In 2009, Satoshi launched the Bitcoin whitepaper, and in over a decade, it would go on to create an industry worth millions of dollars. Bitcoin (BTC) ushered in the wave of other cryptocurrencies, and a few years later, non-fungible tokens (NFTs) followed suit as another offshoot of blockchain technology. While NFTs and cryptocurrency tokens rely on the decentralized nature of blockchain technology, their industry valuations fall and grow in value while their popularity differ.
This disparity, notwithstanding, presents a question: “Can NFTs become as valuable as cryptocurrencies?”
Let’s find out.
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Cryptocurrencies vs NFTs
Although both share foundational similarities, they have distinct features and modes of use. Cryptocurrencies are digital or virtual money forms that are not controlled by the central banks of any government, which gives you flexibility in how you use them and who can track transactions. NFTs, or non-fungible tokens, are assets in digital form, usually works of art, that use blockchain technology to authenticate ownership. Owning a digital painting whose ownership is imprinted by ledger technology on the painting is akin to owning a moment in time (and it doesn’t last forever).
What Factors Are Influencing Cryptocurrency Valuation?
The global cryptocurrency industry is currently valued at $3.44 trillion despite several governments placing some form of restriction on the industry. Despite that, several billion-dollar businesses like MicroStrategy are adopting cryptocurrencies as hedge-fund equities. Factors influencing such actions include:
- Decentralized operations: Banks are often operated or tightly regulated by the government. This inadvertently strips private owners or businesses of autonomy over their funds while exposing them to inflation, especially in unstable economies.
Cryptocurrencies pose a solution by providing avenues for fund-holders to store their money away from government regulations. Also, the decentralized nature of cryptocurrencies enables users to send money across international borders without the tedious and fee-inclusive processes involved with conventional banks.
- It offers security and transparency: Thanks to cryptography — a special sequence of letters and numbers that secures every crypto transaction — cryptocurrencies are protected from unauthorized access and fraud. Also, being hosted on blockchain ledgers, every transaction is documented and can be made public, which promotes integrity.
- It offers investment opportunities: Bitcoin’s recent bullish run, which began immediately after Donald Trump won the November 2024 US presidential election, saw Bitcoin set and break price records multiple times. Firms and private investors who possessed bitcoins and other altcoins like Solana and Ethereum saw astronomic profits due to the increase in the price of Bitcoin. Also, the intention of the incoming US government to own cryptocurrencies has sparked widespread adoption.
These factors heighten the valuation of the crypto industry by promoting adoption, attracting institutional investors, and promoting its use by individual users and businesses.
What Are the Factors Influencing NFT Valuation to Grow in Value?
The non-fungible token market is growing in popularity and valuation, with some artists, like Pak, auctioning a single artwork for as much as $25 million. Let’s look at the factors influencing the valuation of NFTs before analyzing their potential to match the valuation of cryptocurrencies.
- Scarcity: In the art world, plagiarism has been a common problem. It is even more so in this digital age. Plagiarism steals royalties from original creators, and oftentimes, the identities of original creators are lost in the long run. However, digital assets cannot be plagiarized as a non-fungible token because they are stamped with their creator’s identity. This creates scarcity and lasting originality.
- Increasing acceptance by creators: In recent years, many creators have earned millions of dollars from NFTs. This has undoubtedly turned the eyes of other rising and established artists to consider NFTs. Aside from creators, investors are also acquiring projects due to the potential of these assets to rise in value, especially in the web3.
- Innovative use: Futuristic companies like Meta are working on projects offering users immersive experiences via virtual and augmented reality. These projects are expected to incorporate NFTs in the building phase. Also, NFTs are increasingly being used in developing games and collectibles, which is expected to improve their adoption and valuation.
Will The NFT Industry Grow in Value Like the Crypto Industry?
The answer is not straightforward, but we can deduce it from the following observations. Firstly, cryptocurrencies enjoy better liquidity than NFTs. For example, one can easily convert their crypto tokens into fiat cash for payment of goods or services or pay directly from their wallets. This is not the case for NFTs, as they must be valued and auctioned until a suitable buyer comes along before their worth can be liquid. This dependability on buyer interest reduces the potential of NFTs to attract high-end investments or use.
Secondly, scalability is another important factor influencing the value of NFTs in comparison to cryptocurrencies. NFTs are niche-specific, meaning their use is limited to the arts, music, and other forms of imaginative creation. Cryptocurrencies, on the other hand, cut across various industries. They are used as mediums of financial exchange, investment options or hedge funds for institutions and corporations, spot funds, and assets speculated via a crypto trading platform. Instead of NFTs’ niche-specific use, this broad utility puts the NFTs some miles behind in the valuation race.
Also, the market maturity of NFTs may pose a challenge for two reasons: NFTs are a more recent branch of blockchain, and cryptocurrencies are rapidly growing despite starting well over a decade ago.
Considering these factors, NFTs may appear to never become as valued as cryptocurrencies, with the current valuation at about $82 billion. However, technology has always been about disruptions, and you can never tell if, in the future, a market disruption will see NFTs stand shoulder-to-shoulder with cryptocurrencies.
The Future of NFTs vs Cryptocurrencies
Cryptocurrencies such as Bitcoin and altcoins are valued way above NFTs, and the reasons for this are not far-fetched. Scalability, global adoption, decentralized banking, and diverse investment opportunities have placed cryptocurrencies on a pedestal beyond NFTs. However, should there be regulatory shifts, widespread adoption, or any disruptive force, we may witness a world where NFTs grow in value as much as cryptocurrencies.
