In this article, we talk about three (3) risks not to ignore when buying an NFT. Stephanie Wissink, an analyst at investment bank Jefferies, expects the market capitalization of NFTs to reach $80 billion by 2025. It was estimated to be $41 billion in 2021. Many of us will be one way or another tricked into buying NFTs. But here are the risks of buying NFT.
NFT scam – wash trading
The Internet is a bit of the Wild West. Without names or faces to trust, some ill-intentioned actors do not lack the inspiration to deceive investors. Among the most common scams is Wash Trading.
This consists of creating an NFT and initiating fictitious transactions to create a transaction history. The issuer of the NFT himself buys the NFT several times using several wallets to make it appear that his work is very coveted. If an unfortunate investor buys it, he finds himself with work without real demand, difficult to resell.
There are other ways to get tricked, including fakes – NFTs appearing to be from a popular collection. There are also fake artists who inflate the prices of their NFTs.
Difficulties in evaluating NFT prices
The unpredictability of the NFT price estimate is the main market difficulty. The price of each NFT is determined by its innovation, uniqueness, as well as various other factors. Since there is no set standard for any NFT, costs fluctuate widely due to speculation.
As with cryptocurrencies, the risk is to buy at a high price just before interest in the work in question begins to drop. For example, everyday's: the First 5000 Days by artist Beeple sold for $69.3 million. But after the high-profile sale, observers spotted racist designs in the artwork. This compromises its value.
This means that it is unlikely that the buyer will make any capital gains on resale.
Cyber threats and fake NFT marketplaces
The rise in popularity of NFTs has also increased the risk of cyberattacks on various marketplaces. There are several examples of NFT site phishing. Malicious actors have even specialized in selling clone sites of official marketplaces.
These fake NFT marketplaces represent a significant danger, as they can offer NFTs that do not really exist or counterfeits.
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