How to invest in NFT?

02.07.2022
How to invest in NFT?

How to invest in NFT? This is a relatively new direction and it is advantage in terms of investing, as it is not yet fully mastered by institutional investors. It gives private investors the opportunity to receive high returns.

he market for NFT items grew 400 times last year. The growth trend continues 2022 year. This is another reason why we can’t help but pay close attention to the subject of investing in NFTs. Read more about what NFT is and how you can earn on it in this article.

How to choose NFT investment strategy?

There is no perfect non-fungible token investment strategy that guarantees huge returns. But every investor must learn and apply a trading strategy suitable for the existing capital.
At the same time, it is important to set realistic expectations and not be disappointed when a token does not sell for the expected price. These projects are highly dependent on mart trends and marketing campaigns.
Another tip: don’t spend more than you can afford to lose. You shouldn’t spend more than 10-20% of your total portfolio value on a single investment. Non-fungible token is no exception.

Investment risk assessment

How to invest in NFT without risks? When you start investing, remember that any investment involves certain risks. Diversification is the basic rule of investing. Have you ever wondered why you shouldn’t put all your eggs in one basket? Not all non-fungible tokens are successful. Diversifying your portfolio can improve your chances of investing successfully.

What is an NFT investment strategy?

If you act blindly and make impulsive decisions when investing, you will lose money. To avoid it, investors develop an investment strategy.
An investment strategy is a set of parameters that determine the style of behavior of an investor in the stock mart.
Below we talk about the different types of strategies, their nature and their applicability in practice.

DCA Strategy

DCA ( dollar cost average ) refers to the division of an investment into several smaller investments of equal amounts, divided into equal periods of time.

DCA NFT investing strategy
DCA NFT investing strategy

The dollar-cost averaging strategy is suitable for any type of volatile investment. However, DCA for NFT may be even more important. It is because non-fungible tokens are not comparable in terms of volatility and are unable to predict price movements. By doing so, this strategy will balance the purchase price and take advantage of mart downturns.
Other benefits:

  • it avoids the risks associated with buying at the wrong time;
  • it prevents investment decisions based on emotions;
  • it is suitable for those who are interested in a long-term investment.

Follow news and events from the world of NFT

In early May 2022, the sale from the creators of the Bored Ape Yacht Club NFT collection made a splash. The developers drew attention to the APE token by announcing the launch of the metaverse On the other hand and the sale of 55,000 virtual lots to APE. As a result, on May 1, when the sale began, tokens trading volume hit a record high of $780 million. This is a good example of how to invest in NFT.

News NFT trading
News NFT trading strategy

So, in example, we see how the owners of the project have matured to promote the collection through informational opportunities. Here, the logic is simple: credible facts are generated that generate great interest. This ensures that the token sale is more likely to increase its price in the future. Why are they going to grow? Yes, the issuance of NFT is limited, that is, sooner or later it creates a shortage.
Follow the news of the cryptocurrency sector. Thanks to this, you follow a promising collection initially and import it cheaply.

Other investment strategies in NFT

In addition to the strategies above, there are many more. Here are a few:
⦁ Whale tracking from NFT. This type of research allows users to see which collections are being bought and sold by top investors. These participants only invest in high quality non-fungible tokens, their value will increase. Whales tend to have a lot of inside information. Thus, they will always be one step ahead of the entire market.
⦁ Upcoming airdrop of NFT projects. Check out all the upcoming sales that have been announced. It is extremely useful as it gives you an idea of what to expect so you start researching ahead of time. But remember not to miss the moment: the cryptomarket is constantly changing and is constantly flooded with new opportunities. It also lets you see what non-fungible tokens are on sale so you score a bargain if you act fast.

Methods for assessing the investment attractiveness of NFTs

There are also many methods to assess the investment attractiveness of NFTs. And below we talk about the main ones. But we underline: it is necessary to evaluate not by a method but to evaluate a combination. As such, collect the entire image of the project as a mosaic. Only then you make an objective and analytically accurate assessment of prospects. You will also understand how to invest in NFT.

NFT Community Development Assessment Method

The community is the deciding factor for NFT, as its size determines the number of users and potential buyers in the open mart. The bigger the community, the more people remember NFT. Therefore, it can help the collection attract more potential buyers. For example, the popular Bored collection community Ape is tall and dynamic. Due to its size, a larger audience will learn about the collection. To determine the size of the project community, it is enough to visit the official pages of the social network and estimate the number of subscribers.
The best collections have communities that have a life of their own. The worst collections have dead communities that no one cares about.
When investing in cultural value, an important indicator of a project’s sustainability is community activity on Discord . Collections like Pixel Vault or Loot, communities are very actively discussing different directions of development.
Another important factor to consider is the number of in the secondary marts. An abundance of tokens, combined with low bids or low buying activity, may indicate that supply is exceeding demand.
You should also track the number of unique wallets that entered the market each day, week or month. Usually it allows you to accurately determine the total demand in the mart.

Method for estimating capital flows

How to invest in NFT using sales figures? Marketplaces maintain open statistics on the sale and purchase of NFT tokens, which serve as a direct source of information on community activity and collection entries.
As an investor, what indicators should you pay attention to?

All-time Mutant Ape Yacht Club Collection Sales Volume
All-time Mutant Ape Yacht Club Collection Sales Volume
  • Trading volume
    By looking at the total trading volume, you easily determine if a collection is currently in demand. The higher the volume, the more liquid the mart. You need a liquid market so you can easily enter and exit NFT positions.
  • NFT Sales Volume
    This metric helps investors identify past and current interest in the NFT collection. If the NFT collection shows a lot of recent sales, it could be a sign of growing interest. However, one must consider the direction of movement relative to the minimum price. If many non-fungible token holders are selling and the floor price is falling, it could indicate waning interest or even panic selling.

