Shark Tank investor and crypto-convert Kevin O’Leary believes non-fungible tokens (NFTs) will be bigger than bitcoin (BTC-USD).
The chairman of O’Shares Investments told Yahoo Finance Live that NFTs offer value because of their ability to digitally track the ownership, authenticity and inventory management of real-world items like vintage watches (of which O’Leary is a big collector), sports memorabilia, artwork and other assets.
“One of the biggest challenges I have is inventory management, insurance management, and then, of course, authentication,” O’Leary said. “When people offer me vintage watches, I have to go through a very arduous authentication process to know if it’s fake or not, there’s so many fake watches in the market. NFTs could solve all of those problems.”
O’Leary, who once called bitcoin “garbage,” now says investing in cryptocurrencies and NFTs is like investing in the early days of Amazon (AMZN) and Google (GOOG).
“If you invest in Microsoft (MSFT) and Google and Amazon, what is the core you’re investing in? It’s basically software,” O’Leary said. “Well, bitcoin is not a coin, it’s actually software. The blockchain is software, ethereum… HBAR, polygon, is software. So the real decision is if you’re willing to invest in software, because it’s a productivity tool. It provides a service, particularly in payment systems that is being used globally.”
If 2021 was the year crypto went more mainstream, O’Leary says 2022 may see clear regulation in the industry.
“If we make it regulated, if we get institutions into it and find a way for them to be compliant, there’s trillions of dollars going to come into this space, because it has a pragmatic use.”
O’Leary holds multiple positions in the industry including Immutable Holdings (HOLD.NE) which owns NFT.com, the payments platform Circle, and the decentralized finance platform WonderFi (WONDF),which recently bought Canada’s largest crypto exchange. O’Leary is also a paid spokesperson and endorser for crypto exchange FTX.
“The Swiss, the Canadians, the UAE government, some of these places are now becoming a little bit more progressive and you have to invest in those geographies, if you want exposure [to crypto and NFTs],” said O’Leary.
Making the case for crypto
While he admits crypto is more volatile than tech stocks, O’Leary said it’s something investors need to make peace with. Bitcoin recently fell 40% below its November peak as cryptocurrencies stumbled into 2022.
“Bitcoin’s having one of its worst starts [to a new year] ever,” O’Leary said. “But you have to get used to it, just like you had to get used to Amazon, where it would have these 30% to 50% corrections, same thing with bitcoin.”
O’Leary began adding bitcoin to his portfolio in March 2021. At the time, he allocated 3% of his portfolio to the world’s largest cryptocurrency after his native country Canada, and a handful of other countries, eased restrictions on institutional buying of the asset.
When it comes to choosing which coins to own, O’Leary says he applies the same rules of diversification that he applies to picking stocks and bonds. “No more than 5% in any one position, no more than 20% in the whole sector. So I’m not anywhere near 20% in crypto, I’ve just gone over 10.7% in our operating company.”
Ether (ETH-USD) is currently his largest crypto position — even larger than bitcoin.
“It certainly takes a lot of time in my day, just tracking all this stuff,” he said. “I’d say I spend 40% of my investment day tracking cryptocurrencies now.”