NFTs and cryptocurrency are certainly the two most popular forms of digital assets in Web3. Companies such as Facebook (Meta), Apple, and Microsoft are actively competing for their shares in Web3. But which digital asset is more volatile, NFT or cryptocurrency?
Cryptocurrency is more volatile than NFTs. Although both types of asset prices constantly fluctuate, the use-case and promised utility of certain NFTs don’t fluctuate. That being said, cryptocurrency and NFTs should still be considered highly volatile from a monetary investment standpoint.
The variety of technologies that will be implemented in marketing in the coming years is impressive. We are talking about virtual reality, metaverse solutions, digital art, payment gateways, and other options. We decided to focus on the prospects of 2 important assets—cryptocurrency and NFTs.
How Volatile Are NFTs?
NFTs are extremely volatile due to over-speculation and an abundance of scams in the space. It is thought that at least 98% of NFTs on today’s market will be practically worthless in the near future. The underlying technology, however, is still very promising. NFTs will continue to evolve over time.
One example comes from the metaverse. The metaverse is becoming more and more popular among investors, and NFTs are likely to become the main social currency of the digital world.
Leading developers are ready to create a virtual reality associated with social networks and blockchain technology. People invest millions of dollars in NFT projects every year. It’s not only about big companies but also enthusiasts who are looking for a quick profit. It’s an essential factor that determines the cost of NFTs.
Some experts are sure that, despite the high interest of global companies, the metaverse is a rather risky sector for investment. Due to the impossibility of clarifying detailed information on some NFTs, volatility for such assets is always high.
Opponents of this concept bring Amazon as an example. The share price of this company 10 years ago fluctuated on average by about 55 percent annually. But this does not mean that this project is unpromising.
NFT Volatility & Metaverse Prospects
Many large investors buy and create NFTs, that’s a positive effect on volatility. For example, McDonald’s, inspired by the success of other brands, has announced the creation of its own metaverse.
This company has registered its trademarks for virtual goods. According to patent applications, McDonald’s owners want to open restaurants with digital goods for their customers. This is just one of the examples that confirms the fact that the NFT is not an empty shell.
In 2021, it commemorated the 40th anniversary of McRib’s signature sandwich served intermittently in the US. McDonald’s has also been involved in testing the digital yuan ahead of the Beijing Winter Olympics. As many as 270 restaurants in Shanghai have been adapted to serve the Chinese CBDC.
The metaverse is made up of virtual worlds where people can do the same things they do in real life. Such an ecosystem is largely dependent on innovation. This means that the more specific equipment we have on the market—glasses, helmets, VR platforms—the more valuable NFTs could become.
The development of innovative technologies can significantly expand the possibilities of the metaverse and attract millions of users. Because of such prospects, the risks of investing in NFTs are significantly reduced.
With state-of-the-art equipment, participants in the metaverse can work, play, shop, and communicate. They can start their own business, buy land, make art, and go to concerts — all in a virtual environment. In this regard, the owners of McDonald’s, Nike, Facebook, PlayStation, and other global brands were very successful.
How Volatile Is Cryptocurrency?
Regardless of the limited number of coins, the price of BTC changes from time to time. When the market has a lot of volumes and it increases, it affects the volatility.
Cryptocurrency is extremely volatile. Price fluctuation can be caused by the publication of news, changes in legislation, and the approval of advanced technologies. Moreover, this market sometimes correlates with the US tech stock index US100. The dynamics of this share affect the cryptocurrency sector.
In the world of startups and new technologies, there is no shortage of naysayers and stories of precautions when it comes to new and emerging technologies. This is not surprising, because more than 90% of startups fail sooner or later.
Drawing lessons from previous projects, related to entertainment, licensing, and blockchain technologies—ICO, IEO, IDO, and DeFi—we can conclude that not everything is so simple.
Although Bitcoin has its own peculiarity. Despite the fact that many altcoins have been a failure, BTC has not been a source of disappointment. Let’s find out why this is so.
The basis of any cryptocurrency is the blockchain—a distributed ledger that creates an ever-growing single.
Since the Bitcoin ecosystem is a decentralized network, all participants in it jointly agree on rules for the approval of transactions in order to reach a consensus. On this basis, a single common chain of verified data is created, on which everyone agrees and which is always correct.
If we are talking about BTC, then the distribution principles of such coins are impeccable. Enthusiasts who want to offer improvements with the next fork often fail, because it’s not easy to improve the perfect product. Although this does not mean that it will be possible to avoid fluctuations in the exchange rate in this market.
Are NFTs or Cryptocurrency More Profitable?
NFTs have a greater potential to be profitable compared to cryptocurrency. Investing in an NFT is comparable to investing in stocks, whereas investing in crypto is similar to buying foreign currency in the hope to make a profit. Nonetheless, both are volatile, but NFT tech has more potential.
So far, investors have been interested in music, art, social media posts, gifs, and virtual real estate. Such assets may acquire value over time. An NFT is a certificate of authenticity of a digital asset and is used to track the provenance or authenticity of virtual collectibles. They contain encrypted signatures of artists or authors.
Digital tokenization of art is becoming the standard solution for many auction houses and the best way for ordinary investors to make a quick profit. You can check charts on any analytics website like ICOholder to see this.
