servers and following twitter handles of people whose opinions you value.  Learn about buying new mints and start purchasing to gain experience.  It’s a new world, and a dedicated and intelligent person can become pretty intelligent in the space pretty quickly.  Finally, buying the market is very hard right now, as there are not broadly weighted funds, but there are still options, such as buying a sampling of some of the highest valued collections of NFTs.

The one other consideration is if you want to use an NFT beyond investing.  There seem to be some great benefits of owning certain NFTs — take a look — you may want some of these, even putting aside the investing side.

It’s exciting when a new asset class.  Hop in if it’s right for you.