Cryptocurrencies and NFTs
Cryptocurrencies and NFTs: Risks or Rewards?
This resource guide was curated to complement the Read to be Sure (RTBS) Learning Package on Cryptocurrencies and NFTs.
Digital assets such as cryptocurrencies and non-fungible tokens (NFTs) have been making headlines recently. Cryptocurrencies like Bitcoin and Ethereum are digital or virtual money, secured by blockchain technology, and are considered fungible, as they can be directly exchanged for other currencies or goods or services.
Unlike cryptocurrencies, each NFT is unique, and cannot be exchanged for or be equal to another. NFTs are also supported by blockchain and are traded using cryptocurrencies. NFTs can be found in the fields of sports, music and art. Similar to physical assets such as artwork or other collectibles, NFTs may be considered investment assets or personal use assets. Recently, non-fungible token (NFT) trading has become a multi-million dollar industry.1
Cryptocurrency and NFTs are considered to be one of the “newest and most exciting” asset classes available to investors. However, despite the success of the cryptocurrency and NFT markets, there are opportunities as well as challenges ahead for investors.
Cryptocurrencies are high-risk investments that can be extremely volatile.2 They are not issued by any government nor backed by any asset or issuer. Hence, no central authority is required to verify the transactions. The prices of even established cryptocurrencies can be much more volatile than the prices of other assets like stocks. Furthermore, the prices of cryptocurrencies in the future could be affected by regulatory changes, with the possibility of cryptocurrency becoming illegal and hence, worthless. Given the risks involved in cryptocurrency and NFTs as an asset class, investors need to be familiar and cautious with the risks and challenges posed by them.
This resource guide delves deeper into the phenomenon of investing in cryptocurrencies and NFTs and highlights some of the potential rewards as well as risks involved in investing in them.
The guide provides supplementary resources for those who are keen to further explore this topic. You can also visit https://search.nlb.gov.sg/ to search for more resources. If you would like to view other resource guides created by our librarians, please visit Reference@NLB.
How NFT Mania is a Lesson on Speculation
As with other investment platforms, it is important to consider the reliability and longevity of NFT platforms. It would be wise for investors to consider who the backers of the NFT platform are and the track record of the platform they are trading with. The traditional methods of valuation of assets would not be applicable, making it difficult to assign a suitable price to these assets. Hence, investors need to carefully research and study the market before arriving at an investment decision.
Natalie Choy, “How NFT Mania is a Lesson on Speculation,” Business Times, 22 March 2021, https://www.businesstimes.com.sg/banking-finance/money-playbook/how-nft-mania-is-a-lesson-on-speculation
Crypto Theft is on the Rise. Here’s How the Crimes are Committed, and How You Can Protect Yourself
Investors can avoid being scammed by crypto thefts by ensuring they know who they are dealing with; transact through a reputable exchange; and verify all the channels they use. “If an offer sounds too good to be true, it almost certainly is.” Investors can also protect themselves by transferring their cryptocurrency from the exchange to a software wallet or a hardware wallet.
Aaron M. Lane, “Crypto Theft is On the Rise. Here’s How the Crimes Are Committed, and How You Can Protect Yourself,” The Conversation, 3 February 2022, https://theconversation.com/crypto-theft-is-on-the-rise-heres-how-the-crimesu-can-protect-yourself-176027
Application of Blockchain-enabled Technology: Regulating Non-fungible Tokens (NFTs) in Singapore
The surging popularity of NFTs means that a greater understanding of them is required and regulators would need to address the issues surrounding this new asset class in order to safeguard the interests of both buyers and sellers of NFTs. This article discusses the complex legal issues and risks that NFTs raise pertaining to Singapore laws.
Ben Chester Cheong, “Application of Blockchain-enabled Technology: Regulating Non-fungible Tokens (NFTs) in Singapore,” Law Gazette (January 2022). https://lawgazette.com.sg/feature/application-of-blockchain-enabled-technology-nfts/
What are NFTs? A Guide for Investors
Experts advise that the long-term investing goals of an individual should determine the type of NFTs they wish to invest in. Just like any other investment, they should look for NFTs that align with their growth portfolio. Also, an NFT can be a legitimate investment if investors understand what the NFT is being used for. The NFT should be something that has utility in the long-run. The lifespan of the utility will determine the value of the NFT.
