During the global pandemic, non-fungible tokens (NFTs) exploded in popularity, leading to many investors and traders wondering how they could get their hands on them. Speculators, collectors and artists alike have joined the bandwagon as digital assets and cryptos have significantly increased in price.
Many people are still wondering whether this is officially a new and valid long-term investment asset category or if it’s an unstainable bubble that’s going to pop sooner rather than later. However, NFTs themselves hold a lot of potential for artists, and you can use them in the business space as well.
If you’re not sure how to start investing in NFTs, or whether you even should, you’re in the right place because this article will highlight some things you need to know.
1. What to Consider Before Buying Investing in a NFT Project
There are many projects that provide users with an opportunity to purchase NFTs. However, only a few of them are worth it. Moreover, a considerable number of them aren’t good investments.
Most NFT projects have a lot of hype during the launch, which leads to many people rushing to buy them. But, the hype will eventually die down, prices will plummet, and then there’ll be a period where there’s low trading volume. After some time, a few projects will manage to regain momentum, while many will die off.
Here’s what you need to consider if you want to make the best choice.
2. Trading Volume
A good place to start when considering which NFT to invest in is to analyze the high trading volumes projects using sites like Cryptoslam or Opensea. Using sites like these will give you an idea of what NFT projects are currently doing well and need to be looked at. However, keep in mind that volume can drop drastically when the hype surrounding that particular NFT dies down.
3. Project Stage
Has it been there for a while, or is it something new? Is there some measure of progress or developed game? If an NFT project is brand new and there is no mechanism or developed game to help utilize the NFT just yet, then it’ll be way more challenging for that particular NFT to have and maintain a community.
Purchasing NFTs early or in a pre-sale is a lot riskier than investing in a project that has already built something and has a devoted community. However, purchasing early or in a pre-sale can still be a good strategy if you know what you’re doing.
It is essential to know how involved or active the members of the community are in regards to the project. Follow the project’s Twitter handle, telegram groups, join the discord and go through as many comments as you can. Are there many people talking about the project? Are they enjoying playing the game, or are they just standing by watching from the sidelines? After looking at many projects, these are relative and subjective factors that’ll get less tough to analyze.
5. Activity Trend
Once you’ve got a project in your sights you want to evaluate, another important thing you need to consider is the activity changes over time. For example, is the amount of trading volume and users rising, or are they gradually dropping. If you intend on making short-term trades, you only want to consider rising projects.
How is an NFT Created?
Most non-fungible tokens are both stored and created on the ETH (Ethereum) network. However, they’re also supported by other blockchain networks (like Tezos and Flow). Because anyone can view the blockchain network, NFT ownership can be easily traced and verified, but the company or person holding the token can choose to remain anonymous.
Gaming items, artwork and videos or stills from live broadcasts are all excellent examples of digital products you can “tokenize”. NBA Top Shots isn’t only one of the largest NFT marketplaces, but it’s the highest-paid NFT as well.
Most people know blockchain as one of the underlying techs that allow digital assets and cryptos to exist. NFTs are essentially intangible/digital versions of real collector’s artefacts that can be stored on this network.
It’s a crazy world when it comes to blockchain technology and cryptocurrencies. NFTs have joined this chaotic world. non-fungible tokens come in very many different forms, but the most common are collectibles, music and art. Most artists that utilize digital media, like Beeple, Mike Greg and Jon Noorlander, have slowly gravitated towards the NFT space. Even publicly trading companies like Gaming Inc and Score Media have started featuring non-fungible tokens in their weekly broadcast.
It’s a movement that looks like it will be here to stay for a long time and a great investment alternative. There’s a lot out there to choose from so you need to know all about them to reduce mistakes and bad investments. Hopefully, this article will help you get what you want.