Published on April 6, 2021

“Everydays: the First 5,000 Days” is a mosaic of every image that artist Mike Winkelmann, who goes by the name of Beeple, has made since 2013. The artwork is attached to a non-fungible token (NFT), a digital certificate of authenticity that runs on blockchain technology and was sold at a Christie’s auction for over $69 million. Now, the band Kings of Leon is offering its latest album as a collector’s item—online. And NBA fans recently drove the price of a LeBron James highlights video into six figures from an NFT platform called NBA Top Shot.

The NFT marketplace is perhaps the purest distillation of how scarcity is driving investment in the world of sports.

Bloomberg. March, 2021. “An NFT Sold for $69 Million, Blasting Crypto Art Records.”
The Wall Street Journal. March, 2021. “NFTs Explained: What’s Driving Prices for LeBron James and Kings of Leon Digital Collectibles.”

What is an NFT?

An NFT is a digital asset that exists on a blockchain. The blockchain serves as a public ledger, allowing anyone to verify the asset’s authenticity and ownership. So, unlike most digital items which can be endlessly reproduced, each NFT has a unique digital signature, meaning it is one of a kind.

The NFT marketplace is similar to that of bitcoin and other cryptocurrencies, with a key difference: While every bitcoin created can be exchanged for one another at equal values, these don’t. As the name suggests, non-fungible tokens are meant to be unique. The tokens act as virtual deeds, conveying ownership of a digital asset. Each one gets uploaded to a digital ledger where it conveys key information: the date it was created, when it was sold, for how much and to whom.

NFT Marketplace: Coin and Blockchain

“Think of it like a digital passport that comes with an asset,” said Nadya Ivanova, Chief Operating Officer of BNP Paribas-affiliated research firm L’Atelier. “They allow for this trust and authenticity to be established in a way that we haven’t been able to do before, whether it’s with physical assets or digital assets.”

NFT Marketplace: NFT Sneakers by RTFKT

Source: The recent sale of three collaborative NFT sneakers by Rtfkt, a digital design studio, and the teenage artist Fewocious, netted $3.1 million.

NFTs are usually bought with the cryptocurrency Ethereum or in dollars, and its corresponding blockchain keeps a record of the transactions. While anyone can view the NFTs, the buyer has the status of being the official owner - a sort of digital bragging right.

Examples of NFTs include collectibles, game items, digital art, event tickets, domain names, and even ownership records for physical assets. A range of assets is already being sold as NFTs, including basketball highlights, old tweets and a rock album. Recently, RTFKT Studios sold a collection of NFT-minted digital sneakers for the metaverse (The metaverse is an informal term used to describe a collaborative and immersive virtual world).

The recent sale of three collaborative NFT sneakers by Rtfkt, a digital design studio, and the teenage artist Fewocious, netted $3.1 million.

Sources: OpenSea. Jan, 2020. “The Non-Fungible Token Bible: Everything you need to know about NFTs.”; Reuters. March, 2021. “Explainer: NFTs are hot. So what are they?”; CNBC. March, 2021. “Creator who sold NFT house for $500,000: We’ll be ‘living in an augmented reality lifestyle’ soon.”; The Wall Street Journal. March, 2021. “NFTs Are the Biggest Internet Craze. Do They Work for Sneakers?”; The Wall Street Journal. March, 2021. “NFTs Explained: What’s Driving Prices for LeBron James and Kings of Leon Digital Collectibles.”

Meaning of Fungibility

NFT Marketplace: Coin and Blockchain

In economics, a fungible asset is something with units that can be readily interchanged - like money.

With money, you can swap a $10 note for two $5 notes and it will have the same value.

However, if something is non-fungible, this is impossible - it means it has unique properties so it cannot be interchanged with something else.

It could be a house, or a painting such as the Mona Lisa, which is one of a kind. You can take a photo of the painting or buy a print, but there will only ever be the one original painting.

Sources: BBC. March, 2021. “What are NFTs and why are some worth millions?”

NBA’s ‘Top Shot Platform’

In recent months, these blockchain-based items have merged with pro sports in the form of NBA Top Shot, a platform where users can collect highlight clips of their favorite players as Moments. The Top Shot platform was created by Dapper Labs, a blockchain game developer that has received substantial investment capital from notable asset managers. Moments are sold in packs, and there's a limited quantity of each one, making rarer clips more sought-after. There are differences, to be sure, but it's pretty close to a digital analog of the physical sports card market. NBA Top Shot reportedly had hundreds of millions of dollars in sales within six months of its launch last year. Other leagues will almost surely create similar offerings in the months to come.

