Lately, NFTs have become an unavoidable topic. With major brands like Nike releasing NFT collections and artists like Beeple fetching US$69.3 million from just one piece, such eye-watering sums were bound to capture the attention of the masses.
But before you rush in for some quick gains, you might want to consider buying NFT stocks instead. In this article, we will define what NFT stocks are, discuss their advantages over directly buying NFTs, list some of the top stocks to keep an eye on, and finally talk about the precautions new buyers should take before entering the NFT stock market:
What are NFT stocks?
These are shares in publicly-traded companies that invest in NFTs and other innovations in the NFT ecosystem. 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 nascent, so you’ll hardly find a publicly-traded company that is all about NFTs. Most companies we’ll talk about as NFT stocks are already established in other industries like tech, 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, often, the issuers are anonymous. So if there are copyright issues, insider trading, or even 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 more significant 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 company can throw a massive 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 crafty 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 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. You can have a finger in several NFT pies even with stock in just one company. Moreover, you can also buy different NFT stocks and benefit from the various companies’ investment philosophies.
So if one company misses out on a good pick, another 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 investment underperforms, others might excel and offset that loss.
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:
It’s hard to deny that eBay has significant brand recognition in the e-commerce space. Given eBay’s position this gives them a major head start over lesser known competitors when it comes to customer acquisition in new markets.
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 payment methods, making it more convenient for those still wrapping their heads around the dynamics of crypto payments.
Is arguably 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 your pick.
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 customers. 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 straightforward utility, Draftkings also has a marketplace that facilitates peer-to-peer NFT trading.
Coinbase is one of the top crypto exchanges in the U.S., with over 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.
The data shows that once the worst is over, this company will be perfectly positioned to attract more NFT buyers from its existing pool of crypto traders and new users. It’s also worth noting that 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 technology is changing the way ownership is verified digitally and the implementation of the owner’s rights. One of the common ideas 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.
This online trading platform 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 also 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.
Dolphin Entertainment is already at an advantage in the NFT space due to its marketing prowess. This is encapsulated by subsidiaries like The Door, 42West, and Shore Fire Media. Coupled with its recent partnership with FTX, the stock becomes more interesting.
These two have launched an NFT marketplace mainly geared to esteemed sports and entertainment brands. Dolphin Entertainment is also working on NFT projects with Hall of Fame Resort and Entertainment.
Other notable NFT stocks
Many other respected brands have ventured into NFTs in one way or another, 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.
Extra tips 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:
· 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”). Remember that big companies often get it wrong when venturing into new spaces.
· Keep track of the ownership and partnerships of 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.
How to invest in NFT stocks
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1. Conduct research and create an NFT stocks list with your preferences
2. Look through various online trading platforms and find out the NFT stocks they have
3. Select one or more that have the NFT stocks you’re interested in and open an account with them
4. Perform the necessary Know-Your-Customer steps and other verification processes
5. Deposit funds into your trading account and purchase shares of the NFT stocks you like
Investing in companies is already quite tricky and even more so if they are venturing into new businesses. Don’t always stick to the big names. Many are using NFTs as a gimmick to endear themselves to younger customers. Meaning 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 Robinhood and start filling your bag.