NFT is one of the most discussed technologies, and therefore not only professionals are in a hurry to invest in it. However, experts warn against investing people who are far from the industry. They believe that the market for non-fungible tokens has entered a crypto winter. Is it worth waiting for a thaw, which can become a point of growth for the industry, and what strategies to choose for invest in NFT – read in our article.
What is the current situation on the NFT market for invest
Despite gloomy forecasts, the NFT industry has set new price records. In April 2022, the weekly sales turnover reached $1 billion. The growth driver of the NFT market in the spring was the Moonbirds collection, which includes 10,000 images of pixel owls. In less than two weeks, it became the most expensive collection of the month.
In addition, the situation was fueled by the sale of virtual lands in the metaverse Otherside that started in May. Market growth was also stimulated by new technological solutions. In April 2022, the OpenSea marketplace announced the addition of support to tokens on the blockchain Solana, which features increased transaction processing speed and support for the Proof-of-History (PoH) protocol, which makes this platform a scalable tool.
We see a slowdown in growth rates and a small drawdown in July 2022. But in general, for the year, the volume and number of sales, the number of active NFT users in 2022 is several times higher than the results to the previous year. For example, in the first quarter of 2022, 950,000 unique wallets made transactions compared to 627,000 in the fourth quarter of 2021.
Overall, the number of active buyers and sellers increased every quarter from April 2020 until it declined in the second quarter of 2022.
What is NFT investing strategy
An investment strategy (investment plan) is a set of clear, defined rules that a market participant follows when buying or selling assets on the NFT market. Rules should be clear and easily defined, known in advance and tested on historical data or revealed through analysis. An investment trading strategy summarizes and systematizes specific trading rules for opening or closing a position. An investor who follows the rules of his investment strategy knows exactly where to limit losses, lock in potential profits, what trading instruments, how much and at what time to enter a position. The investor must know the amount of information about the market that he needs to open a position. The investor must understand what analytical tools should be used to match the trading strategy.
Why do you need NFT invest strategy
Having an investment strategy is essential to:
Avoid the influence of the human factor
Emotions and stress greatly influence a person’s behavior in the NFT market. Often, under the influence of stress, people make wrong investment decisions that negatively affect the investment portfolio. Decisions made on emotions can be absolutely not rational and cannot be explained. An investor may not adequately evaluate the available market data and make a decision to enter or exit a position at an unfortunate moment. Using investment strategies allows you to avoid situations in which you are required to make an ill-considered and unreasonable decision.
Organize your investment activity
It is very important to have a comprehensive view and a detailed plan of action so that your investments are systematic and profitable. Focus on the details and don’t deviate from your investment strategy.
Increase investment income
Developed on the basis of market analysis, a comprehensive trading strategy can increase your profits, unlike random one-time investments. A more professional approach allows you to get much better results. A formalized and written investment strategy with a clearly defined algorithm of actions can increase your income by more than 30%, with the same investment amounts, due to greater concentration and increased decision-making speed.
What does a invest strategy consist of
Indicate the conditions for opening a position
This mandatory item makes the strategy individual and unique, it should contain clear rules and conditions for opening an investment position. You need to use reliable data to make a decision about entering a position. This may be data obtained from the analysis of the NFT market. It can be positive news or new developments of the project you are interested in.
The investor must understand that his decisions must be verified and justified, because. the algorithm for making a decision to enter a position is the most important part of an investment strategy
Specify the conditions for closing a position
Closing and exiting a position is the second important part of an investing strategy. Your strategy should provide for specific conditions under which you should close an investment position.
At the same time, you need to provide for both a positive and a negative scenario for closing a position.
Time and duration of being in position
When developing an investment strategy, it is very important to take into account the duration of being in a position so that there are no situations when you urgently have to close a position to invest in more promising tokens or collections.
In a good investment strategy, special attention should be paid to analytical tools to obtain reliable and verified data.
When developing an investment strategy, an investor must understand what set of tools he can use skillfully. Consider and understand which analysis tools in which sequence you need to apply. Algorithms for detailed analysis using technical tools for market research should be written into your investment strategy.
Your investment strategy should contain a detailed description of the risk assessment algorithm. It is necessary to accurately determine the level of acceptable risk when entering positions. Very often, if you choose the wrong investment object in the NFT market, you can lose absolutely the entire amount of your investment by going into an illiquid asset.
