Why Kevin O’Leary believes NFTs will ‘only become more useful and valuable’
Image source: Getty Images
Important points
- Kevin O’Leary tweeted that non-fungible tokens have a bright future.
- The billionaire investor remains cautious, particularly about the impact of regulation.
- NFTs are a way to prove ownership of various digital objects such as art, music, photos and more.
Kevin O’Leary, aka Mr. Wonderful, recently added a new string to his bow. The Hai tank judge and crypto enthusiast had his picture made into an NFT. NFTs – or non-fungible tokens, to give them their full name – were all the rage last year.
Unfortunately, the NFT market has gone off in recent months, along with many other digital assets. But O’Leary believes this hiatus won’t last forever. Last month he tweeted: “The way I see it, non-fungible tokens will only become more useful and valuable.”
NFTs are essentially a digital certificate of ownership that is registered on the blockchain. They can be images, artwork, music or in-game objects. Some of the more famous NFTs include Beeple’s “Everydays: The First 5000 Days” which sold for over $69 million, and the Bored Ape Yacht Club NFT, which has become something of a celebrity status symbol.
Why Mr. Wonderful is bullish on NFTs
O’Leary initially became interested in NFTs because of their potential in authenticating physical assets. He has a large collection of clocks and modern art, and says NFTs offer a way to insure pieces when they are placed in different cities, or are loaned out.
In an interview with the Observer, the billionaire investor said he sees two ways NFTs could impact the art world. One is through the direct sale of images, although he warns that these can be “wildly unstable” in price. The other is through companies that serve the NFT world – “picks and shovels,” as he calls them.
O’Leary compared the NFT market to the gold rush, pointing out that it was better to own the tools to support the miners than to dig for gold yourself. This belief led O’Leary to invest in NFT.com. Not only does he now own the NFT portrait of him by Udo Spreitzenbarth we mentioned above, but he also owns the art itself. In addition, his insurance company can access the NFT.
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It is worth pointing out that O’Leary is not optimistic everyone NFTs. He believes that we are only in the “first round” and some NFTs will succeed while others will fail. It’s early days for the industry, and he predicts it will be extremely volatile – similar to Amazon in its early days. “Some of them will end up with arrows in their backs, and some will be fine,” he said.
Why Mr. Wonderful thinks NFT creators need to be careful
Volatility isn’t the only reason O’Leary believes NFT creators need to tread lightly. The second is the way we define NFTs. If the authorities decide that NFTs are securities rather than commodities, there are strict rules on how they can be traded in the US and what information traders must report. Cryptocurrency projects face similar problems, as the SEC has said that many of them can function as unregistered securities. Until we get more regulatory clarity, there is a cloud hanging over the entire industry.
As O’Leary explains: “Let’s say you issue an NFT that gives you tickets to the Formula 1 race in Miami next February, and you buy it. Now that’s one of the benefits of owning that NFT. Is it a currency or is that a commodity or is it a security, like a stock that pays dividends?” Trading in unregistered securities can be problematic. “That’s why I’m very, very cautious about getting involved in NFTs right now,” he adds.
If you are considering buying NFTs, it is important to understand what you are buying and what risks may be involved. O’Leary highlights two important ones: the value could drop to nothing, and the authorities could redefine how NFTs are categorized. The technology will likely become more useful, but that does not necessarily mean that each individual NFT will become more valuable. Like the art world, this is a very unpredictable market and there are no guarantees.
