Since its introduction, the NFT market has been met with skepticism, but several celebrities have begun to make significant investments in non-fungible tokens. Naturally, anything that a high-profile individual does will get substantial media attention, which has increased public interest in the NFT market. The question that early adopters of NFTs are asking is whether or not this celebrity-driven growth is a good thing because it represents impending changes that the market is undergoing.
Most non-fungible tokens are connected to the idea of artwork, which is where a majority of their appeal lies. It's an exciting prospect for many to invest in a constantly developing market because of the tremendous potential for growth. Other blockchain-based prospects have "gone to the moon," and NFT investors want to get in on the craze before it pops off.
Why Are NFTs Taking Such a Hold?
The NFT market has experienced tremendous growth in recent years, but studies have shown that this growth is not how one traditionally would expect it to occur. Rather than more people accepting and investing in NFTs, the market sees a smaller, more passionate base of investors go all-in, each spending a great deal of money on these tokens. So then, the challenge is in making the NFT trade less of a niche market and more accessible to average consumers.
The NFT market is highly speculative, and like any speculative system, it will be hit-or-miss. However, there is an appeal to these tokens to buyers that is almost inexplicable. Perhaps it is the allure of the mystery, but trends show that people are buying NFTs aren't for their physical value—it's for more complex, abstract reasons that have to deal with the perception they have.
Many have compared the NFT market to the market for traditional physical collectibles. It's easy to think of these digital collectibles as virtual trading cards; they are easy to duplicate, but only few authentic copies are produced. This scarcity creates demand, and demand is a fundamental aspect of value creation. However, some factors make NFT trading exponentially different from trading physical collectibles.
One of the main benefits of NFTs is that they can be highly liquid assets. Trade can be conducted nearly instantaneously thanks to the blockchain technology these assets are hosted upon. It takes mere seconds to transfer ownership between parties, and there is then a verifiable record of the transaction stored on the blockchain. On the other hand, transactions involving physical collectibles can be inconvenient and tricky to organize and track.
Why Celebrities Care About NFTs
Recent trends have seen prominent celebrities break into the NFT market and spread the word about their ownership of these assets. But since we don't often see celebrities flaunting their traditional investments unless they are a major stakeholder in the company, why are they so interested in getting the word out there about NFTs? Ultimately, it is because the value of their asset will increase with the more people there are on the NFT market.
Demand and prices go hand-in-hand, and celebrity endorsements are one of the oldest tricks in the book to create demand. If an average consumer sees that a celebrity they are a fan of is an owner of a particular line of NFTs, they will see that NFT as desirable and fashionable. They will invest in that line, and then the price of that NFT line will continue to increase, appreciating over time.
An article in Polygon commented on this unique trend, "Scarcity, speculation, and hype tend to attract a certain kind of buyer. The buyer's profile (or the artist) can be a kind of feedback loop that makes the NFT more desirable." This celebrity boom in NFTs will be a big part of what helps the market enter the mainstream. Even if the average consumer doesn't fully understand what they are putting their money into, they will do so if only to keep up with the trends.
But there are also significant changes in the NFT market that will make them a much more desirable prospect to the average consumer. Critics of NFTs are very vocal that they don't have an aspect of utility. However, NFTs are turning into something more than just a string of code. Owning an NFT endows the purchaser with exclusivity that serves as a significant draw for would-be investors who weren't yet sold on the idea of these digital assets. People want to feel like they belong to a part of something greater than themselves, and these NFT communities may now offer that.
The Utility of NFTs
Several platforms are now enabling NFT owners to integrate their tokens. Twitter has recently opened up the capability for NFT owners to verify their token ownership as part of their profile picture. This is a big step in increasing the overall visibility of NFTs. Other integrations that are being suggested as near possibilities include integrating the artwork associated with your token into video games as a player's avatar, which will make these NFTs even more valuable in the future.
The benefits that NFTs are beginning to offer to owners in the physical world are perhaps more interesting. Recent developments have seen benefits come up with NFTs that resemble being part of an exclusive club, with the token acting as your membership card. It's a development in the NFT space that will have significant implications on the future viability of the market because it could cause massive expansion by attracting new investors.
One of the most prominent examples is the Bored Ape Yacht Club. Being an owner of a Bored Ape NFT entitles an individual to certain benefits that come along with it. These benefits are a big part of attracting celebrities to the NFT market. The potential to be a part of something alongside a star may be pretty appealing to average consumers. Soon, this type of real-world benefit will be necessary to make your NFT stand out.
The Value of NFTs
There are also some more fundamental reasons people could find themselves attracted to NFTs. Just as someone may be interested in purchasing a physical piece of artwork from an artist they like, they may find themselves interested in investing in NFTs minted by some of their favorite creators. Communities are quickly popping up surrounding these tokens, many of which are directly connected to the identity and brand of the token. Famous artists have created some of the most in-demand NFTs.
Some brands have even tried to enter the NFT space and the result was mixed success. These well-known companies hoped to capitalize on the NFT craze and consumers' loyalty to their brands to make themselves seem more in on the latest trends. However, their failures show that investors aren't simply looking for anything that has been tokenized—they are looking for something specific in their investments.
One of the main things investors are looking for is future value in their tokens. Sure, there's a novelty in buying an NFT minted by Taco Bell, but what will that offer to create demand? It's not connected to a piece of artwork by a widely respected artist, and there are no exclusive benefits to owning that token. For an NFT to be successful, there needs to be some justification for (and value tied to) its existence and its purchase.
NFTs also need to offer their owner with some feeling of status. This resembles how physical artwork is purchased. Owning a painting made by a famous painter is a sign of wealth and social status, so investors are looking for tokens that can do the same thing for them. The most popular NFTs become expensive because people want the feeling of importance that comes with possessing them.
But the great thing about the NFT market is that the decentralized nature of blockchain technology eliminates the gatekeepers from transactions. Although the price points for several of the most in-demand tokens can be cost-prohibitive and prevent certain individuals from engaging in trade, there are no longer the demands of "high society" to meet even to be allowed to participate in the art world.
There is also an allure to being a part of something that people don't fully understand. NFTs are in their early stages, and it is a constantly changing field. Many Americans aren't even familiar with how these tokens work. Because of this, some see owners of NFTs as innovators ahead of the pack in adopting new technologies. They embrace trends before they catch on with the public. People will want to be part of this group of early adopters.
There are many changes happening within the world NFTs, which has brought celebrity attention to the market. With these high-profile individuals talking about their investments so extensively, current investors should expect the demand for these tokens to increase. It's a basic economic principle—when there is a greater demand, the value of those scarce resources increases. This step needs to be taken to push this emerging market forward into the mainstream.