More On: NFTs
Senators and regulators explain why the $60 billion collapse of a major cryptocurrency is not the industry's Bear Stearns moment
Kevin O'Leary, a 'Shark Tank' investor, is a firm believer in non-fungible tokens, believing that they have a chance to outperform bitcoin.
O'Leary, the chairman of O'Shares Investment Advisers, believes in NFTs because they can digitally establish ownership of real-world objects like fancy watches or flash automobiles rather than using paper records.
NFTs are one-of-a-kind crypto tokens used to trace the provenance and validity of virtual collectibles like art and sports memorabilia. NFTs have also been attempted to be applied to physical assets.
"You're going to see a lot of movement in terms of performing authentication, insurance policies, and real estate transfer taxes all online over the next few years," O'Leary said on CNBC's "Capital Connection" Wednesday, making NFTs a far wider, more fluid market than bitcoin alone.
"We'll see what happens," he says, "but I'm betting and investing on both sides of that issue."
In 2020, few people had heard of NFTs, but the next year, they became a massive craze. According to some estimates, more than $20 billion worth of tokens changed hands in 2021. After a collage by digital artist Beeple, whose actual name is Mike Winkelmann, was sold for a record $69 million, the trend garnered a lot of attention.
However, there are doubts regarding the market's long-term viability. Some have linked it to the 2017 initial coin offering craze, in which some investors were scammed by uncontrolled token sales betting on start-ups. Meanwhile, a number of frauds and cases of stolen art have surfaced, raising warning signals for some traders.
Reversal of fortune
After earlier calling bitcoin "trash," the multimillionaire Canadian investor has altered his mind about crypto.
In May 2019, O'Leary told CNBC's "Squawk Box" that the currency is "useless." "It's a waste of time."
O'Leary has recently warmed on to the market, seeing it as a means to diversify away from other assets such as real estate in the face of growing inflation. He's particularly enthusiastic about "decentralized finance," a strategy aimed at leveraging blockchain to imitate traditional financial products.
O'Leary just revealed that ether is his largest holding, although he also holds polygon, solana, and bitcoin.
In the previous six months, O'Leary has written over 40% of fresh checks for crypto and blockchain-related enterprises.
O'Leary emphasized the significance of ensuring that cryptocurrency is regulated. Regulators in the United States and others are scrambling to keep up with market developments in order to prevent money laundering and safeguard consumers.
"Different regions have different crypto policies," O'Leary explained. "You should seek out jurisdictions that are more progressive."
He used his native nation of Canada as an example of a jurisdiction that is more progressive on the topic of cryptocurrency than others.
Canada was the first country to approve a bitcoin-related exchange-traded fund (ETF). Though the Securities and Exchange Commission has subsequently approved a bitcoin-linked ETF, it follows futures contracts rather than investing directly in bitcoin.
Other nations that are opening up to crypto include the United Arab Emirates and Switzerland, according to O'Leary.
"You have to be upbeat and productive," stated O'Leary. "A deluge of cash will flow in through sovereign and pension plans that do not yet exist."
Stablecoins, digital tokens tethered to the value of national currencies like the dollar, are of special concern to authorities. Economists are concerned that popular stablecoins like tether and USD Coin may lack the necessary reserves to back up their promises of being backed by dollars.
"I think [stablecoins] will shine as a terrific method to obtain yield when you can't get any interest on cash," O'Leary remarked.
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