The latest craze in cryptocurrency, NFTs, or non-fungible tokens, has suddenly become the top priority for investors; but these attractive assets are profitable for artists, musicians, famous people, and average joes alike.
Investing in NFTs can be very lucrative or just a fun side hobby. It all depends on the effort you put into learning the market flow, when to buy and sell, and how to jump on up-and-coming pieces quickly.
The following article dives into NFTs, including what an NFT is, what you need to know to start investing in NFTs, and whether NFTs are an excellent investment.
What is an NFT?
NFTs, like a work of art or a collection of valuable items, are turned into digital form and sold as verifiable assets on a blockchain network.
Each NFT is unique and cannot be interchanged with any other attached item, meaning that no two NFTs are the same. Furthermore, the NFT’s ownership record is represented as a token on the blockchain, meaning the artist maintains continuity of their creation, even after they sell it.
This is one of the phenomena that has made NFTs rare and desirable, and, therefore, very valuable.
What are some of the items sold as NFTs?
Anything and everything can be created into an NFT. It can create tangible ownership to of a digital product or digitize the original form of something forever. A few examples of some of the items created and sold as NFTs are:
- Digital artwork, such as GIFs of memes and tweets.
- Digitized artwork, such as paintings and photographs.
- Virtual trading cards.
- Real estate in a virtual world.
- Avatars for those virtual worlds.
- Digital fashion for the avatars, like digital Nike Sneakers.
- Originals to art collections, such as the negatives to famous photos of unreleased works of original art by famous artists.
- Memberships to virtual casinos.
- Movie memorabilia.
What do I need to know about investing in NFTs?
Anyone can join the game of investing in NFTs, but even before you decide what type of NFT you are going to invest in, there are significant decisions that you must make to set yourself up for success.
To start, understand that there is a chance of loss, so never invest any money that you can’t end up taking a loss on.
Understanding how NFT markets work, the risks associated with investing, and the community that operates them are pivotal in being successful while trading NFTs.
What are the main things that I need to invest in for NFTs?
- Marketplace Access– Determine which marketplace is best for you. Each different server has its own guidelines and fees, and some marketplaces are by invitation only. The most common NFT marketplaces are OpenSea, Parable, and Mintable.
- Digital Wallet – This is separate from the marketplace you choose and is determined by the type of digital wallet you need, based on the type of marketplaces you work with and whether you want a digital or hardware wallet. You will need a digital wallet to buy or sell NFTs. It is one of the essential parts of keeping your NFT tokens safe, so don’t share or lose the password.
- Cryptocurrency – The previous decisions will ultimately determine which kind of cryptocurrency you’ll use, so do your research to determine which one is best for your investment. Most marketplaces use Ethereum (ETH), but you should know that there are associated fees with converting between different cryptocurrencies.
Is it easy to manage your NFT collection?
Once you understand how the system works, managing your NFT collection is easy. Like managing any cryptocurrency account, NFT transactions can be made via a web-based program or mobile app, making it convenient to watch or make changes to your account in real-time.
Can I sell NFTs that I made?
One of the most extraordinary aspects of NFTs is that anyone can make one. You don’t have to be famous, rich, or talented. Of course, it would help if you had a digital wallet, a small number of cryptocurrencies, and an NFT marketplace. Then, you will be able to create content, upload it onto the marketplace, turn it into an NFT, and list it for sale.
How do I make money trading NFTs?
Once you have acquired a collection of NFTs, you can decide to sell them off or hold onto them depending on what will make you the most profit, just as you would with the stock market. Each marketplace has its own instructions for selling NFTs, so do your research within each marketplace.
Does the principle of “buy low and sell high” apply?
Like in the stock market, the point of trading NFTs is to buy them when the price is low and sell them when the price is high. Some NFTs you will be able to flip right away for a decent profit because you acquired them early in their launch before other investors scoop them up.
On the other hand, some NFTs you will want to hang on to and let them gain notoriety and value within the NFT community, just as you would with an art collection or a cache of silver and gold.
One of the tricky parts about investing in NFTs is recognizing an upcoming collection as one that will be popular enough to gain notoriety to make your investment worthwhile.
Are NFTs a good investment?
It is true NFTs have made people millions of dollars. But the average NFT trader will not hit the jackpot unless they seriously put in the time and effort to do so.
And even then, experts suggest that this market is very speculative, meaning an investor could lose all their worth without notice. Because NFTs do not give the owner an intrinsic value for their investment like stocks and bonds do, they are also not driven by all the same market forces.
Instead, NFTs have a market value that is only dictated by what the buyer is willing to pay for them. As a result, this type of market poses a high risk of investment loss and the potential for tremendous gains.
The most important thing about investing money is understanding the risk of loss associated with it.
Will the craze for NFTs continue?
Nobody knows what the future holds for NFTs. They could become the technological wave of the future or fade away into the past. We know that the total value of NFTs has gone up tremendously in the last few years, from $100 million in 2020 to more than $21 billion by 2021.
Many investors hope this trend will continue while investing millions into virtual worlds and brands. But many experts suggest that NFTs, like any market, are heading for a bubble. This will most likely cause a leveling out of prices, caused by a decline in the amount buyers are willing to pay for the art.
There is no doubt that we will be hearing about money-making NFT success stories for years to come, but how far the NFT world will go is entirely unknown.
Photo by: [Tumisu]