By Christiana Sciaudone
Investing.com -- Nonfungible tokens are hot -- as art and collectibles -- but insiders are more interested in the real life potential of the Ethereum-hosted technology, says one crypto expert.
NFTs can represent the transfer of value, of anything, according to Scott Melker, a relatively long-term crypto investor, who was steeped in equities until the 2010s when he started to poke around cryptos. Now he's a believer, and hosts a crypto-centered podcast, “The Wolf Of All Streets," and writes a daily crypto newsletter.
"You can tokenize anything and transfer it directly without a third party," Melker said in a phone interview this week. "It could be a mortgage, a car title, stocks without clearing houses needed to clear the transactions."
The NFT transactions would be logged transparently on the blockchain. So who wouldn't want to cut out the cost and bureaucracy of the middle man in favor of faster and more open methods of doing business? Why haven't we jumped to adopt this technology?
Think banks, payment companies and governments that do not want to see their power and financial might slip away, Melker said. They are taking steps, however, to join the future.
"Central bank digital currencies are coming; You can't stop this tech, but they can hope to control it."
Melker urges all investors to push into crypto, but also keeps his traditional retirement account, equities and real estate investments humming.
"Bitcoin is the most important asset of our generation by far," but boring portfolios are also important, Melker said. "You should have exposure to both."
One possible way to have exposure to both? A U.S. bitcoin exchange-traded fund. Some of the biggest institutions, such as pension funds, are itching to get exposure to crypto via ETFs, since they can't buy directly, Melker said.
"Everything starts and ends with bitcoin to some degree," Melker said. "That is like investing in gold 2.0. That should be the core of everybody's focus."
But the U.S. Securities and Exchange Commission has been cautious, and has yet to approve any such ETF.
In the meantime, the surge in crypto prices has been compared to the dotcom boom, which Melker sees as an apt and positive comparison.
While most of the early dotcoms failed, the bust "also gave us the Googles of the world," Melker said. There are far too many coins on the market now, but that will certainly change.
Bitcoin will be a survivor, and Melker suggests, "If you want to be exposed to bitcoin you should buy bitcoin, there are no two ways about it."
Coinbase, the cryptocurrency exchange that went public last month, is not a proxy for crypto -- it's a company, not an asset, Melker said.
"Coinbase's stock is more susceptible to the moves of the stock market than bitcoin itself," he said. Buying Tesla (NASDAQ:TSLA), likewise, is not the best way to gain such exposure, he said. Tesla, the electric vehicle maker, bought $1.5 billion of bitcoin in February and briefly said it would accept bitcoin as payment for its cars, until reversing course Wednesday and saying it had suspended that offer because of environmental concerns. Bitcoin fell 10% overnight.
Bitcoin, rather, with its scarce nature, is a way to store value.
"Bitcoin has replaced gold and there's not much need for gold,” Melker said.
Coming in second place is Ethereum, which, as noted above with regards to NFTs, eliminates third parties with peer-to-peer transactions.
"It will be a parallel financial system, it won't replace banks," Melker said. Payment companies like Visa (NYSE:V) and Mastercard (NYSE:MA) also won't go out of business, but they may be forced to innovate.