To say that non fungible tokens (NFTs) have grown big time would be an understatement. According to reports, trading in NFTs hit $17.6 billion last year. That’s a surge of 21,000 % from the $80 million of 2020. Clearly, people are getting more and more into NFTs — in 2021, 2.5 million cryptowallets belonged to people who were either training NFTs or holding them, compared to the 89,000 of the year before —and they’re getting better at selling them as well. Investors generated $5.4 billion in profits from sales of NFTs last year. Collectibles were the most popular category, generating $8.4 billion worth of sales.
What to keep your eye open for when buying an NFT
NFTs are often dropping on marketplaces. Sometimes it’s a question of being in the right place at the right time and seeing the announcement of when they’re going to drop. Perhaps you’re asking, what is an NFT drop? The answer? It’s the release of an NFT project, and the drop refers to the exact date, time and, generally, the minting price of the NFT. But what should you look out for when you’re buying an NFT?
The NFT’s unique properties
You’ll often see NFTs in the form of collections, consisting of different NFT artworks. The properties of each vary. Sometimes more properties means higher value. Others it doesn’t. Sometimes simpler NFTs have higher value. To buy an NFT with a promising value trajectory, check the properties, which is also a good way to verify the legitimacy of the NFT, and their rarity.
Verification of the seller
Often, official sellers on platforms will have a blue tick next to their name. This proves it’s not a fake account and that you can trust them. Check the NFT properties as a backup measure because not all official sellers have the tick next to their name. You can check their social media accounts for further confirmation.
Make sure you’re aware of any existing transaction fees before you buy the NFT. Often, platforms will charge a fee for transactions involving a crypto exchange or NFT purchase. Buyers, generally, don’t have to pay a transaction, but some platforms, such as Rarible, will impose a fee on both sides of the transaction.
NFT liquidity and market volume
One thing it’s important to understand is that NFTs don’t enjoy the same liquidity as crypto coins. If you’re investing in NFTs for a profit, this is an issue because it’s not nearly as easily to liquidate an NFT into traditional currency as it is cryptocurrency.
As well as liquidity, it’s important to consider the market volume of NFTs, which can rise or fall easily, depending on how many people are buying NFTs regularly. The market is young, and the peak may not last as long as expected. Keep this in mind if your foray into the world of NFTs is more a long-term investment.
The price performance of the seller’s NFTs
A good way to check if your investment is wise is to look at the seller’s profile and see what they sold their NFTs for. Then check what they sold for more recently. The bottom end of the value range is the floor price, the minimum price for which NFTs are trading. Doing this will allow you to form a picture of how NFTs are fluctuating.
The volatility of NFTs
NFTs might be the big thing to invest in just now, but this market is highly volatile, and it’s precisely the craze for NFTs that has created this volatility. In a short space of time, the value of an NFT can change dramatically. If you’re in NFTs for the long haul, it’s absolutely crucial to understand NFTs and their behavior so you can make an informed decision of whether to invest in them further.
Some experts state it’s hard to predict the value of NFTs because it’s so dependent on how much people like them and how many more NFT projects will drop in the future. It’s essential to do some serious research on NFTs. Read up on them as much as possible. Acceptance and lack of awareness in the market is causing people to invest in them without fully understanding NFTs.
If you’re just starting out in NFTs, read analysis and forecasts by experts in the field. Then make sure you stay up to date with all the latest developments in the sector before you invest in the next big thing in the NFT world.
NFTs are a relatively new but highly exciting market and have gotten investors rushing to put their cash into them. When investing in NFTs, follow the advice above on what to look for, be aware of the volatility of NFTs and understand exactly what you’re investing in. You can then make the right decisions and enjoy your investments a whole lot more.
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