Why are NFTs so Expensive? Understand the Values of the Market

NFTs are, for sure, one of the markets of the moment. Many people are opening their eyes to new tendencies and learning to invest in them. But a question that always appears when you start to study NFTs is why are NFTs so expensive? Even though this is a very interesting question, it is not that simple to answer and, to do so, we will need to look at several factors related to NFTs.

Before we start explaining the reasons behind NFTs prices, we need you to understand exactly what an NFT is. So, before we start, let’s talk a little bit about the Non-Fungible Tokens themselves.

What is an NFT

NFTs can be literally anything, and when we say anything, we mean it, so you can be very imaginative. They are all kinds of digital assets and digital objects, such as digital art, digital space or digital land, videos, tweets, simple images, collections, and other digital objects.

It’s not what the digital asset is that determines if it’s an NFT or not, but a very important characteristic, that is: the item, no matter what it is, MUST BE unique. And that’s the thing! The digital art, digital space, and other digital objects you buy are unique, no matter how similar they are to any other non-fungible asset you may see. In other words, only one person will have it.

So, as the term non-fungible already suggests, an NFT is something that can’t be replaced or exchanged for something of equal value. Therefore, it cannot be replaced. A one-pound coin, for instance, is something fungible. You can exchange it for another coin in both, the physical world and virtual universe, and have the same value, no matter if the coins are different. 

How Do I Prove the Digital Art or Digital Space Is Mine? 

Since you already know what an NFT is, you may ask how to prove you are the owner of the digital assets. After all, think about a digital painting sold to you by a famous artist. Anyone could get there, take a print of this picture online, and have the exact painting to use the way they want. 

The same can happen with several other digital assets, not just with a particular painting. The first ever tweet was transformed into an NFT and sold for close to $3 million. In essence, it is just a tweet, so everyone could print it.

The first ever tweet was transformed into an NFT

Well, this would configure a fake digital asset as the ownership of digital objects depends on the blockchain. This is how you prove that any digital collectibles are yours, and everybody will know you are the only owner. This new technology holds the ownership history in a giant database.

 Think about Mona Lisa. It has been printed a million times but only the original one has true value. NFTs work with a similar approach. The blockchain will ensure your safety on that matter. 

What is Blockchain?

Blockchain technology is a system of information recording created in a way that is practically impossible to change or hack. This giant database maintained by a great number of people on their computers is what makes the official register of all your NFTs. This digital ledger of transactions is distributed through all the computers that compound the network. It is strong and extremely safe.

Why Are NFTs so Expensive? Main Reasons

Now that we already have established what exactly are the non-fungible tokens, we can finally talk about the reasons that make some of them get to an astronomical price.

No Value At All in Most Cases

The first thing to say about that is not all NFTs are expensive. In fact, most NFTs don’t get practically any value at all, even though all of them are one of a kind and cannot be replaced. So, why do people invest so much money in it? Well, we only hear of the non-fungible tokens that get worth a lot.

In other words, It is always a famous collection, of important digital assets related to the virtual world. It’s like physical art and other physical things, we don’t hear about all the paintings being sold for normal prices, we only hear about the high values.

That’s What People Want to Pay

Many people, mainly before the NFT market explosion bought NFTs because they were really interested in having them. When something is new, original, and innovative it some way, it’s normal that people may want it and decide to pay a higher price.

It’s extremely hard to determine value over a digital object such as a digital painting, even more in a scenario where nothing has identical value, even more considering this is new technology. It is normal to see that, for any reason, a non-fungible token ends up becoming important to someone. Considering that is acceptable to see a person buying it for large sums.

The Bubble Effect

Another important factor that is probably making NFTs expensive is the bubble effect. These bubbles tend when a market starts to gain evidence because of artists or because one or another digital object becomes a record sale.

This makes a lot of people start investing in the market without completely knowing it, with expectations of reselling the digital land or whatever they have bought. One example of NFT that passed for both aspects of the bubble effect is the famous collection called Bored Ape Yacht Club.