Project evaluation method according to Whitepaper

Before thinking about how to investing in an NFT project, we strongly recommend that you read its whitepaper . This is a whitepaper that provides an overview of a cryptocurrency collection. A good formal report should define the objectives of the network and ideally give an idea of the following characteristics:

  • the technology used (is the code open?);
  • the use cases that the project wishes to develop;
  • update the roadmap and new features;
  • coin or token distribution and distribution program.

This information should be assessed in the context of the collection discussion. What are others saying about him? Are there any red flags? Are the goals realistic?

Methods for evaluating competing projects

A good official report should give us an idea of the use case the crypto asset is heading towards . At this stage, it is important to identify the collections with which it is in competition, as well as the existing infrastructures which it seeks to replace.
Ideally, a fundamental analysis of competing collections. The asset itself may look attractive, but the characteristics of similarly sized cryptocurrencies may suggest it is a weaker option than others.

Method of evaluating projects in his team

How to invest in NFT project if you don’t know the owners? If there is a specific team behind a cryptocurrency network, members’ backgrounds can show if they have the skills to complete the project. Have the team members already had successful projects in this industry? Are they experienced enough to achieve the goal? Are they associated with suspicious collections or scams?
Without a team, what does the developer community look like? If the collection has GitHub, check the number of contributors and activity. A piece that is constantly changing is more appealing than a piece whose archive hasn’t been updated for two years.

Tokenomics and initial distribution

Some projects generate tokens and thus create problems for themselves. That’s not to say the collection itself isn’t viable, but the token associated with it may not have sufficient utility. It is therefore important to determine its possible usefulness. And in a broader sense, to understand whether the mart will recognize usefulness. And if so, how much it will appreciate it.
Another important factor: how were the funds initially distributed? Via ICO, IEO or participants can they mine them ? In the first case, the white paper should indicate what the ratio of founders and team is, as well as the amount available for investors. In the second case, you can find out in advance about the organization of mining (mining in the network before the official announcement of the project).
Attribution analysis give an idea of the existing risk. For example, if the bulk of the supply belongs to a select group of people, it could be concluded that it is a risky investment, as these parties are likely to manipulate the market. This is very important when you decide how to invest in NFT.

Choose marketplace to invest in

To avoid bad decisions, every new investor should be aware of several aspects to consider before choosing a platform. You can read a detailed review of NFT marketplaces here. Here are some features to look for:

Type of marketplace

  • open marketplaces like OpenSea or Rarible allow anyone access to mint, buy or sell non-fungible tokens. They enable all kinds of non-fungible tokens, from music, art, virtual world assets to any other type of fungible token.
  • control like SuperRare , Nifty Gateway , Foundation or knownOrigin are more exclusive and decide which non-fungible tokens they allow minting and auctioning.
  • the proprietary marketplaces are the most restrictive and only allows display of non-fungible tokens hit by the mart itself. Due to limited supply, these marts often have high demand and asset prices. The best examples of proprietary marts are Bored Monkey Sailing ship club, high Shot and Vee friends.

Roses

NFT marketplaces charge fees it is their main source of income. Typically, they charge several types of fees:

  • The initial fee refers to the one-time payment that the first user pays to open an account and deposit the token. The prepayment is fixed or variable depending on the mart.
  • Fixed fee. Different marketplaces have their own fee policies, but transaction fees are usually split between buyer and seller. Some marketplaces only charge sellers.
  • Different blockchains have their own network (gas) fees. It means a big difference in NFT transaction prices, especially during times of high network traffic.

Crypto wallet support

The more payment methods for non-fungible token, the better. Cryptocurrencies are the main means of payment in the cryptomarket, although some of them accept fiat currency for purchases.
However, support for crypto wallets may vary from one market to another. It can vary depending on the blockchain the mart is built on and the token standard it supports.

Assess market trends

To invest competently, study trends, follow the cryptocurrency mart and consult experts.
In addition to external analysis, we recommend that you join the social communities of the NFT project where you invest. Doing your own research can tell a good investment from a potential scam. This way you can also see the first signals from inside.
Assess market trendsThe best way to deal with mart volatility is to be well prepared. For example, in a bear market, when others begin to panic and make hasty decisions, you will be able to approach the problem rationally and be able to make a technical analysis of the situation at school. Or you can contact a consultant and understand the basic terms and mart events he will talk about.
In a separate article, we also talk about who the bulls, bears, hamsters and whales are in the cryptocurrency market, and how their actions affect the mart as a whole.

When should I sell NFT and make a profit?

One of the most important things about investing is choosing the right time to sell. No one can accurately determine the asset’s maximum or minimum.
The maximum increase or decrease in the price of a cryptocurrency depends on the main players, but even they, with all their wishes, at certain times will not be able to predict the strength of the panic or active mood in the ranks of the general Public. Therefore, there is no need to wait for the minimum drop point and dream of instant growth to specific heights. As a beginner, it is better to take “above average” profits, otherwise you may not have time to sell your assets.

Inference

The value of NFT is largely determined by mart forces and it is not possible to accurately predict the future of the non-fungible token’s world.
However, your chances of success can be increased if you do proper market research and use the measures above. Use them to better assess and navigate the NFT space. Only in this way will you understand in detail how to invest in NFT.