In this article, we will provide you with important experiences for investing in the NFT market. You will learn how to find and evaluate potential NFT projects with high growth potential. However, before you begin, note the following:
Currently, the NFT market is still not very liquid and can be difficult to sell at times. Therefore, this is not a suitable investment for everyone and requires a lot of knowledge and experience.
This article is for educational and informational purposes only and does not encourage you to invest in NFTs. The NFT projects mentioned in the article are examples only and do not constitute investment advice.
With the above notes, we would like to introduce to you some basic NFT investment experiences to help you start learning about this market.
NFT investment experience from A - Z
What are NFTs?
NFT is an acronym for "non-fungible token" - a type of token that cannot be replaced. This is a type of digital certificate that allows proof of ownership of a specific asset, such as a collectible or work of art, stored on a blockchain.
What's special about NFTs is that they give owners control over their assets. For example, when you own an NFT of a painting, anyone can download or copy the painting - but only you own the original copy of the work.
Similar to a musician, they can copyright a song and sell the ownership to others. Everyone can listen and sing along to the song, but only the copyright owner can control the use of their work.
But it's not just pictures, there are many types of assets/ownership tokenized as NFTs, including:
NFT art: especially digital art, the most popular form of NFT today, such as BAYC and AZUKI.
Collectibles: such as baseball cards and CryptoPunks.
Game NFTs: players own characters and equipment in the game.
NFT Sports Moments: short video clips of memorable sports moments presented as NFTs.
Music NFTs: allow musicians to directly interact with their fans and tokenize their work.
NFT domains: use NFTs to represent domains, URLs, billing addresses, etc.
Fashion NFTs: fashion brands like LV and Gucci release their own NFTs.
Financial NFT: a combination of NFT and DeFi.
NFTs are backed by real assets: such as real estate, gold, antiques, etc.
Requirements when investing in NFTs - Need to know these things
If you are new to cryptocurrency, you should not invest in NFTs right away. First, you need to understand what you are investing your money into. And to do that, you have to start with the basics.
Requirement 1: Basic knowledge of cryptocurrency
Learn about blockchain technology. What it is and how it works. This includes understanding wallets, addresses, private and public keys, how transactions work, and more.
Gain experience buying, holding, and selling cryptocurrencies. You should only invest in NFTs, once you have spent some time trading/investing in cryptocurrencies.
Requirement 2: Cryptocurrency (NFT) Investment Psychology
Investing in NFTs to make money can be an attractive option, but achieving success in this field requires the right investment psychology and knowledge of effective investment rules. Before getting into the actual research, let's learn some psychological tips for making money with NFTs.
Here are the NFT investment experiences you need to know:
Most NFT projects will fail: Similar to cryptocurrency ICOs in 2017, most NFT projects will fail. This requires you to set a realistic profit target and sell as soon as you make a profit, don't hold on for too long.
Invest what you are willing to lose: NFTs are risky investments, so you should limit your risk by investing only a portion of your available funds and a small proportion of your capital.
Buy NFT before it gets hyped: Research and choose an NFT project wisely and buy before the hype and PR starts, then sell when the price reaches the profit target.
Don't be haunted by constant price increases: Don't worry if you miss your chance to participate in an NFT project, as there are plenty of new projects popping up every day for you to take advantage of.
Do not buy at high prices for famous and long-standing NFT projects: Patiently wait for a correction before buying to reduce risks.
Continuous Learning: To be a successful NFT investor, you need to understand why you are making a profit or why
Where to find potential NFT projects?
The next step in the NFT investing process is researching NFTs. To do this, you need to know where NFTs are traded and what platforms/tools to update NFT information from. The most popular NFT exchanges today include OpenSea, Binance NFT, and Rarible. Additionally, there are many other NFT exchanges you can choose from.
Check out these sites for new NFT projects
https://nftgo.io/discover/nft-drops
https://rarity.tools/upcoming/
https://www.cryptoscores.io/calendar/calendar
https://mintyscore.com/home
These resources will give you a good idea and overview of what types of NFTs are available.
