What is the NFT?
Why investment professionals do not recommend investing in NFT market?
Why are major brokers not yet offering NFT instruments?
How can a trader benefit from the NFT market without investing the new market?
What is the NFT?
The non-fungible token (NFT) was an unknown concept until recently and has now become omnipresent. The value of NFTs depends on several factors such as their scarcity, the demand for the artwork. Additionally, even the artist, and for sure the prices of the underlying cryptocurrency used can affect the price. Online marketplaces that offer NFTs are powered by a blockchain. Currently, the Ethereum blockchain powers the most popular ones. When investors are looking to trade NFTs through one of the popular marketplaces, they will need Ethereum’s cryptocurrency, Ether.
NFT Market Valuation Reliability
Market professionals are still not convinced of the NFT market due to many reason such as:
1- In most cases NFTs market depends on nonnumerical methods for assets valuation. Therefore, it is hard to valuate the assets using the trusted and common methods for portfolios management.
2- Market professionals consider the NFTs market as a collectors market. Which means low liquidity and scarcity of interested investors in some tokens.
3- The NFTs market relies on a vast number of technologies. The immaturity of some of its major technologies like Metaverse raises reliability concerns about this market.
4- The lack of transparency in the NFTs market is one important concern, while this is not the case in FOREX, Equities, or bonds markets. Additionally, Large entities can manipulate the NFT market, while near to impossible to manipulate the conventional markets.
Numbers from NFT Market
Financial market professionals and participants believe in regulations, regulatory authorities. In addition to the fact that heavily regulated brokers are more trustworthy to invest with.
To avoid any regulatory conflicts, the unclear state of the NFT market, and to protect their clients from the unknown risks, major brokers tend not to run any NFT services.
At this point, someone might argue that spending on digital assets jumped to nearly $41 billion at the end of 2021 from just $1 billion in 2020. How can a trader or an investor benefit from the NFT market without investing in a such new market?
Cryptocurrencies and NFT Market
Statistically, a study used the dataset of the two largest cryptocurrency markets, Bitcoin and Ether, with the raw data obtained from coinmarketcap.com and the NFT data taken from secondary markets trades: Decentraland LAND tokens, CryptoPunk images, and Axie Infinity game characters, and Individual trade data sourced from nonfungible.com.
The results from the study show that when it comes to volatility in the cryptocurrency market, the spillover effect to NFT markets is lower, suggesting the NFT and the cryptocurrency market are distinct from each other and do not necessarily affect each other in a meaningful way.
When looking at it per currency, Despite the over all decline in Cryptocurrencies market, the currencies that gained the most or remained demanded over the last period are Ether and Solana. These two currencies are very much used to trade NFTs, draining liquidity from other currencies didn’t change the overall volume or value of the crypto market but shifted it from one currency to another.
Once this is clear, the way to benefit from the NFT market without investing in NFTs is by tracking the currencies used and demanded to trade in on the top largest NFT platforms.
This will allow traders to benefit from the leverage provided by brokers to trade crypto CFDs to maximize the returns and at the same time fish in previously explored waters.
The FOREX market is heavily regulated, provides higher liquidity, and keeps the risk within the known range. These are the main reasons investment professionals still prefer not to dive into the newborn NFT market.