FACTORS OF SUCCESS AND RISKS AROUND NFTs (PART I)
Stephane Tadum
Stephane Tadum is a best-selling author and blockchain enthusiast with a passion for innovation. He’s a creative marketer and expert in cryptocurrency, having been one of the first to receive advanced training in bitcoin and blockchain at an American university in Switzerland. Stephane’s mission is to make complex cryptocurrency concepts accessible to everyone through his writing.
SUCCESS FACTORS AND RISKS AROUND NFTs (PART I)
NFTs have taken over the world, with skyrocketing prices and exploding global capitalization. But what explains this success, and what are the risks at stake? Discover the key factors that make NFTs an essential asset, such as FOMO, utility, and the popularity of authors, in this must-read article.
In our last article, we provided an empirical and non-exhaustive overview of the current and future applications of NFTs. However, before dedicating your energy and savings to these assets, it would be wise to understand the risks and success factors that characterize them. That’s why, in this article, we present the key success factors of NFTs as well as the related risks.
Factors that lead to Success
Although the genesis of NFTs dates back to 2011 with the BitDomains project, it became more apparent in 2017 with the implementation of the ERC 721 standard and the naming of NFTs. Between late 2017 and 2021, they experienced exceptional growth, with the involvement of traditional media and social networks.
This success is demonstrated by the sale of the NFT “The First 5000 Days,” a work by artist Beeple, for $69 million, and even the first tweet from the social network Twitter sold by Jack Dorsey for nearly $3 million. Why have the prices of NFTs skyrocketed and their global capitalization increased so rapidly?
Here are some reasons:
FOMO (Fear of Missing Out)
More than 90% of people who buy NFTs want to make a substantial profit, so massive buying can encourage a bullish impulse of certain collections from the start.
UTILITY OF NFTs
While the majority of current NFTs are drawings without intrinsic value, some collections are linked to specific elements such as virtual or physical lands, weapons in a game, access to a private club, and more. Major brands in fashion, automotive, electronics, telecommunications, luxury, and hospitality have also adopted NFT collections that bring value to users and are highly sought after in the market.
POPULARITY OF AUTHORS
Popular stars and personalities like CR7, Lionel Messi, Kylian Mbappé, LeBron James, Francis Ngannou, Snoop Dogg, Donald Trump, and many others are following the NFT trend with collections that, for the most part, are highly successful. This success is due to their popularity and the positive feeling that fans have about them.
PREVIOUS SUCCESS OF THE TEAM BEHIND THE PROJECT
Collections like Bored Ape Yacht Club (BAYC) experienced massive success in 2022, and in late 2022, Larva Lab launched a second collection, Mutang Ape Yacht Club (MAYC), which was also very successful. Buyers rely on these elements to deduce that they can make a profit with a second collection if the first one launched by the same company was successful.
As with any investment, NFTs also have risks to consider before diving in. This aspect will be developed in the next article to make this topic more accessible.
That concludes this article. If you have any questions or would like to learn more about how NFTs can benefit your organization, please don’t hesitate to contact us.
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