Lately, NFTs have become an unavoidable topic. And it’s quite understandable since they are making people rich much faster than you can blink. With artists such as Pak selling a single NFT for a whopping US$91.8 million and Beeple fetching US$69.3 million from just one piece, such eye-watering sums are bound to capture the attention of the global masses.
Different NFT ideas succeed for varying reasons, and vice versa. So before you hurriedly jump in for some quick gains, you might want to consider buying NFT stocks instead. Let’s define NFT stocks, discuss their advantages, list some of the top ones and talk precautions:
What are NFT stocks?
These are shares in publicly-traded companies that invest in NFTs and other innovations in the NFT ecosystem like marketplaces. An NFT stock may also be a share in a privately-owned company that has invested in the NFT space.Please keep in mind that the NFT space is a nascent one, so you’ll hardly find a publicly-traded company that is all about NFTs.
Most of the companies we will talk about as NFT stocks are already established and doing quite well in other industries like technology, food and beverages, fashion, and more.
Why opt for NFT stocks?
NFT stocks can be a better option for some enthusiasts entering the NFT space because:
- They are subject to a more concrete regulatory framework. When you directly own NFTs, oftentimes, the issuers are anonymous. So if there are copyright issues, insider trading, or some other kind of fraud, it might be harder to find someone to hold accountable.
With NFT stocks, there are executives behind every deal, and they have to comply with strict rules set by the respective securities regulators in their region. In that sense, you have more legal recourse if the company you invested in doesn’t keep its promises.
- NFT stocks may be underpinned by greater expertise and resources. Buying NFTs on your own can be very expensive. Additionally, you may not have enough time and skill to conduct thorough research and always pick the next big NFT project.
These factors make it harder for you to win. But if you invest in an NFT stock, the firm can throw a big budget at these challenges, giving you a better chance of profiting from NFTs.
- NFT stocks are more secure. As the NFT space becomes more lucrative, the number of scams and hacks also increases. So as a retail investor without a huge cybersecurity budget, holding an NFT in a self-custody wallet might be extra risky as its value increases.
Luckily, companies holding NFTs can invest more in cybersecurity thus securing them, so on that note, it might be safer to have indirect exposure through NFT stocks.
- NFT stocks make it easier to diversify your NFT investment. Even with stock in just one company, you can have a finger in several NFT pies. Moreover, you can also buy different NFT stocks and benefit from the different companies’ investment philosophies.
So if one company misses out on a good pick, another one might spot it. In essence, you’re like an investor buying into an index instead of just one or two companies in that index. This increases the chances of profiting because if one NFT underperforms, others might excel.
What are the top NFT stocks?
Now that you have a decent idea of what makes NFT stocks a solid investment option, let’s talk about some of the best NFT stocks to buy:
Firstly, eBay already has significant global brand recognition in the e-commerce space. This helps give it credibility and a massive head start in customer acquisition when entering new markets. Think about it, would you rather buy original sneakers from the shop that already sells you original T-shirts, or from some random guy with a stand on the street? Exactly.
Secondly, eBay’s involvement in the NFT industry is primarily as a marketplace provider. This means they earn from facilitating trade rather than speculating on the future price of a specific NFT. eBay charges a 5% flat commission on the total sale amount. So as they see more customers trading and more NFTs selling for large amounts, they make more.
Thirdly, eBay’s NFT marketplace is one of the few that support traditional payments, making it convenient for those still wrapping their heads around the dynamics of crypto payments.
This is one of those NFT stocks with the highest number of solid selling points. For starters, if you’re a staunch NFT enthusiast interested in NFTs and not just the support infrastructure, Draftkings might be the pick for you. This is because Draftkings rolls out tokens frequently.
They are already working with Autograph to offer collections signed by revered sports personalities such as Tom Brady. So not only will they attract genuine sports fans, but also other people who believe the celebrity status of sports personalities is worth an investment.
And if that’s not enough, Draftkings has its roots in sports betting and sports fantasy contests, meaning it already has products that attract many clients. And if they somehow find a way to merge them with NFTs, creating new competitions with collectibles as prizes, they’ll rack up plenty of money. But if you’re the more pragmatic type who’s into products with clear utility, Draftkings also has a marketplace that facilitates peer-to-peer NFT trading.
