Sponsored by Abroaden.
Even if you're not following the crypto or DeFi (Decentralized Finance) space, you've almost certainly come into contact with an NFT. An NFT is this novel concept that stands for "non-fungible token." An NFT acts as a digital certificate linked to an object, using the blockchain to keep a record of ownership. (Abroaden wrote about NFTs and what people living abroad need to know about them in December. If you missed it or need a refresher, you can read it here).
The NFT movement kicked off as a way for artists and their communities to sell their unique digital works. In a massive milestone for the movement, one of the first issuers in the space just became the richest. The Bored Ape Yacht Club was one of the first in this space and arguably the most organized issuer.
As a reward for being first and being on top of their marketing game, the creator's parent company just received a seed round (!!!) investment of 450 million USD. This amount values the startup at four billion dollars, making the company a unicorn.
It's no surprise, then, that people are jumping all over this achievement to try to strike it rich. If you're on Instagram, you've likely seen ads for NFTs. Usually, they promote some art project or other community, mentioning some anthropomorphic graphic you can buy.
Cute, right?
But Should People Living Abroad Invest in NFTS?
That's a great question, and the answer depends.
First, keep in mind that NFTs are both new and entirely speculative. This combination means there aren't many resources or historical performances for you to research. This lack of data makes finding the "right" NFT to invest in even harder, increasing risks significantly.
Second, there's no guarantee that an NFT project will return your money, if at all.
There are tons of copycats out there right now. Communities and issuers are working creatively to differentiate themselves. It's hard to say what makes one successful and another a failure.
Third, many NFT creators have a flawed understanding of finance and investing concepts. We've seen a lot of misleading text out there in some of the projects. If the creators themselves don't understand the inner financial workings, how will they create investment success?
Finally, with a bubble and many inexperienced actors, the likelihood of getting scammed only increases. (More on that below). In any case, if you're comfortable with the risk of investing in an NFT, keep in mind that:
- They are alternative investments.
- It should never be your primary investment (ETFs are much better for that).
- There's a non-zero chance you'll lose your money.
- Taxation on them is unclear at best.
- There's no regulation or consumer protection for investors.
Good luck.
NFT Scammers Get Charged
Speaking of the wild west of NFTs, two project co-creators in the United States were recently indicted for fraud and money laundering. As The Verge reports, these two individuals created an NFT, issued a cryptocurrency underneath it, then, after raising funds, abruptly pulled the plug, walking away with the assets. The frosty project they created was selling unique digital artwork called Frosties, listing 8,888 NFTs for around 130 USD a pop.
The creators promised early investors discounts on future developments around the project, including 3D versions of their tokens and access to a Frosties video game. Instead, shortly after raising money, the co-founders transferred a bit more than
one million USD to themselves in cryptocurrency, then disappeared.
Investors in the project were understandably upset, leading to a criminal complaint by some holders. The FBI was able to track them down by following the "paper" trail they left on the blockchain, eventually linking it back to a US-based credit card and the issuers.
Again, as this bubble continues to grow, it will be more critical than ever for would-be investors to do their homework before jumping on board.
You can learn more about how Abroaden can help you understand your investment options on the website at abroaden.co and you can follow on social media for the latest updates on Twitter @abroadenco, Facebook @abroadenCo, Instagram @abroaden.co and LinkedIn.
Sponsored by Abroaden.