Cryptocurrencies and NFTs are often mentioned in the same breath, yet the two are not the same. NFT stands for “non-fungible token,” which as the name suggests, are non-fungible, or unique. Cryptocurrencies, on the other hand, are fungible assets, meaning they are interchangeable with other like tokens. So, in searching for the best NFT cryptos, investors are looking for the cryptos that facilitate the growth and popularity of NFTs in various use cases such as art and gaming.
As my InvestorPlace colleague Mark Hake points out, NFTs “can be used as standalone art, but are increasingly important as tokens bought as unique items in gaming software. They can also be used as a method of authentication for buyers of unique items, proving aspects such as ownership.”
NFTs have exploded in popularity due to celebrity adoption, the introduction of NFT games and the rising demand for digital artwork. A Research and Markets report from June forecasts the NFT market will grow from $3 billion this year to $13.6 billion by 2027. That implies an impressive compound annual growth rate (CAGR) of 35%.
The most expensive NFT ever sold is known as “The Merge,” which fetched a cool $91.8 million when it sold in December. That’s far too rich for my blood. While some are drawn to NFTs as digital collector items or as investments of the future as the economy shifts toward a more digital world, everyday investors can participate in the NFT phenomenon by focusing on the best NFT cryptos instead.
After the brutal sell-off across the cryptocurrency market, these tokens are trading well off their highs. Though they may still have further to fall before the sector rebounds, each presents an opportunity to profit from the growth of the NFT market.
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Most NFTs are part of the Ethereum (ETH-USD) blockchain. Indeed, Ethereum-based NFT sales make up the largest volume of NFT sales on OpenSea, the biggest NFT market exchange in the world.
Although sales of Ethereum-based NFTs slumped over the summer amid the crypto bear market, roughly 1 million Ethereum NFTs valued at a combined $497 million were sold in August, according to industry data aggregator CryptoSlam! In August 2021, at the height of the NFT craze, the value of Ethereum NFTs sold was close to $3.8 billion.
Ethereum is also the blockchain upon which a number of popular NFT games have been built. Users can collect in-game NFTs, buying, selling and trading them with other players.
Ethereum’s position as a leading cryptocurrency, second only to Bitcoin (BTC-USD) in terms of market cap, provides a level of security for NFT investors, as well as those looking to invest in the best NFT cryptos.
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One of the most efficient Layer-1 blockchains out there, Solana (SOL-USD) is known for its speed and low fees above all else. Its low-cost and fast blockchain has proven valuable in the world of NFTs, with Solana-based NFT sales the second largest by volume among all cryptocurrencies.
CryptoSlam! shows Solana NFT sales peaked in January at almost $300 million. In August, Solana NFT sales totaled $58.6 million. A year ago, they were nearly triple that amount at $164.6 million. However, the number of transactions was significantly higher at 1.5 million last month compared with around 67,400 a year earlier. Notably, during that time, the average sale price per NFT fell from $2,441.56 to $37.67. This shows more buyers coming into the NFT market as it has grown broader and more affordable.
Solana has its own NFT marketplace called Magic Eden, which has emerged as a major competitor to OpenSea. Magic Eden recently expanded its marketplace on Ethereum, meaning NFTs can be paid for with SOL or ETH regardless of which chain the project is deployed on. The move will expand access to popular Solana NFT collections like Aurory, DeGods, Solana Monkey Business and Degenerate Ape Academy.
As Solana and Ethereum become increasingly intertwined, it should bolster the potential value of Solana in its race for market share, making it one of the best NFT cryptos to buy.
Flow (FLOW-USD) is a lesser-known blockchain project created by Dapper Labs, the company behind popular crypto-collectibles game Crypto Kitties. This proof-of-stake consensus mechanism blockchain offers its users a cheap and easy way to close transactions as compared to Ethereum.
Flow has become a blockchain synonymous with NFTs. Given the project’s focus on NFTs and NFT-related games, investors looking for a pure play on the NFT market have tended to flow toward Flow.
In August, Instagram decided to add support for Flow NFTs on its platform. The news caused FLOW tokens to surge 44% in a 24-hour period.
While Flow has since given up these gains, investors looking for future NFT-led rallies have a lot to like about this blockchain’s prospects. In terms of growth, many expect Flow to lead in key categories. In gaming infrastructure, content and decentralized finance applications, Flow has perhaps more growth potential than Ethereum or Solana.
Investors seeking a higher-risk, higher-upside pick among the best NFT cryptos should consider Flow.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.