Did you know that in 2022, the global non-fungible token (NFT) market had an estimated worth of $21.48 billion? Even more impressive is that it has grown further this 2023, reaching an estimated value of $32.89 billion. That’s an increase of almost 35%!
One of the chief reasons investing in NFTs has become so popular is their potential to make money. Indeed, some of these cryptographic assets have sold for millions of dollars.
Another of the top benefits of investing in NFTs is that it’s a unique way to diversify one’s portfolio. To top it off, investing in these digital tokens is easy, and anyone can do so at any time. After all, the NFT market is digital, so it’s open 24/7.
This guide discusses the basics of NFT investing and tips to help you get started, so read on.
Contents
1. Choose a Reputable NFT Marketplace
An NFT marketplace is an online platform for buying and selling NFTs. While you have many choices, some of the most popular are OpenSea, Rarible, and SuperRare.com. You need to open an account with them to start investing in NFTs.
Before choosing a marketplace, review its history of transactions. It should have received praise and positive feedback from its user community.
Next, consider the platform’s selection; it should have the types of NFTs that interest you. These could be NFT art, videos, memes, real estate, sports clips, and collectibles, to name a few.
Just as crucial is to choose a platform that vets, verifies, and approves each of its NFT sellers. It should also have robust security measures, such as multi-factor authentication.
Please choose a secure NFT marketplace to help cut your risk of falling victim to fraud, scams, and crimes. Note that these are prevalent, with some victims losing millions of dollars.
Once you’ve opened an account with a reputable marketplace, link your crypto wallet. Then, ensure it has enough funds you can use to purchase your chosen NFTs.
2. Monitor NFT Trends
Monitoring NFT trends gives you insights into which assets are gaining popularity.
For example, some experts believe that NFTs will affect or even shape the future of real estate. After all, NFT transactions are faster, simpler, and more efficient. These benefits make NFT an ideal alternative to traditional real estate transactions.
With increased adoption, the value of NFT real estate could skyrocket. However, with NFT still being new, there’s no guarantee it will. This is why monitoring market trends and movements is essential to investing in NFTs.
3. Use an NFT Value Estimator Tool
Determining an NFT’s value is an investing strategy for spotting opportunities with collectibles. However, this is highly challenging, considering the immense number of NFTs created daily. Furthermore, thousands of tokens get sold globally each day.
Fortunately, some NFT tools now provide historical and current price estimates of NFTs. To do this, they analyze token characteristics, including rarity and uniqueness.
The rarer and more unique an NFT, the more valuable (and expensive) it usually is.
With an NFT value estimator tool, you can see how much a token is and if its price has increased or decreased. An upward trend may indicate growing interest, possibly leading to its purchase shortly. So unless you track these estimated values, you may miss out on such opportunities.
4. Always Check the Floor Price
Floor price refers to the cost of the lowest-priced token in an NFT collection.
Suppose an entire NFT collection of 5 items is worth $1,000. The lowest price is $100, followed by $150, $200, $250, and finally $300. In this example, the floor price is $100.
Always check the floor price since it helps assess a collection’s performance. For example, it gives insight into trading volume and collection holder activity. It also indicates how the community perceives the entire collection as a whole.
A high floor price (as in the example above) often signals that the entire collection may perform well. As a result, more community members may show interest in it, driving its value higher. For the same reason, buyers may be willing to pay more to be a collection holder.
5. Add Undervalued NFTs to Your Portfolio
Undervalued NFTs are tokens priced under their market valuation. This means their current price is lower than what they initially sold for. For instance, their first-ever floor price may have been $100 but, after a few months, dropped to $90.
Sometimes, a lack of popularity can cause an NFT’s value to drop. It can also be due to instances wherein the cryptocurrency market’s money flows dry up.
However, just because an NFT lacks popularity doesn’t mean it will remain that way. Think of Van Gogh, whose masterpieces only rose to fame after his death.
As for crypto, there’s no sure way to determine its future, considering it’s highly volatile. Still, experts are optimistic that these digital currencies’ prices will rise again. For instance, they project Bitcoin to reach at least $100,000 and Ethereum to be worth $10,000 this 2023.
So while crypto prices are still low, consider buying undervalued NFTs. Then, if cryptocurrency values increase, your NFTs may also experience a price rise.
6. Invest Only What You Can Afford to Lose
Like cryptocurrencies, NFTs are high-risk investments that can pay off big or none. So, your NFTs can be worth $100 today and $1,000 next week. But, on the other hand, you can lose a considerable chunk of that overnight.
Therefore, one of, if not the most crucial NFT investing strategy is to spend only what you can afford to lose. Likewise, don’t invest only in crypto and NFTs. Instead, consider them only as a minor addition to diversify your portfolio.
Investing in NFTs the Smart Way
Remember, investing in NFTs requires due diligence and high-risk tolerance. Choosing a reputable NFT marketplace alone already involves hours of research. Spending enough time monitoring trends and checking prices are also vital strategies.
However, all that time and effort can pay off big. So, if you’re 100% sure you want to invest in NFTs, do so wisely and, if possible, ASAP.
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