June 14, 2024

Exploring the Future: How to Invest in the Booming Digital Collectibles Market

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The collectibles market surged in 2020 as people sought nostalgia and new interests amid the COVID-19 pandemic. Simultaneously, cryptocurrency was gaining mainstream traction. Many companies capitalized on both trends by producing digital collectibles using blockchain technology.

This led to a boom in NFTs (non-fungible tokens), which transform digital items into limited-quantity collectibles. Read on to learn about digital collectibles, how to invest in them, and the top NFTs you can buy.

What Are Digital Collectibles?

A digital collectible is a unique or limited-edition virtual item, often with a visual component such as digital art, video clips, or trading cards. It could theoretically be anything digital, like music recordings.

Digital collectibles utilize blockchain technology to create non-fungible tokens, ensuring they cannot be copied like regular computer data. Ownership can be easily transferred, ensuring the rarity and value of the digital item. Collectors can also set terms for ownership or use.

How to Invest in Digital Collectibles

Digital collectibles can be purchased directly from the creators or through NFT marketplaces where buying and selling occur.

Buying directly from creators like NBA Top Shot or DraftKings Marketplace often allows credit card payments and custodial wallets. Sales can be conducted through their marketplaces.

For the broader market, cryptocurrency is required. NFT marketplaces like OpenSea, SuperRare, and Rarible usually use the Ethereum blockchain, so you’ll need Ether (ETH). A digital wallet, such as Metamask, is needed to store cryptocurrency and connect to marketplaces for transactions.

The digital collectibles market is highly volatile. The value of a collectible depends solely on demand. Collectibles can quickly lose their popularity and value. If you’re buying hoping for value appreciation, be prepared to hold onto your purchase. Digital collectibles, unlike physical ones, don’t require storage or maintenance, reducing ownership costs. Selling fees are typically lower too, usually just the marketplace commission.

Top NFT Collectibles

Numerous NFT projects and unique creations from artists and celebrities exist. Here are a few notable ones:

CryptoPunks 

Created by Larva Labs in 2017, CryptoPunks features 10,000 unique pixelated portraits and is one of the earliest NFT collectibles. Some have sold for millions of dollars, making them akin to blue-chip art in the digital realm. Their status as an early project helps them retain value, though they may not be appreciated as much as newer projects.

NBA Top Shot 

Launched in 2020 by the NBA and Dapper Labs, Top Shot offers collectible video highlights of players, similar to digital sports cards. Customers can buy “packs” of highlights or individual cards through its marketplace. This project parallels physical sports card collecting and is a key indicator of how digital analogs of physical collectibles perform.

What’s Next for Digital Collectibles

Digital collectibles might have lasting value as our world becomes more digital. With the rise of augmented and virtual reality, these collectibles could become more interactive and valuable. Major tech companies are investing billions in developing the metaverse, pushing it towards mainstream use. As digital environments become common, the value of digital collectibles may rise.

However, the market remains volatile. Not all projects will succeed, and popular collectibles can quickly lose value. Investors should be selective and buy items they genuinely appreciate.

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