You might be looking at non-fungible tokens (NFTs) after seeing pictures of things called “CryptoPunks” or “bored Apes” that sell for thousands (and millions) of dollars on the Internet. NFTs are the latest craze, yet most people are still trying to understand them.
NFTs have capabilities that could make them valuable in the digital economy, but they are so new, it’s hard to put a value on them. Consider a cryptocurrency platform Queen Piece (NASDAQ: currency) It might be a good place to start. Here’s how the company’s planned NFT market can help investors make profits from NFTs without having to buy any of them.
NFTs can do a lot of things
Investors look at NFTs and see images, but what’s fundamental about NFTs is the part you can’t see with the naked eye. Built on the blockchain (the technology that creates and tracks digital records of transactions or ownership on computer networks), NFTs are unique digital assets. In other words, NFT has a digitally verifiable fingerprint that makes it unique. Even if you copy the image, it will be like a replica of a painting; It still will not be original.
But NFTs are about more than just art; NFTs can create a community. For example, Bored Ape NFTs double for “Bored Ape Yacht Club” membership, which can include different perks for everyone who owns one of the unique NFTs. The blockchain verifies ownership so that no one can enter with just a copy.
But just as in many new markets, it’s hard to say which NFTs will hold value over the long term and which part of a bubble is bound to become worthless over time. Thanks to Coinbase, investors can instead own the market that will benefit from the broader growth of NFTs instead of trying to guess how much individual NFTs will be in the future.
The new NFT market could be huge
Coinbase is already one of the largest and most trusted cryptocurrency exchanges in the world. Cryptocurrencies use blockchain technology, which makes Coinbase’s digital specialty a natural fit for NFTs. Coinbase has 7.4 million users transacting monthly, which is a large exposure base for NFTs.
The company has already said it will open a market for NFT, with more than 2.6 million users on the waiting list. For reference, OpenSea is now the largest NFT marketplace in the world with 1.8 million users. In other words, Coinbase’s huge footprint could make it the largest NFT market in the world overnight.
Coinbase benefits NFT investors in the same way it benefits crypto investors. You do not need to own the assets directly; Investing in the market means that you benefit as long as people are buying and selling on the platform.
The business is already printing profits
When assets are bought or sold on Coinbase, the company takes fees as much Visa or Master Card Credit Card No to transactions on their networks. Coinbase is very profitable because most of the revenue it generates falls directly into the bottom line.
Coinbase has a gross profit margin of 86%. Even after research and development, marketing, and other expenses, roughly half of its revenue becomes net income, and profits remain after all costs and taxes.
JP Morgan The NFT universe was recently valued at $7 billion, but the long-term potential is much higher. Jeffreys It is estimated that the value of NFTs could reach $80 billion by 2025.
Let’s say Coinbase becomes a major leading market for NFT assets. In this case, this could become a huge growth opportunity for Coinbase, and a profitable one, given the high margin nature of its market business model.
Investors will want to keep an eye on the metaverse to see how the NFT is evolving over time. The metaverse could create a digital economy in the coming years, which will be a boon for NFTs and cryptocurrencies, where value can be exchanged in a digital and secure way using blockchain technology.
The stock is for sale
Several growth stocks like Coinbase have been sold over the past couple of months. Coinbase’s 25% drop over the past month to around $250 puts the P/E ratio of around 22 as of mid-December.
the Standard & Poor’s 500 Now trading at a P/E of around 29, does Coinbase deserve a lower valuation than the broader stock market? We can see in the chart above that Coinbase has a high expectation of earnings growth, and estimates are to grow more than 20% annually on average over the next three to five years. I believe Coinbase’s leadership in cryptocurrency and potential NFT assets gives it a logical path to achieve this growth, so discounting the valuation in the market could make it attractive at its current price.
If digital assets continue to grow and gain significant roles in the metaverse in the coming years, we could see a massive influx of wealth entering the space. Coinbase’s markets and exchanges can expose investors to broad upside without taking the risk of picking and choosing specific assets.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.