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January 11, 2022

What makes NFTs so valuable?

Why people are spending millions of real dollars on NFTs.

Last episode, we discussed what NFTs are and how they differ from cryptocurrencies. But like us, you have probably also wondered: Why do people spend all that money on them? Let’s dive into the two main reasons: Uniqueness and speculation.

You might have heard of the so-called cryptopunks. They are 10,000 NFTs of the same series of artwork: A pixelated illustration of a person’s head. But while they all share common traits (for example a picture background or hair), the style of that trait can be unique. Orange hair, called “crazy hair” for example, is only worn by 414 of the 10,000. Combine that with the green “Zombie” face, which only exists 88 times, and suddenly that specific cryptopunk is really unique among the others.

It’s just like art in real life. People adjust their price accordingly, comparing NFTs, and giving more unique ones a higher valuation.

But why did someone just offer a staggering amount of 111 million dollars for an alien-headed cryptopunk they can’t do anything special with? Blame speculation. See, that same cryptopunk was sold for $7.5m in March and has since received offers up to 126m. Whoever offers this much money simply hopes to ride the wave and sell even higher.

Cryptopunks are extreme examples of this market, but they show you nicely how NFTs get their value.

And next time: How NFTs can actually be useful for artists.

Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.

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