With growing interest in celebrities and influencers, NFT technology is becoming the subject of much discussion. Experts assure that investing in such tokens does not require strong nerves as tracking the rate of cryptocurrency.
That’s not to say that you don’t need to do a generous amount of research before investing in an NFT however.
Unlike an NFT, cryptocurrency is more prone to fluctuations in the exchange rate. So, digital art is becoming an increasingly promising asset. Some of the most expensive sales in the NFT market over the last 5 years include:
- Mike Winkelmann aka Beeple, a digital graphic designer and artist, sold one of his first NFTs for $69 million. This event had a positive impact not only on the NFT market but also on the crypto ecosystem as a whole.
- During Art Basel Miami in December 2021, the SuperRare platform announced the Ross Ulbricht Genesis Collection auction. This lot includes original writing, illustrations, and animation by Ulbricht, compiled into one NFT using the Kanon KSPEC protocol, and was sold for $5.93 million.
- An image of the face of Edward Snowden accused of mass surveillance, made on the pages of a court order, turned into an NFT called Stay Free, sold in April 2021 for $5.4 million. This was one of the largest investments in the NFT ecosystem in recent years.
Should You Buy NFTs or Crypto?
You should buy an NFT if you enjoy the utility it offers. Utilities could include access to an event, physical & digital goods, along with other perks. You should only buy cryptocurrency if you use a platform where a certain cryptocurrency is utilized like an NFT marketplace or a metaverse platform.
Reasons to Buy an NFT
There are three main reasons why you might want to buy an NFT—either as an investment, a flex, or because you enjoy the utility it offers.
- Investment: When NFTs first gained mainstream attention in early 2021, many people were in the market solely to make money. Due to over speculation of many of these assets, people were able to make a significant amount of money with very little effort in a short amount of time. With that, a lot of money was also lost.
That being said, there are still plenty of opportunities to make money in the NFT space. However, it requires a lot of research along with knowing what to buy and when to buy it.
Right now is a good time to invest in NFTs considering it is still so early in the development of the technology. This means new brands are appearing, offering consumers the opportunity to invest in the future success of these brands.
Currently, the use-cases for NFTs are being explored further as many people are moving away from buying NFTs solely as a monetary investment and are seeking more from the utility.
- Flex: As digital assets continue to gain more recognition as valuable assets in the real world, society will also adapt to how they view them. Nowadays, driving a Mercedes and wearing a Rolex is considered a huge flex.
Likewise, owning an NFT that represents one of these real-world brands is considered a huge flex. As of now, CryptoPunks, Bored Ape Yacht Club, and VeeFriends are some of the most recognized brands in the NFT space that are considered to be a flex.
By no means will physical assets not have value anymore. Rather, digital assets are beginning to act as another layer of value in addition to our physical assets.
- Utility: The utility that an NFT can offer is where the real value is held. Beyond verifying authenticity and proving ownership, every NFT is capable of providing holders with certain perks known as utility.
There are no real limits to these perks, the only limit is what the token creator is willing to provide to holders. As various industries continue to explore the potential of NFTs, their use-cases will continue to change, as will what consumers desire from the technology.
Eventually, NFTs will just be a part of society. Similarly to how the internet, mobile phones, and social media have become the modern-day norm.
Reasons to Buy Cryptocurrency
Similar to NFTs, there are a number of reasons why you might want to buy cryptocurrency. You might want to invest in an up-and-coming cryptocurrency or you might need it to be able to function within a platform that utilizes specific crypto.
- Investment: Investing in cryptocurrency in hopes to make a profit is still possible but equally as volatile, if not more, than investing in NFTs. This is because cryptocurrency involves an entire ecosystem beyond the token itself.
Some things to note before investing in crypto are which applications utilize it and how secure the platforms that the crypto is built upon. For example, blockchains like Ethereum and Bitcoin have a solid reputation as secure and trustworthy networks with acceptable use-cases.
However, investing in a new cryptocurrency built on a new network is extremely risky, especially if you don’t understand how that network operates in addition to having minimal data to show how secure the network is.
Cryptocurrency can still be an extremely fruitful investment if done right though. In January 2020, Bitcoin sat around $7,000 per one BTC. Nearly two years later in November 2021, it hit an all-time high (ATH) of $64,000 per one BTC.
Just imagine if you had bought even just one BTC in January 2020 and sold it in November 2021—your profit would have been enormous. And I believe there are still opportunities even in today’s crypto market for gains like this.
- Utility: Cryptocurrencies are likely to become the main form of exchange in the metaverse as people will use them as virtual currencies. The adoption of cryptocurrencies in the metaverse could positively impact the valuation of the entire financial market.
After Mark Zuckerberg’s decision to change Facebook to Meta, the crypto market experienced even greater growth. The process of transition to the metaverse has long been extended not only by Meta, but also by companies such as Adidas, Disney, Nike, and Microsoft.
As existing name brands continue to incorporate metaverse platforms into their brands and as new metaverse platforms are built, cryptocurrencies will continue to adopt different use-cases over the next several years for each of these virtual economies being created.
Most investors are sure of the prospects for mass adaptation of decentralized finance and the legal situation of the entire market. This means we have great prospects for both digital art and blockchain in general.
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