Whether in a bullish or bearish market, investors constantly search for ways to optimize their investments. However, relatively stable investments are often best suited for bearish markets. This is due to some reasons. First, in bearish markets, many investors would have lost confidence in the market’s ability to thrive in the foreseeable future. Thus, strategic investors will prefer placing their bet on investments that maintain value regardless of market conditions. ‘
This ‘store of value’ feature is crypto’s primary appeal. Stablecoins like USDT have served as a safe spot for many crypto investors during market crises. However, other investments can easily function as an effective store of value. NFTs and REITs are often cited as examples of such investments.
While NFTs and REITS can serve as a store of value in certain situations, their respective stability levels differ.
NFTs and REITs: How are They Different?
Non-fungible Tokens (NFTs) are unique financial assets deployed on the blockchain. These assets often represent digital or physical items like art, musical albums, or in-game items. On the flip side, Real Estate Investment Trusts (REITs) involve real estate ownership and operation to earn profits. Under REITs, a company finances real estate projects to pay dividends to investors. REITs enable investors to easily invest in real estate without undertaking the burden of directly financing or operating the projects.
NFTs or REIT: Which is the Better Store of Value?
There is no doubt that NFTs and REITs are popular investment options. However, their stability levels are not the same. Many may argue that NFTs are relatively stable, however, recent market trends have proven otherwise. For instance, American popstar Justin Bieber purchased a Bored Ape NFT in January 2022 for $1.3 million. However, by November of the same year, the NFT’s value had plunged to $70,000. This represents a loss of more than 90 percent of the NFT’s value. For many NFT investors like Justin, NFTs did not maintain their initial value for long. Given this outcome, most NFTs can hardly qualify as a store of value.
On the other hand, REITs are more stable. This is because investors are guaranteed a strong, stable, and annual dividend payment. Also, REITs are liquid. This means that most REITs can be easily sold. For instance, investors can sell their publicly traded REITs with minimal hassle. However, NFTs are not as liquid. Many times, a holder’s ability to sell their NFT depends on the availability of a buyer who bids according to the holder’s price expectations. This makes it more difficult for NFT investors to exit the market at will.
Conclusion
Given the points raised, REITs are undoubtedly more stable than NFTs. However, it is important to do your research before investing in any asset. This way, you can understand the risks and prepare for them.
