Famous investor Kevin O'Leary of Shark Tank is a major advocate of non-fungible tokens and has expressed the belief that such assets could become an even bigger deal than Bitcoin. Serving as O'Shares Investment Advisers chairman, his philosophy stems from the concept that NFTs represent proof of ownership for items that exist in the real world like flash cars or designer watchers but in a digital domain.
What are NFTs?
By definition, NFTs represent unique cryptocurrency tokens that prove the authenticity and rarity of virtual collectibles such as sports and art memorabilia. Furthermore, significant efforts have been made to tie NFTs directly with physical assets.
"You’re going to see a lot of movement in terms of doing authentication and insurance policies and real estate transfer taxes all online over the next few years, making NFTs a much bigger, more fluid market potentially than just Bitcoin alone." - Kevin O'Leary
Almost nobody had even heard of these kinds of assets back in 2020, and yet they evolved into a cultural phenomenon in 2021. Over $20 billion worth of NFTs exchanged hands throughout the course of last year in accordance with certain estimations. Such a trend gained immense public attention upon the moment a collage created by Mike Winkelmann, a digital artist operating under the alias Beeple, was sold for almost $70 million.
Still, there is a growing concern with respect to market sustainability. Many analysts have compared the trend to the initial frenzy of cryptocurrency that began in 2017, which defrauded several investors as a result of placing bets on startups through unregulated sales. At the same time, there have been a record number of instances in which art was stolen and scams were committed which has raised a number of red flags for traders.
What was once considered a worthless currency by analysts is now viewed as a manner of diversification for other assets amid growing inflation. In particular, O'Leary has expressed fondness for decentralized finance which is a trend that is designed to replicate traditional products on the blockchain. His largest position was disclosed to be in the form of Ether despite also owning some Bitcoin, Solana, and Polygon.
Nearly 40% of the checks that O'Leary has written out in the past 6 months were specifically for crypto ventures. He, like many others, has stressed the necessity of guaranteeing that crypto is privy to federal regulation in the same way traditional securities on the New York Stock Exchange are. To protect customers and prevent unwanted laundering, regulators across the country are pacing themselves with ongoing market developments.
Canada is one example of a nation that was among the first to approve a fund traded on an exchange that provides investors Bitcoin exposure. Despite the fact that the Securities and Exchange Commission (SEC) in the United States has greenlit ETFs linked to Bitcoin, the product is designed to track futures instead of making investments directly.
"The floodgate of capital will come in through sovereign and pension plans that don’t exist yet." - Kevin O'Leary
Regulators are specifically worried about stablecoins; defined as digital tokens that are tied to the value of fiat currencies like the U.S. dollar. Economists have claimed that noteworthy stablecoins like USD Coin and tether may not possess the reserves to justify the claim of being backed by a fiat currency in the same manner as the historical Gold Standard.
"I think [stablecoins] will also get a chance to shine in the sun as a great way to get yield when you can’t get any yield on cash." - Kevin O'Leary