The most important things to know about (NFTs):
- Digitizing and monetizing – For years, artists have been creating easily accessible art online, often with little to show for it, especially financially. NFTs enable digital artists to truly own and sell their creations while also profiting financially.
- NFTs are a risky business, just like any other investment. They are unregulated, and the craze that surrounds them may cause volatility: buyers may purchase an expensive NFT only to discover later that it isn't worth much. Because NFTs are not easily exchangeable for cash, liquidity is an issue.
- Environmentally unfriendly – While digital assets are paperless, they are far from green. NFTs (and cryptocurrency in general) require a lot of energy for computers, storage, and security.
- They are not tax exempt – Buying and selling NFTs are both taxable events. NFTs are taxed at the maximum capital-gains rate of 28 percent because they are considered collectibles. Investors should also expect to be taxed when purchasing and selling NFTs with cryptocurrency, exchanging one NFT for another, and converting cryptocurrency back into US dollars.
