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The Central Bank of the Republic of China (Taiwan’s central banking institution) reportedly warned that the non-fungible token (NFT) sector is full of fake transactions. As such, it advised investors to beware when dealing with such digital collectibles.
Investing in NFTs Hides Risks
According to a recent report by the Taiwan News, the nation’s central bank does not find dabbling with NFTs as an appropriate investment strategy. Citing a survey, the institution reminded that less than 30% of investors profit when selling digital collectibles, while every third produced artwork doesn’t end up sold.
NFTs could define both digital and physical objects. As such, one could prove ownership over those assets and verify their authenticity. The bank, though, argued that this quality is doubtful since every individual can produce a digital collectible and use it to steal data.
Last year, the American YouTuber – Logan Paul – joined the NFT craze by partnering with Bondly Finance. They vowed to create and distribute non-fungible tokens for Paul’s “Pokemon Break Box.”
Several months later, the American dived into the space again, but his actions sparked doubts among investors. He was alleged to have photoshopped stock images for his Cryptozoo project and later sold those fake items to investors for millions of dollars.
The central bank of Taiwan further noted that despite its progress last year, the NFT market has slowed down recently. The number of traders was not more than 75,000 in 2020, while a year later, it skyrocketed to 2.3 million people.
It is also worth noting that NFT trading volumes were charting their most impressive peaks last summer. At the end of August, they exceeded $500 million for a single day. However, the trends changed, and the craze started cooling off in September.
Bill Gates’ Thoughts on NFTs
Last week, the American business magnate and Co-Founder of Microsoft – Bill Gates – advised investors to pay extra attention when trading NFTs because they are based on “the greater fool theory.” The billionaire sarcastically noted that “digital images of monkeys are going to improve the world immensely.”
With his comments, he most likely referred to the Bored Ape Yacht Club (BAYC) – an NFT collection featuring different caricatures of monkeys. Despite Gates’ negative opinion of them, numerous celebrities have already spent millions to acquire some of the collectibles. The singer Madonna, the Brazilian soccer star Neymar, and the tennis champion Serena Williams are some examples.