If you’ve been paying attention to the cryptocurrency market or the blockchain space, the chances are that you’ve heard of the term non-fungible tokens or NFTs. The NFT market – digital assets like art, video, collectables, music or in-game assets – rose to prominence in 2021. According to Reuters, in the first six months of the 2021 year, the sales volume of NFTs grew from $59.2 million to $2.6 billion.
As dollars and cryptocurrencies flow into the NFT market, companies are trying to figure out how they will capitalize on this revolutionary technology. So how can legacy companies profit from the NFT market? This article looks at NFT stocks and how legacy companies are leveraging them to create more value.
What are NFT Stocks?
An NFT is a digital representation of real-world assets. As mentioned before, currently, most NFTs are used to represent art, music, in-game assets, images and brands.
While cryptocurrencies like bitcoin are said to be fungible, NFT are non-fungible. Bitcoin is considered a fungible asset because each bitcoin has the same value as another bitcoin. NFTs, on the other hand, are assets that cannot be exchanged for each other. Each one is unique and has its properties encoded into the blockchain.
There are a plethora of NFTs, each offering its own unique set of features. For instance, The Bored Ape Yacht Club allows you to own one of 10,000 unique Ape NFTs and gives you member access to an exclusive club of similar NFT owners. This is a great example of some of the ways NFTs are providing more value to NFT holders. Users hold it for sentimental value and the benefits that come with owning that particular NFT.
So, if NFT is a digital representation of real-world assets, what are NFT stocks?
Various companies look to leverage NFTs by either creating NFT or by investing in the NFT market. Some of these companies are listed as public companies, and you can own their stocks without actually owning any NFTs. So, by investing in these companies’ stocks, you are investing in NFT stocks. In short, NFT stocks are stocks that belong to a company working in the NFT space, whether by seeking to grow their business infrastructure for NFTs, launching their own NFTs or creating sites to sell NFTs. While NFT stocks have not been as popular as NFTs, they are slowly gaining traction as more companies diversify their business models to leverage NFTs.
How relevant are NFT Stocks?
Like any other hot consumer trend, investors and organizations are more than eager to participate in NFTs. Because of this, companies of all sizes are entering into the NFT space. For instance, VISA purchased a $150,000 NFT with plans to understand the technology better before offering NFT related services to their users. According to Cryptonomist, Shopify now allows a select group of merchants to sell NFTs through mainstream marketplaces.
While their business models might be different, both companies have made attempts to integrate NFTs. Cryptocurrencies like bitcoin are currently facing volatility, with irregular Bull and Bear runs. However, despite this, the interest in the underlying technology, blockchain, remains high.
NFTs VS NFT Stocks: What’s the difference?
The obvious difference is that, with NFTs, you own the digital asset itself. However, with NFT stocks, you are investing in a specific company associated with the NFT space. It’s exactly the same premise as owning Tesla stock or a Tesla car.
Investing in NFTs is a compelling opportunity because they can be resold for enormous profits. Additionally, no fraud or theft is possible once you receive an NFT in your wallet since the transactions are recorded on the blockchain. However, they are also a tricky investment because their price can drop over a short period. Moreover, the price of the crypto used to purchase the NFT, e.g. ETH, can also plummet, taking the NFTs down with it.
NFT stocks, on the other hand, depend on the valuation of a company, with real-world assets, and other asset classes not tagged to the crypto market. AS such, this makes NFT stocks more stable when compared to NFTs.
iii. Tax Implications
Additionally, you should note that cryptocurrencies and NFTS have distinct tax implications. While they are subject to capital gains tax, they are also classified as collectables. This means that NFT holders may not receive the long term capital gains rates that apply to traditional stocks. As such, NFT holders may end up being taxed at higher rates.
Considering the benefits and challenges of both concepts, NFT stocks have found a great balance between NFTs and traditional stocks. As a result, it has introduced a new way to tap into the rise of NFTs without actually owning an NFT or being subjected to high volatility. Here is a list of 5 NFT stocks that have been mentioned as the best in the market:
Top 5 NFT Stocks to invest in
DrafKing (DKNG) is an American daily fantasy sports contest and sports betting platform. Recently, Draftking launched an NFT marketplace for sport-related NFTs so that users can buy, sell and hold sport-related NFTs. If sports NFTs take off, this would be a huge benefit to Drafking stockholders, and it might also be the smartest move by Draftking.
Based in California, Cloudflare is a cloud-based platform with Enterprise Solutions. In April 2021, Cloudflare announced that its video-sharing platform would now support NFTs such as GIFs, tweets and other artistic images. Additionally, video NFTs could be the future and Cloudflare is strategically positioned to take advantage of any future developments in the NFT market.
Founded in 1995, eBay is a multibillion-dollar e-commerce business with a market cap of $45.48 billion. Over the years, it has facilitated buying and selling of products via its platform. While it still prefers dollar transactions over crypto transactions, eBay recently took an interest in the NFT market. However, there has not been much change in its stock price, and the future is yet to be decided by how they leverage NFTs.
Funko is an American company that manufactures licensed and limited pop culture collectables that include Vinyl Figurines and Bobbleheads. According to BusinessWire, Funko recently purchased majority ownership in TokenWave, a developer of TokenHead, a mobile and web app for tracking NFT holdings. Funko also plans to regularly create NFT assets that will be sold on the WAX platform.
5. Dolphin Entertainment
Dolphin Entertainment is a film and television production company located in Florida. Recently the company launched Dolphin Digital Studios, an NFT division that produces NFTs both for itself and other clients. Their initial NFT assets revolve around professional football, but they are diversifying their services to other major sports and entertainment brands.
The Future of NFT Stocks
For now, the list of NFT stocks is limited. However, this niche will definitely expand as more companies will find ways to integrate NFT into their business structure.
NFT stocks have introduced a new way of investing where you do not only invest in NFTs but also in the underlying business. For instance, with eBay, you invest in the NFT assets and services and on the e-commerce platform. Therefore, a threat to the NFT market does not mean a threat to NFT stocks. NFT stocks are pegged to a company’s value and utility. As such, they are becoming increasingly popular to investors interested in the crypto market who are sceptical of the volatility in the crypto market.