NFT mania moves into the stock market — valuations moves beyond fundamentals

How NFT awt collectas choose their digital art

Another issue, another market madness. This time, NFT’s (non-fungible tokens) — stock market edition.

Welcome to the NFT mania

NFT’s are digital assets that can be used to represent unique ownership of digital files (i.e. digital art, video files, items in games, etc.).

By being hosted on the Blockchain, no one else can change the identity/record of ownership. One of the first NFT uses was CryptoKitties — a blockchain-based platform launched in 2017 to trade virtual kittens.

Now that same tech is being used to sell digital art. Most notably, a $69m sale of a digital piece of art by artist, Beeple. Investors are taking this one step further, into the stock market:

• Takung Art ($TKAT) — a Hong Kong-based online art trading platform, has risen over 19x in the past 2 weeks in the “hopes” that Takung will adopt NFT.
• Dolphin Entertainment ($DLPN) — a marketing and content production firm, launched a unit that will promote NFTs and its stock nearly tripled.

Remember initial coin offerings (ICOs)?

In 2017, ICOs became a popular way for startups to raise money from investors by “issuing” their own digital currency. At the height of the mania, even Kodak got into ICOs with the launch of their own KodakCoin in 2018. Yes, the same Kodak that once produced disposable cameras and announced their entry into vaccine development in 2020 — just to fail.

The ICO bubble had popped in early 2018. (TAJ Guess — Kodak enters NFT game in 2021)

The similarities are uncanny between ICOs and NFTs. They’re both based on blockchain, are being promoted by celebrities and prices are soaring via excessive FOMO. But here’s the difference — the bubble hasn’t burst for one yet.

For investors… Fundamentals don’t match reality

While there could be many practical uses for NFTs (i.e. identity/medical records, gaming, etc.), investors have bid up stocks to extreme valuations. In some cases, purely off the “hope” that they’ll enter the NFT space.

It’s all fun and speculative until you’re one of the investors caught when the bubble bursts. Stocks that have risen for speculative reasons rarely stay up and those who buy late are often left with large losses.

Some of the companies caught in the NFT hype: Oriental Culture Holdings ($OCG), ZK International Group ($ZKIN), Liquid Media Group ($YVR), Leaf Group ($LEAF), Funko ($FNKO), Cinedigm ($CIDM), WiSeKey ($WKEY)