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Will Non-Fungible Tokens Hold Value?

By June 23, 2021September 7th, 2021No Comments
Will NFTs hold value

Being worried about the ever-present potential of an NFTs value to decline in the future is a valid concern.

Nobody wants to purchase an NFT, only to see its price crash later on.

When purchasing an NFT, most buyers secretly hope two things: that it will “hold the value” it had at the time of purchase; or that it will outright appreciate in value. But for this to happen, it’s important pick and choose NFTs methodically.

Will NFTs hold valueThe NFTs we purchase will more likely hold their value if they are scarce. Scarcity is what many have in the back of their minds when shopping for NFTs. Unique Editions and Unique Series are attractive propositions for collectors.

It is possible to assess the scarcity of NFTs manually by looking at on-chain data, however it is much more convenient to use real-time NFT Market Data by providers such as NFTEXP.

Will NFTs hold valueNFTEXP has created two indicators that can be used to rate NFTs and assess their scarcity: Asset Rating (AR) and Trait Rating (TR). AR and TR are metrics that indicate the real rarity of an asset, with a score of 100 being rarest and 0 being the least rare.

AR and TR are metrics that show rarity across collections. They are helpful tools for collectors who wish to make an educated judgment about NFT assets, in order to determine if they will hold their value or not.

Waifusion #2143, for example, has an Asset Rating of 82 – this NFT, being in the top 18% across all collections, could represent an excellent purchase opportunity, especially if obtained at a discount on a secondary market such as OpenSea or Rarible.

Will NFTs hold valueThe NFTs you purchase may be more likely to hold value (or even appreciate) if they can be used in Decentralized Finance protocols – which are designed to “unlock” the usability of NFTs.

We are seeing an increase in use of NFTs in Decentralised Finance (DeFi). NFTs used in DeFi protocols could be given a “Usability Premium” (a direct consequence of increased demand) and perhaps not only hold their value – potentially appreciate relatively to their purchase price.

Will NFTs hold valueDeFi lenders such as NFTFI, which specialises in NFT Lending, Hoard Exchange, a marketplace that makes it possible to rent and lend NFTs, and Stater Finance, an NFT Lending marketplace, are now being approached by customers seeking to put up newly minted NFT art collections as collateral. NFTs that can be used as collateral may be sought more than those that cannot be used in this manner – a “Usability Premium” may be attached to these assets. The NFTs that can be leased for an arbitrary amount of time may also benefit from increased demand.

These are oftentimes the NFTs that investors seek. These NFTs, thanks to their Scarcity expressed in AR and TR terms, and thanks to the fact that they can be used in various DeFi protocols, may “hold their value” and could be the most likely appreciate in value due to increased demand.

Not financial advice, do your own research (disclaimer).

Lukas Merville

Lukas Merville

Born and raised in Montreal, Canada, Lukas Merville graduated in Literary Studies at the University of Quebec in Montreal (UQAM) and in Art History at the University of Montreal. He then flew to Japan to complete an Art Internship at Shizuoka's Center for Creative Communications (CCC) under the guidance of Curator Pamela Jewell. Lukas is a patient and prolific writer, having published numerous articles and books, mostly on the Phenomenology of the Artistic Experience and Aesthetics. His approach is inspired by Wolfgang Iser's Phenomenological method applied to the reading experience, Husserl and Ingarden.