NFT art finance is under the microscope due to the explosion of interest in non-fungible tokens (NFTs).

Investors are rushing to the trend-setter, but you need to think about the pros and cons before putting your money in.

As an asset class, NFTs are easy for everyone to invest in and ownership of an NFT is highly protected by the blockchain technology used.

## What are the Downsides?

NFTs require an energy-intensive operating protocol:

Ethereum blockchain is chiefly used to support NFTs. That means they need Proof of Work (PoW), an energy-intensive protocol. The electricity required for a single NFT transaction is almost equivalent to the electricity used by a home for a day or two.

## NFTs are an asset class:

As ownership of an NFT is represented as asset ownership, the value of your investment is exposed to market forces. High levels of interest in NFTs have seen values rise impressively, however, you could see the value of your asset diminish should the hype fade.

### [Ether (ETH)](/coins/eth):

While there are other ways emerging, many NFT transactions, because they are based on the Ethereum blockchain, require the use of Ether (ETH). That, of course, requires you to have ETH in order to buy.
And the Upsides?

### Blockchain Confidence:

Your ownership of the NFT is protected by blockchain technology. This makes NFTs feel like more secure and reliable investments, giving buyers confidence.

### Easy for All:

As these digital assets are tokenised, it means NFTs can be easily and effectively traded by people all over the globe. It makes this investment accessible and straightforward.

A wise investor will always look at the positive and negative sides of every story. While NFTs are a relatively new phenomenon, there is plenty of information about the pros and cons of NFT art finance out there for you to research.

Have a strategy for your investment and accept that there is a level of risk with every investment, even something so seemingly fool proof as NFTs.
 
 
 
 
 



NFT Art Finance: The Pros and Cons

Sometimes a crypto crash wipes out wealth so severely.

Despite the well-known volatility of cryptocurrencies, investors do not seem deterred. Crypto can have big days when values soar. And there can be big days where prices go the wrong way.

When values plummet, it's hard to be prepared. A crypto crash is uncertain; nobody knows the exact time when it will happen.
But what causes a crypto crash?

## Cryptocurrency Security

Network security is a factor that could spark a crypto crash. Security flaws in any blockchain can cause concern among the public and regulators, impacting on the value of coins and tokens on that network. The value of crypto is driven by investors' interests; fear, uncertainty, and doubt can lead to a crypto crash.

## Volatility in the Cryptocurrency Market

When investors liquidate high volumes of a digital asset, crypto markets witness volatility. While this can hurt some investors, there are others watching for, or perhaps contributing to, such a situation. Others drive up prices and over-inflate the value of certain coins and tokens, again contributing to volatility. Both have contributed to crypto crash scenarios, when prices are deliberately forced down or plummet when the hype dies. 

## Cryptocurrency Regulation

China banned crypto mining in 2021. This move, positioned as regulation, saw cryptocurrency values decline as the hash rate slowed.
This is a single example, but demonstrates how regulation can contribute to a crypto crash.

## Crypto Influencers

This is an extension of the volatility explanation, but is specifically referencing those who use their platforms to shift prices, deliberately or not.

For example, when Elon Musk tweeted his support for [Dogecoin](/coins/doge), the value soared. When he criticised other cryptocurrencies, their values fell.

## The Stock Market

Although seen as distinct, there is a correlation between activity on old-fashioned stock markets and the new crypto exchanges.
There is so much that can impact a market value, this is inevitable. If taxes go up in a country, or financial regulation is tightened, or inflation and cost of living explode, both types of market will be impacted similarly.
 
 



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Author: Muhammed Abid Khan

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