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Non-Fungible Tokens (NFT’s)

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What are Non-Fungible Tokens (NFT’s)

  • Digital token created using blockchain. The technology is behind crypto’s.
  • Grants ‘ownership’ of something such as: Art, Music, In-game items, and even videos
  • Worth noting ownership is not what you might think it is. In some cases item is still available to other online, therefore can be viewed or even copied. It may not transfer copyright and is more like a digital bragging right.
  • NFT’s are still very new, they were first created 2014
  • However recently they are becoming very popular – $USD 13.7 million in sales in 1st half 2020, $2.5 Billion in sales in 1st Half 2021, They are fueled by stories of big prices for some NFT’s
  • Artists or creators initially sell the NFT’s to buyers as they can then be sold on secondary markets in the same way art is sold. For example, Christies the Auction house has auctioned a number of NFT’s. Specialist markets have grown for NFTs like OpenSea. They are typically traded for Cryptocurrencies.

NFTs as an Investment

  • Should be treated with caution
  • Market for NFT’s is extremely new. There is limited history on which to assess returns and potential risk. It is unclear whether they will stand the test of time.
  • Price driven purely by demand for the tokens, unlike shares or bonds, there is no economic basis for value. Similar to many ‘collectible’ investments like art, wine and cars.
  • Subject to capital gains taxes
  • Secondary Royalties. NFT creators can attach secondary royalty rights to an NFT which means that they can get a cut of future sales. This varies between 1 and 10% of sale price.

OVER TO YOU

Select a coin, try to be creative and avoid the main ones from those available on coindesk.com. Collect price data for your chosen coin since its inception.

Coin Desk

Make sure you select ALL and then press the symbol next to it as shown in the screenshot above.

Calculate the daily return for each day (see this video for how to calculate log returns) and calculate the average return and the average standard deviation for the entire period and for the last 12 months. Also consider the trading volume and any information about the coin, do you think this coin is worth investing in?

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