The Bubble Effect- Bored Ape Yacht Club

Celebrities like the star Justin Bieber and the football player Neymar are two examples of famous people who got their Bored Ape Yacht Club digital art. More than that, they paid millions to get it. Another example is the digital land sold in the Otherside Virtual World. Those who want a small part of virtual land had to pay more than $6,000 for each piece.

Metaverse Potential

Other NFTs get extremely valuable because they offer advantages in real life, inside an online game, or virtual world. Once again, the Otherside Metaverse is an example. Virtual goods related to it are expensive because people know how big the metaverse tendency may become, and they want to be a part of it.

 It is a new technology with great potential and when such technology appears people want to take advantage of it. The expectation is that people start to pay tens of millions for it soon. Otherside, for instance, is also created by the same company that created the Bored Ape Yacht Club, so you can imagine why these NFTs are valuable and are sold for a higher price than most. Some people even dream about the monkeys appearing as unique avatars.

Metaverse potential is a new digital life

A Metaverse is like a game or virtual world where people have unique avatar versions of themselves. It’s like a new digital life in a whole new world of unlimited possibilities. Even though we have no idea of how far it may go, many people have already paid thousands to ensure their space.

Real World Benefits

Besides the rising dream of digital life, many NFTs may ensure their owners specific advantages in real life. And, for such advantages, people may want to pay a lot of money. One example is the music album When You See Yourself, by the Band Kings of Leon,  which had more than $ 2milion in sales. Besides the complete track of songs, the album’s acquiescence ensured the owner the possibility of watching the next shows of the group in special places without paying more for it. 

NFTs: The Risk Behind the NFT World

A lot of people are getting delusional about NFT but we recommend you be extremely careful. Of course, NFTs are awesome and new, so it has a lot of unexplored potential. But their values are extremely hard to estimate and the markets tend to be volatile. Besides, is not absurd to say that 95% of all NFTs are faded to fail and disappear, which will make a lot of people lose money.

Study and Connsicience are the Keys

As mentioned before, NFTs NFTs are extremely volatile and hard to predict but, as in any kind of market, there are patterns and situations that will interfere and can make NFTs valorize. In the same way, other factors can make the values go down. It is not like a physical house or investment in big companies, that tend to valorize with time. Things can go crazy very fast. 

Examples of factors that can interfere may be celebrities buying NFTs, countries’ economical situations, and government measures, like new taxes. That way, we recommend you to only buy NFTs with money you are not afraid of losing. Besides that, watch for the factors already mentioned and for others that you may think will interfere in the search for NFTs, crypto coin value, such as BitCoin is, surely, another thing to pay attention to, for instance.

NFTs are extremely volatile.

Look for the Right Type of NFT

Of course, you will find some NFTs that seem to be a little foolish but ended up becoming famous pieces of well-known collections. The thing is that they are one in millions. More and more, the NFTs that will make success are the ones that are a part of consistent projects or that offer real benefits for people, companies, or the world itself. 

That way, we recommend you look for creative ideas or projects that you believe could work. This is what makes metaverse-related NFTs so interesting, for instance. Metaverse, nowadays, isn’t something completely established, which everybody knows and participates in. But everybody understands the potential and the possible return it has, so everybody wants to buy NFTs. 

NFTs of rising companies related to the digital world, or from big and established organizations are two good calls. Besides that NFT games, Metaverse, or NFTs related to environmental projects can also be a great start.

Conclusions

From bubble effect to Metaverse possibilities, you already know what are the main factors responsible for the explosion in the prices of NFTs. Besides that, you already know other factors that surely impact the development of this complicated yet very rewarding market.

If you need more information, texts, tips, and guides about the NFT world and various other topics related to games, the digital world, and business development, take a look at GamerSEO! Besides that, if you need help with content production for your site, get in touch with us! We will be pleased to help!  

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