When it comes to saving money for retirement, financial services giant Fidelity Investments could be getting ready to disrupt the market in a major way. On Dec. 21, Fidelity filed a number of trademark applications related to non-fungible tokens (NFTs) and the metaverse, including an application for a new NFT marketplace and another to offer financial advice within the metaverse.
Put another way, Fidelity could be getting ready to make NFTs part of the way you save for retirement. This will probably sound insane to many investors, given the NFT market cratered this year and popular metaverse cryptos like Decentraland and The Sandbox are down more than 90% in 2022. While we don't know what exactly Fidelity will do with these trademark applications, we can speculate about possible future use cases.
NFTs as collectible art
The most obvious use case is buying NFTs as collectible art. One reason NFTs took off in the first place was the assumption you could buy an expensive asset and flip it in the future for a much higher price. The expectation, of course, is that digital art from a top artist or creator will appreciate over time. Ten, 20, or 30 years from now, you might be holding the equivalent of a digital Picasso or van Gogh.
Image source: Getty Images.
While it might be hard to imagine holding a Bored Ape or CryptoPunk in your digital wallet for a decade or longer, clearly there is a scenario in which digital art could become part of your long-term retirement portfolio. The one caveat here, of course, is that the IRS has made it very clear that collectibles are prohibited from inclusion in individual IRAs and 401(K) plans.
NFTs as staking assets
Staking crypto has become an increasingly popular form of generating passive income for crypto investors. Go to any top cryptocurrency exchange, and it's possible to find ways to earn anywhere from 1% to 10% on your crypto holdings. Staking NFTs works similarly, only you use an NFT, not a cryptocurrency, as the underlying asset. This option could become more popular over time, especially since many assets in the metaverse (including virtual land) are actually NFTs. When you are not actively using these NFTs, you might want to convert them into earning assets.
CRYPTO: APE
Key Data Points
Conceptually, this option is much harder to wrap one's head around, but think of it this way: You agree to loan your highly valuable NFT for an agreed-upon amount of time, during which you will earn rewards. At the end of that period, your NFT is returned to you. In the real world, wealthy art collectors loan their valuable artworks to museums and galleries for exhibitions, so why not in the crypto world? In early December, for example, ApeCoin (APE 4.05%) introduced new staking pools for holders of Bored Ape NFTs.
NFTs as an entirely new asset class for a diversified portfolio
Things get really interesting when you start considering NFTs an entirely new form of asset class. Typically referred to as "digital assets" or "tokenized assets," this class comprises just about any crypto-related investment but cryptocurrency itself. The long-term trend is toward the tokenization of the world, and this implies a digital representation of real-world, physical assets.
CRYPTO: BTC
Key Data Points
Once an asset has been tokenized, it can be traded, shared, and transferred just about anywhere. And best of all, it can be fractionalized, much like buying just a single satoshi of Bitcoin. Say, for example, you would like to invest in really expensive watches but can't afford a Rolex. Well, now you can buy a fractional share in one via a crypto token traded on a decentralized exchange.
Where does Fidelity fit into the picture?
In a basic scenario, Fidelity will simply provide investment advice about these different options. Maybe you can book some time with a digital avatar in the metaverse and discuss your retirement future in a digital office built on digital land. Between slaying dragons and earning valuable treasure in your favorite metaverse world, you might stop in for a quick 30-minute retirement checkup. Back in April, Fidelity set up shop in the metaverse via a multi-story digital building complete with a dance floor and rooftop garden, so this is definitely within the range of possibilities.
In a more advanced scenario, Fidelity would begin providing increasingly more ways to invest in digital assets like NFTs. In December, for example, Fidelity launched its new Crypto platform for retail investors, enabling everyday people to buy and sell cryptos like Bitcoin in a safe, zero-commission environment built by Fidelity. So, imagine this platform transforming into a new platform where you can buy and sell a range of NFTs in addition to cryptos.
Obviously, this is all speculative, given we don't know what Fidelity will do. But certainly, Fidelity taking such an innovative approach is fascinating. What if NFTs really can help you save for retirement?
