Emily Clarke

Should I Invest in NFTs?

People have been collecting art for centuries, but in the digital age, it's easier than ever to both create art and share it. Although traditional art in the form of paintings is still collectible, artists have had a hard time figuring out how to monetize digital art. After all, if someone can easily download and share a digital image with a few mouse clicks, where is the value in a piece of art on the web?

Non-Fungible Tokens

Non-fungible tokens (NFTs) have been promoted as a solution to this challenge. An NFT is a digital certificate of ownership. It states that the owner of the NFT is the one true owner of a piece of digital content. NFTs use blockchain technology to record purchases so that no one else can claim to be the owner of a digital file.

Artists have created NFTs and sold them to buyers and dealers, and some NFTs have demonstrated substantial value. Some NFTs have been sold for tens of millions of dollars with the record being held by Pak's "The Merge" bringing in over $90 million.

Investing in NFTs

If you're considering getting in on the action by investing in NFTs, there are a few things to consider. First, purchasing an NFT is not like buying a painting. You are buying a token that is tied directly to a digital image. Someone can still easily copy and distribute the image associated with your NFT.

Despite this, the second consideration for people considering NFT investment is that valuation works similarly to the traditional art world. An NFT is only worth as much as someone is willing to pay for it. Unlike investments like stocks or even cryptocurrencies, NFT valuations aren't directly tied to a physical currency or trading market.

Lastly, you will want to consider the tax implications of investing in NFTs. If you're serious about collecting NFTs for resale value, you're encouraged to look into NFT tax software. This software is specifically designed to account for the issues you may face regarding taxes and NFTs. NFT tax software may be incorporated into larger tax applications, so check around before deciding on a solution.

Disclaimer: The above is not investment advice. Consult with a financial advisor before investing in any asset.

Author Resource:-

Emily Clarke writes about portfolio management, finance tracking and Consumer SaaS services. You can find her thoughts at NFT tax software blog.