5 things to consider when investing in NFTs

More than $10M for a pixelated image that can be easily copied and pasted? No, it’s not a joke, it’s the reality and even the hype of the moment, the NFTs.

They are an integral part of the web3.0 revolution that will be the metaverse, but they are also very much in vogue for speculation. Today we’re going to talk about investing in NFTs.

Disclaimer: Our content is intended to be used and must be used for informational purposes only. It is very important to do your own research and analysis before making any investment based on your personal circumstances.

What is an NFT?

An NFT is a contraction for Non-fungible token, which to be simple, means that the token is not divisible and that it is unique. A Bitcoin is divisible and even if you can trace the origin of a particular BTC, one Bitcoin has no more value than another.

This is very different for NFTs, as the Crypto Punks and Bored Apes waves show. These are tokens that have similarities (they are all Crypto Punks, etc.) but some of them have a special feature that makes them more desirable and therefore more expensive.

How to evaluate if an NFT is worth investing in?

There are several ways to invest in NFTs, the first and simplest is simply to buy an already created NFT. To do this, you need to go to an NFT exchange platform, I recommend OpenSea, the latter being the biggest. You will also need ETH previously deposited in a compatible wallet, MetaMask being the easiest.

Once you are ready to buy your first NFT, what should you pay attention to?

  • Liquidity and volume

It is important if you want to resell your NFT easily, that your chosen collection is liquid, meaning that the NFTs change hands often, making your resale quick. In the picture below, for the Autoglyph collection, except for the NFT sold yesterday, the previous one was sold 3 months before.

5 things to consider when investing in NFTs - 4C Trading

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  • Past price performance

Even though we are currently riding a speculative wave in which any NFTs seem to appreciate, it is still necessary to look at the past performance of the NFT.

  • Transaction fees 

Transaction fees are also very important to take into account, you will be using the Ethereum blockchain for the most part and therefore paying your fees in GAS, which can quickly turn out to be extremely expensive.

So be careful about the timing of your purchase, watch the ETH blockchain congestion to make your transaction with the least amount of fees.

  • Utility and additional rich content 

Although NFTs are already unique in and of itself by nature, there are additional rich content and utility that can be added to the NFTs to further increase its value—Grimes who added music to her “WarNymph” collection, VeeFriends and Ghetto SharkHood that turn their NFTs to a VIP Membership, providing perks and privileges to the community; with the latter bridging the gap between the real world and the metaverse.

  • Scarcity 

Scarcity and authenticity often go hand-in-hand. One good example to illustrate this is the livestream of “BurntBanksy” via Twitter; whereby Injective Protocol bought and burnt a physical screen print of an original Banksy piece so that the NFT version can increase in value while living immortally on the blockchain. The scarcity principle also applies to the sole possession of an NFT. Even though NFTs can be downloaded, replicated, screenshot et cetera, only one person can possess the original piece—kind of like owning the original piece of an artwork versus a screen print in the physical world. 

Another example—the Mona Lisa NFT created by the Louvre museum is a single release and it will be obviously more valuable than other Mona Lisa created by others after this. 

Indicators of NFT scams

As any segment that has the wind in its sails, NFTs and cryptos in the broad sense gathers an increasing number of fraudsters, here is a non-exhaustive list of scams that you should be careful of.

  • Someone DM you 

When someone sends you a private message with an offer that sounds too good to be true, trust me, it is! The classic case is a request for funds for the minting of an NFT with promises of future returns, to be avoided like the plague.

  • Social Media & Giveaway

The same reasoning applies, if you come across something too nice, it is 99.99% of the time a scam. Remember, there is no free lunch!

  • Fake platform

This one is easily bypassed by using a big known platform like OpenSea.

Conclusion

Given the diverse avenues to invest and trade in the cryptoverse, there is one commodity that is far more valuable than any assets—time. To maximize your opportunities, you often have to spend a great deal of time researching, mingling with the community and participating in various activities to understand how an ecosystem of the NFT or Metaverse works. For those who are time starved, this can be a challenge. 

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