NFTs Price Discovery Within A Metaverse Economy

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Written by

Pantera

Bitcoin Is Cash

2 years ago (Last updated: 1 year ago)

Topics: NFTs, Tokenization, Metaverse, Crypto, Decentralized, ...

NFTs is one of the technological wonders of the 21st century.

The NFTs technology will become the standard for private property in the Metaverse and real life since there is no better alternative.

Furthermore, the utility of the technology can be applied in various fields of our economies, present a unique solution to the reduction of operational costs for multiple industries, and generate better governance solutions.

The difficulty in evaluating NFTs begins with the unique attributes and artwork each NFT contains, as well as the creator’s popularity, the stage of hype in an NFT market, side perks offered to holders, and contains many factors we may ignore.

The initial price discovery is the cost of acquiring an NFT. Of course, the purchase cost barely determines the present or commercial value of an NFT.

The cost of producing NFTs is minimal.

Price discovery is limited since NFTs are unique, distinguishable, non-fungible, and illiquid assets.

NFTs And The Companies Of The Metaverse

By 2030 businesses will have to adjust since a large part of their assets will be located in the digital (or better) virtual world, the Metaverse.

The technology and infrastructure for a fully blown Metaverse are not ready yet.

The Metaverse will either attract global adoption or remain as a gaming VR facebook platform with games and socializing. In this case, we will be talking about a wasted opportunity.

Still, we hope it will evolve into an actual 3D/VR universe with self-ownership and exclusive digital rights as the core principles.

Accounting represents the most precise valuation of assets for businesses and corporations following strict auditing principles.

The Price of NFTs

NFTs do not wear and tear with time. Yet, they lose value according to the market trends and demand similar to collectibles.

The free market puts a price on an NFT, but as collectibles, their price is not stable.

Only an auction will represent the exact price of an asset, like an NFT, for that period. Its price can appreciate or depreciate afterward.

We can categorize NFTs either as Works of Art, or long-term (digital) financial assets. However, any accounting legislation to this point is treating NFTs similar to Bitcoin (BTC) as collectibles.

The IRS hasn’t explicitly said that NFTs are collectibles. (CNBC).

A framework for businesses should be considered, as NFTs may not be a dominant force yet, but the future of the digital spectrum will integrate such a disruptive technology.

Proper Pricing

Evaluating assets at the minimum price between different possibilities is the right approach.

This is how price research works and how businesses correctly price their assets.

You bought that Dorsey NFT for a million two years ago? Well, now nobody wants it. It could be Jack’s publicity that went down the gutter or just the NFT hype deflating, but if you put it for sale, you will not sell even at 90% lower.

So, while the cost of purchasing an NFT (or any asset) is the price we paid, eventually the present value will most definitely differ.

Conclusion

(Picture by BrianPenny on Pixabay)

Calculating the actual price, the market price of NFTs is a challenge.

In the real economy, companies monitor prices and re-evaluate their intangible assets regularly. Similarly businesses can estimate their NFT assets valuation inside the Metaverse.

We should consider counterfeit trades as well, which can be difficult to expose. Traders can manipulate volumes, and we recall many cases of blatant wash trading.

The most acceptable business approach is to evaluate its NFT assets at the lowest outcome of all methods used for price discovery. For retail investors, evaluating NFTs can work with a similar approach.