eBay (EBAY) is taking its massive collectibles business into the digital realm. The e-commerce giant acquired non-fungible token (NFT) marketplace KnownOrigin to turbocharge its digital asset trading ambitions.
NFTs use blockchain technology to verify ownership and prevent duplication of assets such as artwork, music, videos, and literature. In turn, NFT owners can earn royalties and other rewards while also benefiting from their asset’s uniqueness. That’s made the assets very popular with collectors and investors.
Sales of NFTs soared 21,000% to over $17 billion in 2021, according to data provider Nonfungible.com. Some estimates of the size of the NFT industry are even higher. Market tracker DappRadar places last year’s sales of NFTs at roughly $25 billion. Individual NFTs have sold for millions of dollars, with one selling for a stunning $69 million in a transaction facilitated by venerable auction house Christie’s.
NFTs are particularly popular among sports fans. Sales on basketball-focused NFT marketplace NBA Top Shot surpassed $1 billion in May.
The purchase of KnownOrigin doesn’t by itself make eBay a good investment. It’s true that NFT transactions could boost sales on eBay’s platform. However, it should be noted that the NFT market’s growth has slowed considerably in 2022.
Moreover, eBay has been losing buyers in recent quarters. Inflation is driving many consumers to pull back on their discretionary spending. And the collectibles market isn’t as hot as it was during the early stages of the pandemic, when stimulus checks and time off from work gave people the means and opportunity to expand their collections.
Outside of the collectibles market, eBay has been surpassed by e-commerce platforms operated by the likes of Amazon.com, Walmart, and Shopify. That makes eBay a less attractive play on the long-term growth of the online retail market.
Thus, rather than buying its stock, investors may be better served by watching eBay’s NFT plans unfold from afar.
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