One of the differences that can be difficult to wrap your head around is the fact that NFTs are entirely virtual—a $1 million baseball card is just a piece of cardboard, but it's at least something you can hold in your hand. And most (if not all) of the clips that people are paying six figures for on Top Shot can still be found on YouTube. Top Shot investors aren't buying exclusive rights to a highlight; they are buying exclusive rights to this one particular version of the highlight, and they're buying the guarantee that no other versions will later be created. That satisfaction of knowing you own something that no one else can own is central to the idea of collecting.

Collecting turns into investing when the value of the items purchased is expected to appreciate over time. And regardless of whether the money is being invested into a sports league or a sports highlight, the driving factor for appreciation is scarcity.

NFT Marketplace: 338 Million in Top Shot Sales Since Oct 2020

NBA’s Top Shot has been a lucrative marketplace where fans spent five—and in some cases six—figures to own NFT clips of highlights such as a LeBron James dunk. It has minted unlikely millionaires and left many scratching their heads as it processed more than $250 million in sales from 100,000 buyers over the last month alone.

The peculiar but lucrative subculture of Top Shot reminds others of a similar hit from the same company, Dapper Labs, in which people collected virtual cats instead of NBA highlights; CryptoKitties was a fad that was mostly forgotten after a few crazy weeks in 2017.

Now the idea has roared back in part because Top Shot is built for a different audience: the average NBA fan. Dapper Labs cut deals to give the league and its players a slice of every transaction—the company takes a 5% fee—with the goal of reaching casual basketball consumers and not just blockchain evangelists. Instead of swapping jerseys after games, NBA players are exchanging Top Shot moments.

Sources: The Wall Street Journal. March, 2021. “The Whales of NBA Top Shot Made a Fortune Buying LeBron Highlights.” ; PitchBook. March, 2021. “10 big things: PE, NFTs and investing in sports scarcity.” ; CoinDesk. Feb, 2021. “NBA Top Shot, CryptoKitties Firm Dapper Labs Raising $250M+ at $2B Valuation: Report.”;

Recent High-Profile Sales in the NFT Marketplace in 2021

NFT Marketplace: Recent Profile

Source: Reuters. March, 2021. “Explainer: NFTs are hot. So what are they?”

Growth of the NFT Marketplace

Traded since around 2017, NFTs have surged in 2021. Monthly sales on the NFT marketplace, OpenSea, hit $95.2 million in February, up from $8 million in January.

Total NFT trading volumes on the Ethereum blockchain amount to over $400 million, nearly half of which were in the last 30 days, according to, which aggregates data from NFT marketplaces.

NBA Top Shot, which is not included in data, has 683,000 users and has seen $396 million in sales, $232 million of which were in February.

Crypto asset sales surge

Monthly sales volume on OpenSea, in U.S. dollars

Note: Data as of March
Source:,, Dune Analytics

Source: Reuters. March, 2021. “Explainer: NFTs are hot. So what are they?”

Risks and Concerns

Fraud/ Verification of Authenticity: Anyone on the internet can create an NFT out of literally anything, which means there are a lot of "really bad" tokens out there, Ivanova said in an interview. It takes a trained eye to weed out what's worth collecting or investing in. "That applies to the physical art market as well — it's usually a space for the knowledgeable. Same thing with NFT art," said Nadya Ivanova, COO of L'Atelier , who collaborated with on a report on NFTs in February.

Volatility: The NFT market suffers from volatility, said Ivanova, in part because there aren't any mechanisms in place yet to help people price assets. Over the course of 2020, the value of some of the most popular types of NFTs spiked by around 2,000%, L'Atelier's report found. On Top Shot, some highlights that initially sold for a few dollars are now worth tens of thousands.

Illiquidity: When it comes to liquidity — how readily an asset can be exchanged for cash — NFTs are a lot more like baseball cards or paintings than bitcoin or stocks, because every seller needs to find a buyer who's willing to pay a certain price for a particular, one-of-a-kind item. That can put collectors in a difficult spot if they, say, spent $100,000 on a Top Shot moment and the market begins to tank, Ivanova said. But illiquidity can also be a good thing, since it prevents people from making rash decisions, Andrew Steinwold, a crypto investor who started an NFT investment fund in September 2019, told Insider. If people don't have the option to panic and offload their NFTs, the market could avoid the kind of plummeting values that would spark such a selloff in the first place, he said.

Environmental Cost: Like Bitcoin, Ethereum requires computers to handle the computations, known as "mining," and those computers require a lot of energy. An analysis from Cambridge University found mining for Bitcoin consumed more energy than the entire country of Argentina. Ethereum is second to Bitcoin in popularity, and its power consumption is on the rise and comparable to the amount of energy used by Libya.

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