Why NFTs can be a riskier investment than cryptocurrencies, report
Investors who survived the 2008 financial crisis understand the importance of liquidity. When an economic recession starts, deflationary pressure hits the market, and buyers disappear. Sellers frantically try to sell assets before their prices drop further, but buyers want to de-risk and go into safe-haven assets, such as treasury bonds and money market funds. The lack of liquidity associated with nonfungible assets is the one reason why investors may think they are riskier than cryptocurrencies. When an investor wants to sell Bitcoin (BTC), they can easily sell to an order book of buyers at various price points. If a seller doesn’t sell their Bitcoin today, they can easily come back tomorrow and part ways with their Bitcoin in favor of willing buyers. In contrast, nonfungible tokens (NFT) are unique, and matching sellers with buyers is much more difficult. Cointelegraph Research analyzed what liquidity looked like for NFTs and whether some collections were traded more frequently than others. Cointelegraph Research is releasing its first-ever report on NFTs in October to answer exactly this question and many more surrounding the risks associated with NFTs.
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- CoinRado.com