NFT Is Riskier Investment than Crypto; Report Says
A recent research has investigated the world of NFTs, and the results indicate that investment in them is riskier than investment in crypto.
Recently, a 90-page report has been published about the findings of a research on NFTs. This research is about the amount of investment that is made in and around NFTs and then sitting on the investment, while liquidity of the investors’ assets just goes up in smokes, essentially.
The most important factors for investors, at least in the above-mentioned study, is liquidity. How fast can assets be liquidated?
In the disastrous 2008 financial breakdown, it became crystal clear to all investors that when the market goes down, so do buyers. In those situations, it becomes nearly impossible to liquate your assets before their value drops down to a point where all you will sustain is loss and more loss.
So, this is the perhaps the biggest reason why the study on NFTs concluded that they are a riskier option for investment than cryptocurrencies. Precisely because they are more difficult to liquidate.
It is clear that when an investor wants to sell their cryptocurrencies, whatever it may be, Counos X, Xbit Coin, Bitcoin, Ethereum, etc., they can just go and very easily liquidate that asset.
On the other hand, in the case of Non Fungible Tokens, it would be rather difficult, if not impossible, to turn your investment into liquid assets as quickly as you would want.
There are a number of reasons why this rate is lower for NFTs than for crypto. Firstly, the fact that non fungible assets are rare makes them more difficult to trade. Because the market for them is smaller. There is only one of each. On the other hand, fungible assets like cryptocurrencies, have a huge market.
Along the same lines, because the market is smaller, the NFT trades usually take place bilaterally between two traders alone. So, it is just difficult to find someone who would be willing to purchase your NFT.
So, all in all, the lower rate of liquidity for non-fungible assets, which could potentially be so low that selling them becomes rather impossible, at least in the short term, makes these assets a risky choice of investment in the world of Blockchain.
Would you be willing to take the risk?