How to research NFT projects before investing
Next, we will look at the different steps to study the fundamentals of an NFT project. The beauty of NFTs is that anyone can create and sell them. But that doesn't necessarily mean they'll be good. That is why it is important for you, if you want to become a successful investor, to know how to analyze.
So, when researching a project, make sure you know/understand the following information:
Criterion 1: NFT creator
The people behind an NFT project are one of the most important factors you need to research. Because only if the team understands the community well enough and has the right skills and knowledge can they make their plans a reality.
To find out information about the creator, you should check in different places like the project's website, social media channels, project press releases, etc.
Criterion 2: NFT collection roadmap
A roadmap is an essential piece of information that shows what has happened so far and what an NFT project wants to achieve in the future.
Let's focus on the following:
What developments and other things does the project still have in its plans? What is the growth potential?
In what time frame will these points be implemented?
Are the stated goals and timeframes realistic?
How many goals or milestones were achieved? This is an indicator of how quickly the project is developing.
Criterion 3: Marketing of the NFT collection
Marketing is essential for any type of NFT project. No promotion = not many people will see or know about the project = not many people will buy NFTs = no growth in value.
An example of this is the failure of the GamiFi cryptocurrency projects. If no one plays the game then NFTs will have no value.
Answer these questions to evaluate a creator's marketing performance.
What marketing channels does the group use? How many followers do they have? Is there a lot of user interaction?
Do they have strong partners/brands to promote their NFTs?
How do they promote their NFTs? Is it professional? Do they address community comments and expectations?
The above 3 criteria cover some of the most important steps when researching NFT projects. But NFT is also a crypto asset, so you also need to research some other criteria: community, investors, competitors, which blockchain it operates on, transaction fees, etc.
How to evaluate the value potential of NFTs
To make money from NFTs, you need to know why one NFT project is more likely to increase in value than another. In the following, we will show you some key aspects that play an important role in determining the value of each NFT project.
Utility of NFTs
Utility refers to what you can use NFTs for. Much here depends on the type of NFT you own. Below are a few examples:
Art: Many factors such as the artist's reputation and artistic style play an important role here. One thing that art NFTs have in common is that the value of each NFT is individual, and they are priced very subjectively.
Gaming: Some NFTs are used as in-game items. For example, a sword with a +5 damage attribute will naturally outperform a sword with only +2. Importantly, it must be an item in HOT games.
Finance: Some projects offer NFT holders some perks like lower transaction fees.
Music: NFTs give owners ownership of a song.
Sports: Some sports NFTs grant collectors special perks, such as access to VIP areas on match days.
The creativity and uniqueness of NFTs
Successful NFT projects so far all have the presence of creative elements, be it in the drawings, or in the uses of the NFT. So what kind of features does the NFT you're interested in have that sets it apart from others?
Crypto Punks: Pioneer project, paving the way for PFP NFTs, simple, unique drawings.
Bored Ape Yacht Club (BAYC): More uses for NFTs through real-life gear airdrops, expanded collection through NFT airdrops (MAYC),…
Azuki: High anime image quality.
World of Women (WoW NFT): Exclusive works of art dedicated to women, created by women.
MonkeDAO: Community-Decided Collection (DAO NFT).
NFT rarity
NFT investment experience, this is the most important factor determining the value of NFT projects and individual NFTs. Rarity is affected by different aspects.
Supply – how many types of NFTs are there or will be minted? The total supply of an NFT collection refers to the number of NFTs in an NFT collection. The total supply of NFTs also affects the price of the collection. Collections with a large total supply typically have a lower value per NFT, whereas collections with a low total supply often have a higher floor price due to the rarity of the NFTs.
Hot NFT projects on Ethereum mostly have a total supply of 10,000 NFTs because the NFT market has grown in this ecosystem. On Solana, projects often have a smaller total supply. You can find this number on the project homepage or on Marketplaces like Opensea.
