Blockchain technology makes it possible to represent any form of value as a digital (or crypto) asset. For instance, real-world currencies can be represented as stablecoins, whereas other real-world assets like art, games, and collectibles can be represented as non-fungible tokens or NFTs. And the market for NFTs is growing like wildfire.
In 2020, consumers spent about $100 million on NFTs, according to DappRadar. But that figure soared over 21,900% to $22 billionin 2021. Of course, you can buy tokenized assets from a number of online marketplaces, like OpenSea and Rarible. But if you don’t want to speculate on individual items, you can still cash in on NFTs by adding certain cryptocurrencies to your portfolio.
Here are two great examples.
Ethereum (CRYPTO:ETH) is a programmable blockchain powered by the ETH token, meaning developers can build smart contracts on the platform. In turn, that technology has allowed Ethereum to become a thriving ecosystem of decentralized applications (dApps), including numerous NFT marketplaces and NFT-powered video games.
For instance, Decentraland is a virtual world in which players can buy and sell unique parcels of digital land, wearables for their avatar, and other in-game items, all of which are represented as NFTs. And because those tokenized assets exist on the Ethereum blockchain, transaction fees are paid in ETH. Similarly, OpenSea is the most popular NFT marketplace, boasting a total transaction volume of$15.9 billionover the past year. Moreover, the vast majority of NFTs listed on OpenSea exist on Ethereum, so most transactions are funded with the ETH token.
Here’s the big picture: Investors are throwing money at NFTs, and Ethereum is the go-to gateway for tokenized assets. In fact, the blockchain accounts for 80% of the NFT market in terms of transaction volume. And while that figure has fallen 15% from the beginning of 2021, Ethereum is still the leader by a wide margin. For that reason, if NFTs continue to gain traction with investors, demand for ETH should rise, pushing its price higher. But that’s not the only reason to buy this cryptocurrency.
With more than 2,900 dAppsdeployed on the network, and $120 billioninvested in DeFi services, Ethereum is the most popular ecosystem of decentralized products in the blockchain industry.And as those products become more popular with consumers, the ETH token should become more valuable. That’s why this cryptocurrency could make you richerin the long run.
2. Axie Infinity
Axie Infinity (CRYPTO:AXS) is an Ethereum-based game powered by two different tokens: Axie Infinity Shards (AXS) and Smooth Love Potion (SLP). As with Pokmon, players collect, train, and battle digital creatures known as Axies, each of which has different genetic traits and battle stats that make them more or less valuable. Players can also purchase digital land and other in-game items, all of which are represented as NFTs on the Ethereum blockchain.
What about the tokens? Gamers have the opportunity to earn AXSand SLPtokens by completing daily quests, going on adventures, and battling other players throughout the virtual world. The AXS token alone is used for governance and staking, but both tokens are needed to breed Axies, a feature that allows gamers to blend the genetic traits of existing creatures to make new (and potentially more valuable) Axies.
To that end, all NFTs on the platform can be sold on the Axie Infinity Marketplace, which ranks as the second-most-popular NFT marketplace in terms of total transaction volume, according to DappRadar. For context, gamers spent more than $3.8 billionon the Axie Marketplace in the past year. And through November 2021, Axie Infinity ranked as the most popular Ethereum game in terms of daily, weekly, and monthly active users.
If Axie Infinity stays trendy with crypto enthusiasts, demand for the AXS token should rise, both because it’s required for Axie breeding, and because AXS holders can stake the token to earn rewards. In fact, the payout currently sits at a mind-boggling 50.3% annual percentage yield after inflation. And as demand for AXS rises, the token should become more valuable. That’s how this cryptocurrency could help you cash in on the booming NFT market.
This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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