1. Speculating or supporting?
There are two main discourses around why an individual might want to buy an NFT: to speculate or to support.
Take Kings of Leon, for example. They have just released their latest album “When You See Yourself” as an NFT.
For two weeks, individuals can buy the token priced at $50 and receive an album package with vinyl as well as a digital download.
Music fans have traditionally purchased digital downloads and vinyls to support bands. NFTs are just another way to support creators that is direct and avoids various intermediaries.
However, the limited two-week time period provides speculation opportunities because it creates scarcity.
Creators can control the scarcity and value of tokens. They can choose to drop tokens at a set price for a limited amount of time or sell only a few. This decision benefits buyers, who could resell the token at a later date potentially for a higher price.
But it’s important to remember there are two different types of speculation in the NFT market.
The scarcity and value components of most NFTs creates natural speculation. Individuals are speculating and supporting a cultural trend, much like angel investing.
—Eva Beylin (@evabeylin)
On the other hand, the intense interest in NFTs, combined with surging asset prices elsewhere, have created a different type of speculation where individuals are entering the market hoping to make money by flipping or because they fear missing out.
Steven McClurg, a crypto bull and chief investment officer of digital assets firm Valkyrie Funds, thinks it’s mostly speculative.
Despite McClurg’s bullishness on bitcoin, he said most of the NFT market looks bubbly with mass speculation occurring because there is too much money in the market.
Whereas Matt Higgins, a venture capitalist and early investor in bitcoin and Coinbase, thinks NFTs are here to stay but acknowledges the speculative behavior.
“At the moment, we’re in a slight period of irrationality, where just putting three letters on something means it’s valuable and that defies common sense,” Higgins said. “So long the space, short the froth at the moment.”