Value context and insight. lkm@koreatimes.co.kr
NFTs emerge as new value investments
An electronic trading board shows the prices of bitcoin, Oct. 21. Korea Times file
By Lee Kyung-min
By Lee Kyung-min
Non-fungible tokens (NFTs), a type of blockchain-mediated digital asset, are emerging as value investments, propped up by the steady inflow of pandemic-induced liquidity and robust growth of the cryptocurrency market, in which a variety of new virtual assets are being generated.
The growth prospects of the digital tokens as a new asset class could brighten further, as proven in part by a sharp increase in share prices of entertainment and gaming firms after their announcements of hefty investments into the new investment vehicle.
Also bolstering the view is a rapid increase in the number of young investors who have increasingly been embracing the digital token as a viable method of asset increase ― a result of gains from crypto investments over the past few years.
Some equity market analysts say that a large portion of key investors will prefer NFTs to stocks ― an understandable choice given the gradual yet firmly hawkish monetary policy direction of the Bank of Korea in recent months.
It remains to be seen whether and by how much the new tokens will replace the benchmark KOSPI and small-cap, tech-heavy KOSDAQ as the most popular method of financial investment.
The apparent vibrancy of investing in NFTs contrasts with the outlook for the stock market, as forecasts by local brokerages set the limit of the benchmark KOSPI to a range of between 3,400 and 3,600, up only slightly from the previous high of 3,316 in June.
Market analysts say that high inflationary pressures, accelerating tapering measures by the U.S. Federal Reserve and concerns over the COVID-19 pandemic, will limit the stock market's performance next year.
“The local stock market will remain bearish in the first half of the year, recovering bullish sentiment in the latter half, since a variety of volatility factors will weigh it down for the months to come,” a Korea Investment and Securities report said. “Even if the economy improves moderately in the first half of next year, following a partial easing of global supply bottleneck crises, the outlook for the second half of the year can just as easily be clouded by downside risks as borne out by leading economic indices and concerns about U.S. rate hikes.”
Growing popularity
NFTs initially gained popularity in the field of art because of their characteristics that can help prove the authenticity of art pieces.
However, the tokens are increasingly being used as an actual business model by the gaming, fashion and entertainment industries, with many market leaders introducing related services and products.
Game developers, for example, have announced a new plan whereby users will be able to make a profit with the tokens, stored by blockchain.
This plan is a new approach from the previous policy, under which users had to buy items sold by game developers, who had the sole discretion to determine whether certain paid items should no longer be allowed for use, said experts. The new plan is welcomed by game users who will be able to retain the full rights to the paid items even after the gaming session service is over, they said.
JYP Entertainment, a top-tier entertainment agency, signed a business partnership recently with Dunamu, the operator of Upbit, the largest crypto exchange in Korea. The partnership was to develop and operate a platform where K-pop goods and services related to NFTs will be developed, provided and operated.
HYBE, the entertainment agency representing BTS, has also partnered with Dunamu. YG Entertainment and SM Entertainment are also gearing up to enter the NFT business.