As one thinks about investments, stocks, bonds and cash come to mind. For the more sophisticated, derivatives and private markets are also fertile hunting grounds. Some individuals have also milked returns from the most esoteric and uncommon of assets, such as cryptocurrency.
Technology is taking over everything and a new breed of investments has begun to emerge. They range from cryptocurrency to mobile apps to unique digital collectibles such as Non-Fungible Tokens (NFTs).This is the weird, wonderful world of new alternative assets made possible by the Internet.
24/7 online marketplaces allow people to buy and sell businesses, mobile apps and cryptocurrency with just a few clicks. New alternative investments seem like an irreversible trend, but they are not without its risks. A lack of regulation and poor understanding of investments are some issues that often emerge. So which ones are simply passing fads, and which ones are here to stay?
New assets and alternative platforms
The emergence of alternative platforms and alternative assets (in themselves), is a positive thing. Alternative platforms typically make it easier for users to obtain what is a desired outcome.
The existence of alternative assets similarly provides a consumer with a greater choice of goods and services. Instead of investing in conventional art (represented in physical form), the consumer has the option of purchasing art in “digital” form.
A major trend in the digital assets space is tokenisation, which is strongly believed by investors that they could fundamentally change the way people invest in assets. It creates greater access to both conventional and unconventional assets.
Tokenisation refers to the issuance of a blockchain security token that represents a real tradeable asset, from fine art to buildings to even livestock.
Key advantages of this process include greater liquidity when tokens are traded on a secondary market, faster and cheaper transactions due to automation, and more transparency due to immutable records.
Therein lies the appeal of non-fungible tokens (NFTs), which contains an unalterable record of what makes that particular asset special. NFTs have been used to represent ownership of digital art, collectible game cards, sneakers and even virtual pets. In October 2020, a collection of NFT-based Batman artwork was auctioned for a record $200,000 on marketplace, MakersPlace. Non-Fungible Tokens that are extremely rare, thus their higher value is created on rarity.
There is still plenty of work to be done prior to the NFT ecosystem becoming remotely mainstream. The floor is still being set in terms of value and this is seen as the best time to become involved from a monetary sense.