Here are some tools you can use to check the rarity of certain NFTs:
https://rarity.tools/
https://raritysniper.com/
https://rarityranks.io/
The above websites allow you to search for NFT projects and will provide you with various statistics showing the rarity of each NFT.
https://opensea.io/
Unique to OpenSea, the OpenSea properties section of each individual NFT lists how many NFTs in the collection have the same properties.
Exaggeration
OK, this is a bit difficult. In this case, hype refers to the community's excited enthusiasm for an NFT project. It is a phenomenon that you can see quite often in the cryptocurrency space. And it usually doesn't last long.
How can you ‘measure’ the hype?
You can not. But if you see a lot of people talking excitedly about a certain NFT project on places like Reddit, Twitter, etc. then maybe it's being exaggerated. It's best not to pay too much attention to this factor alone. But if an NFT project comes with a lot of hype, that's a good sign – or that the people behind the project know how to market it well.
But please note that many projects use the airdrop method to get followers, or even buy bots to increase followers. This is a minus. A tip for you is to use this tool to check whether that follower is a bot or not. In addition, you should pay attention to the ratio of likes/retweets compared to the number of followers to see if the community is really interested in the project.
Supported by large organizations, celebrities
In 2022, companies and celebrities from outside the crypto world will increasingly join the NFT train. From Italian fashion company Gucci to English Premier League clubs, and many different companies are working on NFT projects.
Big name means big cash flow. For NFTs, the support or distribution of famous brands, people and companies will be an important value creator in the future. Due to their popularity and marketing power, they will generate massive interest in their NFTs. Investors keeping an eye on NFTs that fall into this category will certainly have an advantage.
Analysis of NFT trading metrics
Finally, let's examine the most important trading parameters to understand the market for an NFT project and individual NFTs.
NFT floor price
The floor price is the lowest price of NFTs in a project. Your goal is to buy a rare NFT at a price close to the floor price. Or if that's difficult, then find a project that balances value and accessibility. Projects with high floor prices have certainly affirmed their value, but traders with smaller capital will have difficulty accessing them.
Here is a website where you can check floor prices: https://nftpricefloor.com/. Or on many NFT exchanges, they also clearly state the floor price information for each NFT.
The floor price can be seen as a measure to evaluate the community's acceptance of the project. If the project is highly sought after, if demand increases, the floor price will increase. The simplest NFT investment experience is that you buy the cheapest NFT in the collection, in the future you can sell when the collection becomes more popular and the floor price increases.
Trading volume
These will show you how much demand there is for an NFT. By looking at total trading volume or daily trading volume, you can easily gauge whether a collection is of interest or not. With projects with high liquidity, we can more easily enter and exit NFT positions.
NFT investment experience, trading volume can be used in tandem with floor price to see the level of interest in the collection. If trading volume increases, many NFT holders sell NFTs and the floor price drops low, this could be a forecast for a panic sell.
Projects that still keep their floor prices and transaction volume at a stable level even in the bear market are very likely to increase when the market stabilizes again.
Number of holders vs. number of NFTs
What we need to find is a small number of NFTs and a large number of holders. A large number of NFTs per owner may indicate that demand is not high and when there is selling pressure, the price floor will drop. OpenSea provides a simple overview where you can see the total number of items and owners of an NFT project.
To analyze various trading metrics, you can use two analytical tools:
https://dune.xyz/home – There are various features where you can find different metrics such as the project's overall floor price, top owners, etc. Users can also create their own dashboards following the instructions provided.
https://nftgo.io/ — This platform offers all different types of market data. An important feature is the whale tracking page: https://nftgo.io/whale-tracking/trade
Also, pay attention to the allocation rate. Looking for holders that account for a large proportion of the total supply, are these whales, long-term holders or the project team itself? Observing what these holders do will give you a lot of information. Tools that can help you do this are Nansen.io, Explorer like Etherscan, Bscscan, etc.
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