Singapore — Non-fungible tokens (NFT for short) are digital assets that everyone wants to own these days. But are they really good or just a tendency to go through?
This is part of the series Yahoo Finance SingapOre focuses on various aspects of millennials and their finances. In this second part, we will discover if millennials are better off investing in NFTs.
What is an NFT?
For beginners, NFTs are basically a certificate of digital ownership and have received a lot of attention in recent years. The certificate has a unique record that is written to the blockchain’s fixed code (which cannot be modified) at creation or creation, and is an encrypted asset. It can take any form, from digital art pieces, in-game items, music, fashion items, and even virtual lands.
Simply put, NFTs are crypto assets that record ownership of digital files such as images, videos, and text. Anyone can create, or “mint”, an NFT, and token ownership usually does not grant ownership of the underlying item.
Profit is generated when you sell an NFT to someone who wants more NFTs and is willing to pay a higher price, which is usually paid in cryptocurrencies. The value of an NFT is highly dependent on emotions and hype, as it wants to sell it to aspiring buyers at a higher price. This puts the seller at risk of price fixing.
For example, Twitter CEO Jack Dorsey created an NFT from the first tweet and sold it for $ 2.9 million in early 2021. Digital artist Beeple has sold his NFT for $ 69 million and has become one of the most valuable living artists.
The usefulness of NFTs varies greatly around the world. For example, security tokens (to prove your identity) and governance tokens (to show your voting rights). You can buy NFTs with crypto coins, NFTs can also represent valuable stores, and some tokens are more valuable than others.
In fact, according to market tracker DappRadar, NFT sales in 2021 totaled $ 24.9 billion, compared to $ 94.9 million the previous year.
Speculative and unstable
Despite the vast number of people looking at NFTs, financial experts warn that unlike traditional financial assets, there is little or no basis for NFT valuations.
This is because the NFT’s asset price is determined by supply and demand. Traditional financial assets, on the other hand, create some sort of yield or value. For example, if you invest in a company’s stock and its business model is growing, the value of your investment will increase accordingly.
“NFTs do not have a fundamental economic benefit based on the economic activities of a company or country. Their payoff structure is speculative and volatile. You can win astronomically, but you can lose everything. “Chuin Ting Weber, CEO of Money Owl, a bionic financial advisor, said.
Therefore, Weber recommends that millennials consider buying NFTs primarily as a bet or venture. This means keeping your investment low and investing only what you are ready to lose.
Providing a similar analogy, Gavin Chia, Head of Managed Investment and Investment Advisory at Standard Chartered Bank Singapore, said: Create value or generate profit. “
Financial experts warn that the hope of achieving financial freedom through investing in NFTs is not a plan for financial success, as NFTs are speculative in nature.
Gregory Van, CEO of Endowus, a financial technology company based in Singapore, said:
“It’s important to build core assets through an investment strategy that is globally diversified, low cost, yet strategic and reluctant to allocate assets,” he added.
Van also advised that millennials investigate and validate the information they find online before taking action. This is especially true for high-risk investments such as NFTs.
Lack of regulation
The Monetary Authority of Singapore does not currently regulate activities related to NFTs, but reminded consumers that investing in digital tokens, including NFTs, is not suitable for private investors, Tharman Shanmugar said. Senior Minister Mugaratnam said in a written answer to the congressional question. February 15th.
“Especially for NFTs, the perception of their uniqueness helped raise prices, especially for NFTs,” said Tarman, chairman of the Monetary Authority of Singapore. You may be at risk of major losses. ” He said NFTs pose significant legal complexity and risks.
Despite the lack of regulation, some Singaporean companies can quickly get up to speed.
Ryde, Singapore’s ride hailing app, launched its first NFT project in April this year. NFTs, called “Ryde Pals,” offer owners special in-app benefits and benefits such as discounted rides and cash back. RydePals NFTs can also be traded on secondary NFT exchanges such as OpenSea.
“We want to deploy NFTs in a way that creates more realistic value, especially for the fast-growing market segment of cryptocurrencies,” said Ryde’s founder and chief executive officer. Terence Zou says.
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