Paulina Likos, “What are NFTs? A Guide for Investors,“ US News & World Report, 21 January 2022, https://money.usnews.com/investing/cryptocurrency/articles/what-are-nfts-a-guide-for-investors
What You Should Know Before Investing in Crypto
This video cautions that the cryptocurrency market is simply too volatile for many people. It offers three tips for potential investors. They should find out: if the founding team holds a large proportion of the tokens, and if they are barred from selling them all at once; if the project is trying to raise too much money by over-estimating the value of its tokens; and if the project adds any real-world value. If individuals wish to dabble in cryptocurrencies, they should make sure that it is only a tiny fraction of their investment portfolio.
CNBC International, “What You Should Know Before Investing in Crypto,” YouTube video, 8:10, 21 December 2021, https://www.youtube.com/watch?v=U3IROJkwqvo
Crypto: Will the Bitcoin Dream Succeed?
Rather than becoming a new form of money, Bitcoin has become a highly volatile investment asset, creating big winners as well as big losers. For the believers, Bitcoin is a stepping stone for a utopian future. For the sceptics, the crypto market is nothing more than a digital casino, too volatile to be trusted. Bitcoin may yet become a stable asset like gold or prove to be a “bubble that bursts spectacularly.” The one thing that is certain is that the utopian dream of Bitcoin becoming a new form of money beyond the control of governments and central banks appears to be still elusive.
The Economist, “Crypto: Will the Bitcoin Dream Succeed?” YouTube video: 10:44, 12 June 2021, https://www.youtube.com/watch?v=5tt7y0gesyo
Can You Make Money From NFTs?
Despite its many unique advantages, many experts remain hesitant about entering the NFT market at its current price point. The fear is that the market has grown too big and too fast, under immense hype and speculation. Both supporters and sceptics agree that this is just the beginning of the NFT movement. The market is still in a price discovery mode. The real worth of NFTs may not be known as “they are only worth what people will pay for them.”
CNBC, “Can You Make Money From NFTs?” YouTube video: 13:08, 28 November 2021 https://www.youtube.com/watch?v=mMUnNsY2ztg
What are NFTs?
Non-fungible tokens or NFTs represent a unique piece of media like an image or video that live on a blockchain. NFTs are seen to be a wild and tentatively lucrative marketplace. Are NFTs an over-priced digital art or a promising new technology that can transform the way we live? This video argues that NFTs, especially those linked to digital artworks, are over-hyped and over-priced. The technology, however, is worth watching closely.
The Economist, “What are NFTs?” YouTube video: 11:26, 4 February 2022, https://www.youtube.com/watch?v=EJzB_Fa27ko
Non-Fungible Tokens as an Alternative Investment: Evidence from CryptoPunks
CryptoPunks are a non-fungible token (NFT) collection of pixel art images, each with their own personality and unique combination of distinctive and randomly generated features. Holding a CryptoPunk NFT makes an individual the sole owner of a one-of-a-kind pixel avatar. This paper investigates CryptoPunks as an investment option, focusing on: evaluating the investment performance; assessing the variables that determine prices; calculating the portfolio diversification potential; and comparing the investment performance to other financial assets.
Luisa Schaar and Stylianos Kampakis, “Non-Fungible Tokens as an Alternative Investment: Evidence from CryptoPunks,” The Journal of The British Blockchain Association, 5, no. 2 (2022), https://jbba.scholasticahq.com/article/31949-non-fungible-tokens-as-an-alternative-investment-evidence-from-cryptopunks
Cryptocurrencies and Future Financial Crime
This study, involving a scoping review of academic research and grey literature on cryptocurrency fraud, ranks pump-and-dump schemes and ransomware as the biggest threats. Pump-and-dump schemes, however, are considered to be the less severe threat of the two. Study findings emphasise the need for better collaboration across sectors and a consensus on the definitions of cryptocurrency fraud to address the problems identified.
