Exploring Sports NFTs: Is it Worth the Hype?

Exploring Sports NFTs: Is it Worth the Hype?

In recent years, blockchain technology has brought about revolutionary advancements in the sports industry, particularly in the form of non-fungible tokens (NFTs) for sports. These digital assets have gained popularity as a way to own a unique piece of sports memorabilia, such as a video clip of a game-winning play or a limited-edition trading card. Thus, for example, an NFT of LeBron James's iconic basketball runaway dunk was sold for over $20 million.

But the question remains: are sporting NFTs a good investment? Let’s look at the world of sports NFTs from an investment perspective.

Sports NFTs explained: understanding the concept

Sports NFTs are unique digital assets that can be verified on a blockchain. They are created to represent various sports items, such as sporting moments and digital memorabilia. Athletes, clubs, and sports brands can use sports NFTs to monetize their brand and gain a competitive edge while providing fans with a new way to connect with their favorite teams and athletes.

To have a deeper look at the concept of Sports NFTs and their examples, check out our February blog post.

Market state

Despite declining sales and falling prices throughout the year, the overall volume of NFT sales in 2022 almost matched that of 2021, according to DappRadar. The NFT market generated about $24.7 billion of organic trading volume in 2022, slightly lower than the $25.1 billion total recorded in 2021. The NFT market followed a similar progression to the crypto market, with sales surging in January and falling towards the end of the year. However, overall trading volume ticked slightly in December, and the number of NFTs sold rebounded after a dip in November, with nearly $684 million worth of organic trades produced in December.

According to a study conducted by Market Decipher, the Sports NFT market is predicted to grow at a compound annual growth rate (CAGR) of 36.3% and is expected to reach $41.6 billion by 2032. The research also indicates that the most popular sports branches in the NFT market are NFL, Football, Basketball, Baseball, Cricket, and Ice Hockey.

Authenticity and exclusive ownership

Sports NFTs provide proof of ownership and authenticity, which is essential to collectors who want to ensure they invest in a genuine item. This makes sports NFTs a more trustworthy and reliable investment compared to physical sports memorabilia.

Many sports NFTs commemorate historical events, such as championship victories or record-breaking performances. These NFTs have a unique cultural and historical significance, making them an even more valuable investment to fans and collectors.

Sports NFTs can also provide fans with a new way to engage with their favorite sports teams and athletes, giving them additional unique access to the fan community. It can foster a deeper connection between fans, teams, and players by providing them with a tangible asset that they can cherish for a long time, regardless of whether they physically possess it.

Token gating

Token gating is a verification method whereby communities can provide exclusive access to spaces, events, and content to owners of specific digital assets in their wallets. Thus, some sporting NFTs go beyond the idea of digital collectibles by offering owners tangible benefits and exclusive privileges associated with ownership. Rather than simply considering NFTs as memorable objects to be collected, they have practical uses, such as serving as event tickets, granting holders extended membership in a club, or participating in the gamification experience. For example, Sorare NFTs represent digital versions of licensed soccer player cards that give access to participate in free tournaments and win digital and physical rewards.

Sports NFTs can also provide the owner various benefits, from access to branded meetups to the possibility of winning unique prizes. For instance, the collectors of the digital asset that MO:ME:NT is minting for FC Twente not only can own essential moments of their favorite club but also can win club branded and officially signed souvenirs and meet & greets.

Potential for resale

Sports NFTs can be resold on various online marketplaces, providing a potential profit opportunity. As demand for certain NFTs increases, investors can sell their NFTs for a higher price than they paid for them. For instance, XCOPY’s NFT, known as Reflection, was sold on the primary market at Fortnight for $98,000 and resold on the secondary market for $872,000.This means that the original buyer was able to make a significant profit by selling the NFT to someone else.

Additionally, for example, in 2021, the popularity of non-fungible tokens (NFTs) increased the value of sports-related collectibles, such as trading cards and virtual memorabilia. This has allowed collectors who are well-informed about the market to profit significantly by purchasing these items and then selling them at a high price during the NFT boom. As a result, Sports NFTs have provided an opportunity for collectors to capitalize on their knowledge and expertise in the field.

Market volatility

The market for NFTs is unstable, and gathering sports-related NFTs may lead to the loss of money, remarkably, if the licensing agreement of an NFT brand is terminated, as occurred with F1 Delta Time in the recent past. Consequently, individuals contemplating purchasing sports NFTs as an investment must be cautious and only invest what they can afford to lose since there is a likelihood of losing money in the NFT market. However, investing in NFTs consciously can bring more benefits.

Overall, we looked at the main benefits and drawbacks of investing in sports NFTs, as well as factors that may influence their value over time. The emergence of sports NFTs has created a new investment opportunity for collectors and investors. Despite the potential risks, sports NFTs revolutionize the sports memorabilia industry, providing a new way for fans to connect with their favorite teams and athletes, and collect and trade their favorite sports moments.

In our following blogs, we continue to discuss sports NFTs, diving deeper into where and how to buy sports NFTs, also covering the leading NFT marketplaces.  Stay tuned!