How important is liquidity to NFT?

Liquidity refers to the efficiency with which an asset can be converted into ready-made cash without affecting its market price. The most liquid asset is cash itself. In other words, liquidity describes the extent to which an asset can be quickly purchased or sold in the market at a price that reflects its intrinsic value.

To measure the value of an NFT, past transaction data is an important factor, but a well-rounded buyer will consider many other factors, such as liquidity compared to other products of the same type, referred to as relative liquidity. The reason is simple. A higher number of transactions represents higher liquidity to some extent.

How important is liquidity to NFT?

One of the biggest obstacles facing the NFT market, at least in the world of digital assets, is the lack of liquidity and the ability to obtain a return on investment without selling NFTs. As demonstrated by DeFi, investors value liquidity and desire returns.

For NFT, liquidity is one of the factors that determine its value. For those who do not plan to hold NFT for a long time and want to obtain income through NFT trading, liquidity indicators are indeed one of the data that must be paid attention to. However, the importance of NFT liquidity should also be viewed in different scenarios.

How important is liquidity to NFT?

NFT artworks do not require excessive liquidity, but it does not mean that collectibles, games, and social tokens cannot pursue liquidity. They should be viewed in different categories based on facts.

The prospect of NFT is broad enough, and now it is obvious that there are two sources of value for assets on the chain and native works. At least there are four categories of art, collectibles, games and social tokens, and even among them, it can be further subdivided. In short, you can’t wear new shoes and go the old way, and don’t judge NFT completely based on the value standards of DeFi and real artworks.

How important is liquidity to NFT?

The value of collectibles, such as NBA Top Shot, comes from the appeal of NBA stars, and these NFT collectibles can boldly pursue liquidity, because they are actually more like a type of DeFI assets and are very valuable. From this perspective, It is also good to be a good distribution channel.

The vision of blockchain games is to break through the platform’s control over players. Specifically, the value of item trading will be transferred from platform control to player control. However, the generation of items requires time to collect, and the improvement of item skills requires the participation of the player group.

How important is liquidity to NFT?

Therefore, NFT game items are actually more suitable for the concept of liquidity, but it should be noted that in terms of item acquisition and used to enhance the player’s game experience, the purpose of trading NFT items should be used for the game itself, if it is purely used as a speculation On the contrary, tools will destroy the overall ecology of the game, and will eventually defeat speculators.

In the future, as intellectual property rights are transferred to the blockchain as NFTs, trillions of digital content will be transferred to the secondary market. This will release huge illiquid value and become the largest asset class in the blockchain, giving NFT liquidity a deeper meaning.

How important is liquidity to NFT?

With the help of standards and smart contracts, NFTs may be divided, jointly owned and managed by multiple users or communities, and conduct fragmented transactions, crowdfunding, and release more value.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-important-is-liquidity-to-nft/
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