The estimate of profitability must be justified. The most reliable method for calculating profitability is based on analogues.
Stopping investments – it is necessary to stop investments in a timely manner if something goes wrong. Markets change, and sooner or later strategies stop working, and the task of the investor is to understand in time that the strategy is failing and it is time to modernize it. A clear sign that it is time to stop, take a break and test the strategy is a serious drawdown of the deposit during a growing market trend.
Advantages for the NFT investor at the moment
Considering the current situation on the crypto market, let’s look at the potential return for investment: almost all collections have reduced floor prices. Lots can be bought several times cheaper due to the fact that the crypto-currency market is in the “bear” stage, that is, the number of sellers is growing on it – the so-called “bear” investors, who earn on falling quotes.
For example, some tokens from the blue-chip collection Otherdeed (NFT for the metaverse Otherside), which were in high demand in May 2022, have fallen in price by about 30% over the past month, while the cost of BAYC items has decreased by almost 33%. Do you understand what we are hinting at? 🙂
But we are not campaigning for wholesale invest in NFTs. This type of investment is complex and high-risk, but also highly profitable. Our team can help you with an investment strategy, choosing specific NFTs that you can earn on. You can read more about this here.
Investing strategies for invest in NFTs
In the digital asset market, you can find a lot of strategies that investors use to make money on non-fungible tokens.
Among them, the NFTMetria team has identified the most popular and affordable.
Buy on the bottom: Invest Strategy
The essence of the investment strategy: to buy NFTs at the early stages of sales in order to sell tokens at a higher price on the wave of hype.
As a rule, the creators of collections warn potential buyers about the start of sales. Many projects put potential buyers on waiting lists to inform users. The investor must understand the mood of the market. Otherwise, you can miss the moment for profitable resale in the secondary market.
Follow Google Trends
The essence of the investment strategy: analyze Google search queries to identify promising projects.
You can explore the sentiments of the participants through the analysis of Google search queries. To do this, many users use the Google Trends service, which shows current trends. Using the platform, you can analyze the potential level of demand for a particular collection of non-fungible tokens.
Team up with other market participants
The essence of the investment strategy: to conclude agreements with other market participants on the purchase of the collection in order to fix the price of NFTs.
As a rule, collections are bought by buyers who are not related to each other. Fragmentation allows owners of non-fungible tokens to independently set the price tag to assets. Some sellers for one reason or another may reduce the cost. Such member behavior will negatively impact the overall evaluation of the collection.
You can prevent local NFT sales that reduce the value of the collection by joining forces with other buyers. To do this, users will need to form in advance internal agreements that will regulate the formation of prices to non-fungible tokens controlled by them. An alternative would be to buy the entire collection one-on-one. In this case, the owner of non-fungible tokens will be able to independently set prices.
Important! It is worth remembering the risks. It is possible that buyers of assets in the secondary market will want to resell them at lower prices. This behavior by new NFT holders may reduce the overall value of the collection.
Work through NFT value analysis
The essence of the investment strategy: to buy non-fungible tokens that are of value.
The more valuable the NFT, the more growth opportunities open to the digital asset. Participants who can see the potential of tokens in time earn on a gradual increase in prices.
How can an investor understand how rare and unique a token is in front of him? Our team has developed a unique model for assessing the rarity of NFTs, which allows us to make a rational and statistically correct assessment of potential invest in NFTs.
Buy market leaders
The essence of the investment strategy: to buy the most popular non-fungible tokens.
On many sites, you can sort tokens by a number of parameters. For example, some platforms offer NFT withdrawals at a price ranging from the most expensive to the cheapest. As a rule, tokens that appear in the first lines of the sort output attract a lot of attention. You can earn on the interest of users in such assets. But here you can expect a very high entry threshold, the cost depends on the collection you choose.
It is important to be aware of the risks. No one guarantees that in the future the buyer of the most demanded tokens will be able to earn on their resale.
Cheating the cost of NFTs
The essence of the investment strategy: to resell a non-fungible token to yourself at a price higher than the market price in order to create the illusion of an increased value of the asset.
The hype around many collections is artificial. The owners of assets draw attention to them by increasing their value. To do this, they sell tokens to themselves at inflated prices through various crypto wallets . In the history of the asset, transactions are recorded that automatically increase the formal value of the NFT.
