What are NFTs and how can you trade them?

NFTs have been at the heart of (too) many discussions, mostly between participants that still have trouble explaining what on earth are NFTs and why the fuss around them.

Now it’s our turn to try. So here we go, nice and simple.

NFT means non-fungible token, i.e. a single item that is not interchangeable. For example, money is fungible (my dollar bill has exactly the same value as yours), but a work of art is non-fungible because it is unique.

The items range from pictures, memes, digital artwork and any other artform stored in a digital file to which a digital certificate of authenticity has been attached. If you want to get more technical, let’s say an NFT is a cryptographic token stored on a blockchain.

And this is where it gets interesting.

Apart from NFTs being referred to as crypto art, what blockchain also brings to the mix is the uniqueness inherent to it: each NFT and by extension their digital file are unique. When you buy an NFT you buy exclusive ownership of the original work included in this NFT.

What’s more, no authority or computer or individual can cancel your ownership to an NFT or recreate the same.

How are NFTs different from Bitcoin?

  • Value: NFT depends on the value of its underlying asset, BTC depends on market fluctuations.
  • Token type: an NFT has a unique value, while every BTC tokens have the same value.
  • Object : an NFT is linked to an asset, a BTC is considered as currency.

But what’s the point? You might ask.

Well, for a buyer, the NFT helps support an artist, by collecting digital works of art and speculating on them. For an artist, an NFT makes it possible to sell a digital file just like a physical artwork.

Disruptive, tradeable and so GenZ.

People have realized that a unique digital object can have significant monetary value, because just like a work of art, it is unique and tradeable. This is why turning digital images into assets has suddenly generated deals hitting $22 billion in 2021, up from just $100 million in 2020.

The highest NFT sale recorded this year was that of Everydays: The First 5000 days, a digital collage by American artist Beeple which sold at an auction for 88.7 million dollars in March 2021. The transaction made it one of the most valuable works of art ever sold by a living artist.

Other multimillion-dollar sales include Bored Ape Yacht Club (BAYC), a collection of 10,000 NFTs that depicts comic book monkeys in thousands of different ways, all of which represented a transaction volume of more than one billion dollars.

NFTs also opened the doors to the metaverse and the communities created around works of art, which didn’t go unnoticed by major brands like Nike, who announced the creation of its own world, Nikeland, in which you can buy NFTs in order to dress up your virtual character.

How can CFD traders jump on the train?

With NFT valuations going wild and the open and unregulated nature of this emerging market, the inherent volatility is a pull factor for derivatives trading.

Currently, the easiest way to proceed would be to trade stock CFDs in NFT-related companies. Given the growing interest in the token hype, the list is long, but here a few early adopters and first-movers who already invested significantly in NFTs: Mattel (MAT), Twitter (TWTR) Cloudflare (NET), Takung Art (TKAT), Funko (FNKO) and PLBY Group (PLBY).

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.

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