Employing Diversification in Cryptocurrency Investing
To borrow from Heraclitus - if there is a constant in the world of investing it’s change. Something new is always catching the eye of investors, something exhilarating is always popping up in portfolios and generating buzz around the financial world.
Enter non-fungible tokens (NFTs).
You’ve probably heard about NFTs by now, at least in theory. In short, an NFT is basically certification of ownership of an exclusive digital asset. Investors have been paying millions for digital collectibles like animations, custom songs, and 10-second video clips. Investors typically don’t own the collectibles or obtain physical copies, but they do receive digital code that proves ownership.
Source: cryptoart.io
NFT investment lands you a chunk of code on a digital ledger, known as a blockchain, that acts as a map to where the digital collectible exists – typically as part of a server somewhere in the world. The blockchain technology is part of what makes NFT investing so attractive, as it all but ensures a digital public record of ownership – something that contains incontrovertible proof of proprietorship.
Why Invest in NFTs?
Source: cryptoart.io
For many conventional investors, NFTs can be a tough sell. After all, who wants to part with millions of dollars for an animated image of LeBron James dunking a basketball when there are so many images of LeBron James dunking a basketball?
But here’s the thing: exclusivity matters and the pandemic has changed things, including value.
COVID-19 has pushed people into home spaces, which means more people have been pushed into virtual spaces and the realm of virtual currency. An explosion of interest in cryptocurrency has led to interest in other types of digital assets, which in turn has led investors to rare collectible holdings of the digital variety. Think of the sudden spike in rare coin prices that surfaced during the Great Depression, a consequence of the human desire for ownership even in spite of tremendous adversity.
NFTs have generated a lot of talk about so-called virtual money, which has drawn investors from around the world. Since multiple investors can own parts of a digital asset and obtain parts of the code of an NFT, the possibilities are endless.
The Importance of Diversification in the World of NFTs
Source: Winvesta.in
Investment principles still apply, even in the virtual world, and that’s why top-tier wealth management firms are getting involved.
Investors can get involved in a number of ways, but the most popular method of investment in NFTs in particular seems to be found on the Ethereum blockchain. Think of Ethereum as a sci-fi-sounding decentralized computing platform, like a laptop that runs thousands of machines around the world without a single owner. It allows for the transfer of digital currency across a distributed network.
Diversification of investment in NFTs becomes a lot more sustainable due to the flexibility and convenience of cryptocurrency. And because NFTs draw significant value largely by cultural impact, you can see why change is the only constant. Diversifying crypto-based investments in the NFT space makes for a more robust and adaptable profile, something that can evolve as the world does.