Important! Many consider this method dishonest. At the same time, there are no punishment schemes for users who use the method of artificially increasing the value of assets on the market.
Work through the promotion of the NFT project
The essence of the investment strategy: to promote the collection of non-fungible tokens in order to increase the value of assets.
Many creators do not make due efforts to promote their developments, which negatively affects their assessment. Interest in a collection from a participant who has the resources to promote the collection can greatly increase the value of an NFT. About how to properly promote NFT and use marketing read our article.
Before you spend your time, effort and, possibly, money on promoting non-fungible tokens, it is worth calculating the terms of a possible return on investment. To do this, you need to analyze the potential of the collection and the interest in it from market participants.
Tracking the whales of NFT projects
The essence of the investment strategy: identifying and monitoring the transactions of the largest investors of non-fungible tokens.
Such participants invest only in high-quality NFTs, the value of which will grow. Whales tend to have a variety of insider information. Therefore, they will always be one step ahead of the entire market.
Upcoming NFT airdrops
The essence of the investment strategy: study of all upcoming NFT sales announced by various resources, including us, NFTMetria.
This gives you an idea of what is trending and gives you the opportunity to buy NFTs at the lowest price. But remember not to miss the moment: the NFT market is constantly changing and constantly filled with new opportunities.
What is the most profitable NFT investment strategy?
The most profitable NFT investing strategy is a complex strategy consisting and including the observance of a number of factors for opening an investment position:
- Full analysis of the project. The analysis should include: checking the project team, checking the project roadmap for realism, checking the technical background of the team, checking marketing competencies, checking the project community.
- Conduct an analysis of the distribution of NFT among users. The presence of a large number of NFTs in the same hands can negatively affect the increase in the price of the collection.
- Don’t try to buy from the market. Make offers with your price. Take your time.
- Analyze pure rarity and visual characteristics of attributes. (Not always rarer more expensive)
- Analyze the development and conduct of marketing. Follow the news.
This is just an example of the algorithm that you need to follow in order for your investment strategy to be profitable and less risky. The most profitable strategies are based on analyzing transactions and being ahead of other players. Example:
- Earlier determination of accumulation and concentration of tokens
- The emergence of large buyers, who gradually accumulate most of the collection
- Cheat statistics
- Cheating social activity
- Significant increase in activity
What is the most effective NFT investing strategy?
The effectiveness of a trading strategy is determined by the rate of return. Analyzing many trading strategies in different markets and historical data, it is impossible to determine the most effective investment strategy in a certain market period. Therefore, complex strategies should be used based on a full pre-scan data analysis.
What is the safest NFT invest strategy?
One of the safest and least time-consuming analysis is the DCA NFT investing strategy. The strategy of asset cost averaging. By using this strategy, you avoid the negative factors associated with incorrect determination of the market trend and entering into a position at high prices. This strategy allows you to reduce the impact of emotions on investments.
How to develop an NFT investment strategy yourself?
Developing an investment strategy requires a lot of time spent on analysis. However, your own trading strategy allows you to thoroughly calculate all possible risks and provides any level of investment comfort. To develop your own strategy, you need:
- Decide on the tactics of opening and closing positions
- Determine the necessary analytical tools
- Identify sources of information
- Compile and write down a detailed algorithm of your behavior in the market
Is it worth to invest in NFT?
As with all other types of investments, NFTs present a financial risk. Although, of course, there is a chance that you will be lucky and earn millions of dollars. But there are even more chances that you will either win nothing or even lose your investment completely.
How you choose to invest your money is up to you. And if you feel that the NFT trend will move in the same direction as cryptocurrencies (like Bitcoin), then go for it. For now, you only risk capital that you can afford to lose, as it should always be.
Why are such investments so high-risk? The fact is that invest in NFTs are:
- comprehensive understanding of the crypto market,
- blockchain technologies,
- knowledge of project teams, their participants, their successful cases,
- understanding how the market usually reacts to their collections,
- what are the possible upward trends in prices and, conversely, what can collapse the price of the collection,
- what correlations are possible, and what they depend on.
There are many such parameters. If you yourself understand all the intricacies, there is a high probability that you will hit the jackpot. If you want to comprehensively understand how to invest in NFTs, then we invite you to our course.