Could asset backed NFTs become a hedge against crypto market crashes?


It’s undeniable that for all the utility created by crypto, a lot of the value it currently holds is based on speculation and hype from people who don’t really believe in the tech. This is especially true in the NFT space where many “investors” treat them like get rich quick schemes.

Naturally, this is a major reason why crypto assets are so volatile. People who are just trying to time the market unload their holdings as soon as they see the price declining.

Enter asset backed NFTs. These are NFTs where owning them is backed by actual physical assets, unlike profile picture projects where you only own a digital picture.

Here’s some examples for reference:

I’ve already done a post on real estate and NFTs, but I’ll keep it simple here and only mention one project. Balcony DAO is early stages but they’re building a luxury residential building where owning an NFT confers ownership shares in the building. It’s basically a REIT but as an NFT so it has lower overhead, more liquidity, and more flexibility.

In beverages, BlockBar sells NFTs connected to physical bottles. Essentially, the types of collectors bottles that would previously be sold at auction at Christie’s or Sotheby’s are held in a vault. Owning the NFT for the bottle allows you to redeem the physical bottle in exchange for burning the NFT, but it basically allows you to invest in expensive bottles without having to go through an auction house.

In luxury goods, LuxFi is like BlockBar but for designer watches, purses, shoes, etc. If you buy a Rolex NFT, there’s a corresponding physical Rolex that you can trade the NFT in for if you want to claim it.

This is still a super immature field, so they’re not at a place yet where they hold much value as a hedge. These projects still follow normal hype-based trends in the NFT market and derive much of their value from that rather than just the underlying asset. For example, a bottle in BlockBar usually trades for considerably more than that same bottle would be worth at a traditional auction. But as this field evolves, I can see asset backed NFTs being crypto assets that are divorced from the normal trends of the crypto market. If instead of being valued based on crypto speculation, they were valued based on the value of the asset itself, they’d be useful ways to diversify your holdings within crypto and hedge against market crashes without having to move your money into fiat (or putting it all in “stable” coins only to get LUNA’d).

submitted by /u/UnamazingHero
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