Why Are Some NFTs So Expensive – 2024 Guide

Humanity cannot seem to resist jumping on every new craze that suddenly appears. Whenever a new type of investment opportunity arises, no matter how strange and unorthodox at first, millions jump aboard without question. This has always been the case and it will always be.

As commodities became more and more peculiar and seemingly fake, people will continue buying them and investing their money in them believing it to be the next big thing. Well, the next big thing has been around for more than a few months already and yet there are still many on the fence about it. We are of course talking about NFTs.

The Next Big Investment Opportunity

img source: istockphoto.com

By now you have probably heard of NFTs, just like you heard about bitcoin and cryptocurrency almost 15 years ago. Just like back then, your interest was drawn to it and you wanted to know more. Then, you did find out more but you probably still had no idea how and why people are buying BTC then and NFTs now.

How can it be used? What is the catch? And most shocking of all, why is it so expensive? Representing and expressing the value of something using traditional currencies is how people value commodities. If it is expensive, it must be worth it. And if it is advertised as unique, well then it has to be the right thing to own.

NFTs are both of these things, but not in the same way other, physical stuff is. Despite this, many of them are extremely expensive. Why is this the case? Bear with us here as we explore the world of NFTs. Join us as we try to answer why some of them are as expensive as they are and whether or not these price tags are justified.

These investment opportunities are said to be the future so it makes sense to know more about them despite not believing in them. It is a cultural shift and an important thing for the development of art, entertainment, and finance, so you should know more about them.

What are They?

img source: istockphoto.com

In order to understand their high price, we must first understand what they are. The acronym NFT stands for nonfungible token and it is an original digital image, a piece of art that is unique and which only a single person can own. NFTs were advertised as the bitcoin of the world of collectables. Just like BTC became the digital answer to currency and finance, the NFT movement is thought to be doing the same for collecting valuable art. Of course, there are many sceptics claiming this to be a fraud and nothing but a new way to take money out of people.

The term fungible in economics stands for something that can be interchanged for other things that are the same, like traditional money for example. Exchanging one $20 bill for two $10 dollar bills allows you to have the same value in two different ways. This is not the case with nonfungible assets. This means that every NFT is unique and that it cannot be exchanged for anything else.

Such a trait is basically the same with valuable art, the Mona Lisa for example. A one of a kind piece of art that can only be exchanged for something entirely different. Of course, photos and prints of the Mona Lisa do exist but the real one is at the Louvre and always will be. Think of every NFT as a Mona Lisa and every owner as having their personal Louvre for it. Nobody else can own what they own.

Apart from having the digital token, i.e. the image, it also doubles as a certificate of ownership for those who bought the NFT. It is a virtual asset, and despite not being physical like traditional art or other nonfungible things like property for example, it still has value. Some of them are so valuable and the general industry is so big that rich and famous celebrities jumped in.

One of the most popular influencers, YouTubers, and social media personalities Logan Paul already has his own collection, which you can learn more about Logan Paul Bumblebee ON1 Force NFT. The question of why certain NFTs are so expensive is raised next. What makes them more appealing than others, so much so that certain virtual nonfungible tokens are worth millions of dollars?

Why so Expensive?

The truly expensive NFTs started appearing in the first few months of 2024. The iconic animated GIF titled Nyan Cat, one of the most well-known internet memes that appeared in 2011, sold for over $500,000 on February 19, 2024. A short video on loop of a flying pop tart cat in space sold for half a million dollars. Everyone knows it, everyone has seen it. But the original GIF and the certificate now belong to just one person.

This opened the market and about a month later, Grimes sold some of the digital art she made for over $6 million. The founder of Twitter, Jack Dorsey, managed to sell the first ever tweet as an NFT for close to $3 million, which he converted it all to BTC and donated to Africa fund. Sorare, a firm that deals with football cards, has raised some $700 million from football trading cards as NFTs. Digital artist Beeple’s NFT went for $69 million and set a new world record.

When it comes to the reason some of these are worth millions of dollars and some are only worth mere pennies is simple. It is similar to anything else out there in the world. Basically, it does not matter what the art is and whether it can be considered true art as long as it has some kind of ownership history, underlying value, buyer’s perception, future value, and liquidity premium. An NFT by someone already famous will sell for more.

An NFT of something famous originally bought by someone famous instantly raises the price for the next buyer. The ultimate goal of every NFT investor is to eventually sell their collection to the next person and make a profit, i.e. sell for more than they originally paid. The scarcity of it all inflates the price even more, and despite many claiming the market is a bubble bound to blow soon, the industry appears to be going strong. We will have to wait and see if the NFT craze is real or not and whether the millions were spent well or were a huge investment mistake.