Coinbase is one of the top crypto exchanges in the United States, with more than 8.8 million active monthly users. Having launched the beta version of their NFT marketplace in April 2022, the platform garnered 900 transactions amounting to US$210,000 in sales volume.
Coinbase NFT’s sales volume hit US$668,668 after two weeks, attributed to 1,287 active users. While the current market downturn has caused many to leave the crypto industry, Coinbase is still one of the top three crypto exchanges by trading volume globally.
In the long run, it will be perfectly positioned to attract more NFT traders from its existing pool of crypto traders and the newcomers. The Ethereum-based Coinbase NFT will enable people to mint NFTs and has partnerships with prominent NFT collections in the pipeline.
Cloudflare is another NFT stock that is particularly appealing due to its foundation being in tech. This company runs a content delivery network and secures multiple web and application resources, serving 32 million HTTP requests per second on average. The company has already capitalized on this by creating an intersection between its servers and the NFT world.
They enable you to create an NFT on Ethereum to represent a video or other content available via its Cloudflare Stream offering. NFT tech is commended for changing the way ownership is verified digitally and the implementation of the owner’s rights. One common idea was that whenever a song, video, or some other piece of art is sold, the original owner can get some of the proceeds. Now, Cloudflare might achieve the same for streaming.
Takung Art is an online trading platform that enables people to secure partial ownership of fine art, primarily from Asia. From paintings to jewelry and more, investors and collectors can buy and sell minus the forgery and price manipulation common in such markets.
Takung Art only recently launched its NFT marketplace and intends to provide consultancy services for other firms looking to venture into NFTs. Currently, the stock is down a lot, which scares many. But depending on your perspective, it could be the perfect “get in on the ground” opportunity unlike many of the larger NFT stocks that are already very expensive.
Coupled with its recent partnership with FTX, the stock becomes more interesting. These two have launched an NFT marketplace geared to esteemed sports and entertainment brands. Dolphin Entertainment is working on projects with Hall of Fame Resort and Entertainment.
What are the other notable NFT stocks?
Many other respected brands have ventured into NFTs, including Nike, McDonalds, Heineken, Playboy, and more. You can also look into Oriental Culture Holdings, Funko, CurrencyWorks, Hasbro, and the Defiance NFT Exchange-Traded Fund (ETF) for exposure to the NFT industry.
What are the extra tips to note on NFT stocks?
Before you settle on NFT stocks to invest in, do the same things you’d do for regular stocks:
- Find out whether the company pays dividends or not
- Analyze the stock’s performance in recent years, especially during market downturns
As for the NFT-specific due diligence:
- Try and find out which NFT creators the company is partnering with, or which NFTs they are buying (yes, humans run companies, so they aren’t immune to FOMO and “hopium”). In fact, big companies often get it wrong when venturing into new spaces.
- Keep track of the ownership and partnerships pertaining to the NFT part of the company. You don’t want to wake up one day wondering why your NFT stock isn’t going up only to find out that they sold their NFT-related assets a while back or have minor shares in them.
What steps must you take prior to investing?
- Conduct research and create an NFT stocks list with your preferences
- Look through various online trading platforms and find out the NFT stocks they have
- Select the NFT stocks you’re interested in and open an account with them
- Perform the necessary Know-Your-Customer steps and other verification processes
- Deposit funds into your trading account and purchase shares of the NFT stocks you like
Investing in companies is quite tricky and even more so if they are also venturing into new businesses. Don’t always stick to the big names. Many are just using NFTs as a gimmick to endear themselves to younger clients. They probably won’t develop their NFT wing much.
Try spreading out your money across established brands and a few underdogs who seem very passionate. The smaller companies could surprise you. If you feel you’re ready to buy some NFT stocks, register on Charles Schwab and start filling your bag.
Gerald Ainomugisha is a freelance Content Solutions Provider (CSP) offering both content and copy writing services for businesses of all kinds, especially in the niches of management, marketing and technology.