This question is not as clear cut as a “Yes” or a “No”, and here is why.
The very definition of the word investment is an asset or item acquired with the goal of generating income or appreciation. Appreciation refers to an increase in the value of an asset over time.
There are multiple factors that affect the investment potential of an NFT. Value can also come down to what benefit they provide each individual person.
Factors such as utility, art style, community behind the NFT, roadmap benefits, brand associations, etc. all play a role to define value, both financially and from a self-fulfillment point of view. Sometimes investing in something that makes you happy is just as beneficial as a financial gain.
From a purely financial point of view, like any asset, NFTs are subject to market forces. These can include:
- Overall downturns/upturns in NFTs generally caused by large macroeconomic factors (which may be real world or crypto-specific).
- The release of information about a particular NFT or its competitors including:
- Partnerships (generally good),
- Unexpected costs (bad),
- Spending on roadmap items (good),
- Favourable reviews (good),
- Purchases by a reputed NFT investor (good).
In fact, just like traditional financial markets, all information sources can affect the value of NFTs and where information is freely available, markets take that information and translate that to changes in supply or demand of a particular NFT on the open market.
The most common advice heard in this space is that it is important to Do Your Own Research (DYOR).
And it is very true.
Educating yourself about various projects and their future plans plays a large role in speculating which projects may be likely to succeed against those that may be lacking certain “investor attracting” elements. Those that do the hard work of researching projects are more often the ones that make sound investment decisions.
So, while the question about whether NFTs are a good investment is not an easy one to answer, it does highlight that there are many contributing factors that go into the final choice.
One set of factors remains clear above all else – the NFT space is still relatively young. Over time, there will be more entrants and an increased demand for NFTs in general. It is a space that will see innovation and real-world use. The better prepared you can be, the more likely you will be to make a well informed decision about projects you’re interested in investing in.