One of the few good things to come out of the COVID-19 pandemic is the rise of the collectible industry. The consumers’ ability to spend disposable income on travel, dining, and other personal experiences has dramatically reduced and they have turned to other hobbies like collecting anything from coffee tables to rare whiskey, from sports cards to sports cars. Consequently, the physical collectible market has soared in the recent past.

‘Collectors’ was the name given in the past to the rich who were accumulating rare watches, furniture, jewellery, limited edition shoes. Today, along with the aspirational class, they are merely investors investing in an alternative asset class.

In a survey conducted by ‘Morning Consult’ with a sample size of 2200 adults in the US in March 2021, 1 in 3 people said they collect some sort of a physical item as a hobby or investment. Millennials were by far the most likely to engage in collecting physical items with 42% saying they do so. 37% of Gen Xers and 20% of Gen Zers were also collectors according to the survey. As this survey indicates, the physical collectible industry is not confined to a single generation of people, but it transcends across age groups.

Why the rise?

The trouble with physical collectibles in the past was the difficulty of verification of the authenticity of the piece acquired. Enter, Non-Fungible Tokens (NFTs). NFTs can help alleviate the problem by ascribing a distinguishable, unique identification token to any object in the world — digital or physical. Each token is unique, which creates digital scarcity since there are only so many tokens to go around. And everyone knows how many there are and how to distinguish them.

Today, NFTs are mostly used for digital art. People are creating things with no real value and attempting to bring value to them through tokenization. So instead of continuing to push for tokenizing anything and everything, the better path forward is working with physical objects that have existing ecosystems built around them—ecosystems in which they hold value. A few examples of these objects are rare cards, scale models, artwork, whiskey, and memorabilia.

Tokenisation to increase liquidity

Tokenizing physical objects gives investors a chance to expand their portfolio, and owners the potential liquidity when they need it. Let’s say we are tokenizing a rare ‘Spider-Man action figure’. Ideally, not all the tokens offered will be fungible. Some of the tokens may grant strict ownership of the action figure, while others may only grant access.

The same idea could be applied to the artwork as well. People with different levels of investment have different levels of control over the artwork. In theory, a museum could allow the public to purchase shares in an artwork to raise money to buy a new piece. The museum wouldn’t hand over control of the piece, but they would offer people the opportunity to invest in it.

Sustainability through verifiable ownership

As the NFTs gain traction, legality and transfer of ownership can be easily verifiable in one concise location, even for the rarest of rare collectibles. A digital signature on any collectible, which can be distinguishable, gives collectors confidence in its authenticity which in turn makes the asset appreciate in the long run.

Millennials with high spending power

Millennials (people between ages 24 to 39) are the largest adult population with the highest spending power, were expected to accrue more wealth, and were trended to spend $1.4 trillion in 2020 alone, according to this article. Combining this with the fact that 42% of the surveyed millennials were open to engage in collecting physical items as a hobby, the physical collectible industry is here to stay and thrive.

Bottom line:

With the increase of the spending power of people, the physical collectible industry has become a more attractive investment vehicle for the rich and aspirational investors alike. Understanding what the collectible market exactly entails and how its value is created in such investments are the first steps in entering an asset class that is gradually becoming more accessible to individual investors.

ADDX is your entry to private market investing. It is a proprietary platform that lets you invest from USD 10,000 in unicorns, pre-IPO companies, hedge funds, and other opportunities that traditionally require millions or more to enter. ADDX is regulated by the Monetary Authority of Singapore (MAS) and is open to all non-US accredited and institutional investors.