Arianna Trozze et. al., “Cryptocurrencies and Future Financial Crime,“ Crime Science, 11 (2022). https://link.springer.com/article/10.1186/s40163-021-00163-8
The Volatility of Bitcoin and its Role as a Medium of Exchange and a Store of Value
This analysis highlights that the volatility of Bitcoin prices is extreme and almost 10 times higher than the volatility of major exchange rates, such as the US dollar against the euro and the yen. The extreme volatility may adversely affect its potential role in investment portfolios. Study findings imply that Bitcoin cannot function as a medium of exchange and has only limited use as a risk-diversiﬁer.
Dirg G. Baur and Thomas Dimpfl, “The Volatility of Bitcoin and its Role as a Medium of Exchange and a Store of Value,” Empirical Economics, 61, no. 5 (November 2021).
Retrieved from EBSCOhost Business Source Complete via NLB’s eResources website. (myLibrary ID is required to access this article.)
Cryptocurrencies, Correlations, and COVID-19: Diversifiers, Hedge, or Safe Haven?
The findings of this study provide investors with empirical results regarding the relationships between Bitcoin and the cryptocurrency market with that of other assets and their potential role within a portfolio. Findings indicate that Bitcoin acts primarily as a diversifier to other assets; is a strong hedge to the aggregate cryptocurrency market; and is neither a strong nor weak safe haven. It was also found that the cryptocurrency market is primarily a strong hedge to other assets.
Brian Lavelle, Katherine N. Yamamoto, and Michael Kinnen, “Cryptocurrencies, Correlations, and COVID-19: Diversifiers, Hedge, or Safe Haven?” Review of Integrative Business and Economics Research, 11, no. 2 (2022).
Retrieved from ProQuest Central via NLB’s eResources website. (myLibrary ID is required to access this article.)
Retrieved from OverDrive. (myLibrary ID is required to access the eBook)
The Everything Guide to Investing in Cryptocurrency (Avon, MA: Adams Media, 2019).
This eBook throws light on the different kinds of cryptocurrencies, including Bitcoin, Litecoin and Ethereum; where to buy and sell cryptocurrencies safely and securely; setting up and managing your cryptocurrency wallet; and properly analysing their investments.
Cryptocurrency: The Simple Yet Perfect for Beginners Guide Explaining What it is and How to Take Advantage of this Opportunity (Fastlane, 2018).
This work looks at the importance and significance of the various types of cryptocurrencies available in the market. It offers practical advice on how to trade it, obtain it, and mine it, along with some precautionary measures.
Matt Fortnow and Terry QuHarrison,|
The NFT Handbook: How to Create, Sell and Buy Non-Fungible Tokens (Hoboken, NJ: Wiley, 2021).
This handbook provides a detailed guide on how to create, sell and buy non-fungible tokens without the need for a technical background. It looks at what NFTs are, how they evolved, and why they have value. It also delves into the different types and aspects of NFTs and discusses the different NFT marketplaces and the pros and cons of each.
Bubble or Revolution: The Present and Future of Blockchain and Cryptocurrencies
All rights reserved, Seattle, Paravane Ventures, 2019.
The authors look at the core concepts of blockchain and cryptocurrency technologies and shed light on their strengths and weaknesses using real-world case studies; dive deep into their technical, economic, political and legal complexities; and offer insights into their future through exclusive interviews with tech industry leaders.
Neel Mehta, Aditya Agashe, and Parth Detroja, Bubble or Revolution: The Present and Future of Blockchain and Cryptocurrencies (Seattle: Paravane Ventures, 2019).
(Call No.: 332.4 MEH)
The resource guide was prepared in March 2022 by Anasuya Soundararajan, Manager at the National Library, Singapore.
The information in this resource guide is valid as at March 2022 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history on the subject. Please contact the Library for further reading materials on the topic.
All Rights Reserved. National Library Board Singapore 2022.
Lisa M. Blum and Benjamin P. Foster, “The Taxation of Nonfungible Token Transactions,” The CPA Journal, 91, no 6/7 (2021). Retrieved from ProQuest Central via NLB’s eResources website. ↩
Dirg G. Baur and Thomas Dimpfl, “The Volatility of Bitcoin and its Role as a Medium of Exchange and a Store of Value,” Empirical Economics, 61, no. 5 (November 2021). Retrieved from EBSCOhost Business Source Complete via NLB’s eResources website. ↩