How to Invest in NFTs? 20 Tips
How to Invest in NFTs? 20 Tips
If you follow the cryptocurrency industry, then chances are that you have heard about NFTs, which have taken the world by storm, turning digital works of art and collectibles into easily tradable items on the blockchain as discussed over at runrex.com. With the NFT market being so hot right now, people are increasingly considering investing in NFTs. If you are one of them, this article will look to provide tips that will help you when it comes to investing in NFTs.
Reasons why you should invest in NFTs
NFTs have become a profitable form of investment because of several reasons, which include:
They create value for the tokenized asset
NFTs create a medium whereby physical objects like artworks can be tokenized, therefore, eliminating the duplication of such artwork and limiting ownership to the artist. This, according to guttulus.com, in turn, creates scarcity for the artwork and, hence, value for it.
They provide investors with more liquidity
Tokenizing assets also gives investors more liquidity over their assets when they need it. For example, when a virtual landowner decides to rent out his/her virtual space to advertisers or influencers for a fee, while still retaining ownership over the land, the virtual land, in this case, will still belong to the owner, but part of it will be liquified as rent as covered over at runrex.com.
Potential for growth and development
NFTs, possess huge potential for growth and development according to the subject matter experts over at guttulus.com. The NFT industry is extremely hot right now but it has the potential to be even bigger in the next few years, which is why investing in NFTs is a sound idea.
Tips for investing in NFTs
If you are looking to invest in NFTs, then consider the following tips:
NFTs are only as good as their underlying asset
One of the most important things to remember about investing in NFTs is that non-fungible tokens are only as good as their underlying asset. This is shown by the fact that an NFT from NBA Top Shot featuring a LeBron James highlight reel sold for $200,000, while less famous players have had reels that sold for as low as $9. Therefore, consider the underlying asset before investing in an NFT.
Get some insight into the assets they represent
The previous tip shows us how important it is to have some unique insight into the assets they represent if you are to make money from NFTs. This is because avid NBA watchers can correctly identify future NBA superstars, and could, therefore, buy cheap highlight reels today and earn millions when the stars break out several years from now.
Focus on your area of expertise
According to discussions on the same over at runrex.com, if you want to make money from investing in NFTs, make sure that you are focusing on your area of expertise. If you are a video game player, look into Decentraland, a digital world backed by Ethereum. If you are a sports fan with an eye for talent, then the NBA’s NFTs could be for you, and so forth.
Make sure you trust the cryptocurrency system
If you are investing in NFTs, then you need to trust the cryptocurrency system itself according to the gurus over at guttulus.com. This is because when you invest in an NFT, you are assigned a token that tells the world that you own a specific asset. This is often done on the Ethereum network.
Make sure no one owns what you are looking to invest in
As articulated over at runrex.com, when you buy an NFT, you need to make sure that no one else owns that property off-chain already. While in the real world there is an entire industry of title insurance that makes sure you are not buying a property where the seller has faked his/her ownership, in the world of NFTs, you need to do your homework to ensure that you are not investing in an altered to copyrighted item.
Don’t limit your exposure to any single NFT
Another very important tip when investing in NFTs is the importance of making sure that you don’t limit your exposure to any single NFT. Even if you believe an asset could double or quadruple in value, it is usually wise to limit yourself to 5% to 10 % of your total investment portfolio in case something goes wrong. Even the best investments can go to zero under the worst circumstances.
Don’t spread yourself too thin
While it is important to ensure that you dint limit your exposure to any single NFT as pointed out in the previous tip, it is also important to ensure that you don’t spread your bets too thin. While buying a thousand pieces of low-quality digital art might come cheap, even a 10x winner is unlikely to move the needle in such a situation.
Invest in Ethereum
One of the ways to invest in NFTs indirectly and make money is by investing in Ethereum. This is because, as articulated over at guttulus.com, most NFTs and altcoins work off of protocols first introduced by Ethereum and will continue to rely on it going forward.
Stay up to date
Also, the experts over at runrex.com point out how important it is to keep up with the top NFT exchanges like Nifty Gateway and OpenSea to get an idea of where this market is headed next so that you can invest early.
Be on the lookout for fraud
As the subject matter experts over at guttulus.com point out, crypto wallets are often used to circumnavigate government controls and many fake accounts and false copyrights at auctions are a serious concern, which means you should be watchful when investing in NFTs.
Take your time to understand the industry
It is worth noting that understanding the industry takes time, which is why you should take your time to explore the platforms, follow them on social media, and participate in discussions. The NFT market can’t be understood by simply skimming the top, which is why you should take your time to fully understand it before investing.
Research the artists you are interested in
Another tip that will come in handy when looking to invest in NFTs is making sure you research and follow some of the artists you are interested in. This will allow you to know all about their personalities, art style, selling style, mint frequency, and so forth, which will help you make investment decisions.
According to discussions on the same over at runrex.com, another important tip when it comes to investing in NFTs is the importance of tracking sales. You can use platforms like CryptoPulse to know the sales history of artists and art, which will also help you make investment decisions.
Know where to buy NFTs
Many reputable trading sites have popped up to serve the NFT community. According to guttulus.com, some of the most trusted ones include Rarible, OpenSea, among others. You can also buy NFTs directly, with the NBA, for example, hosting a site to sell highlight reels.
Focus on quality
Regardless of where you choose to buy NFTs, although you must plump for a platform that is reputable and reliable, the gurus over at runrex.com are adamant that you should make sure that you are buying something limited in quantity, and is high in quality.
As is the case with any investment, it is important to be careful with how you invest in NFTs. While it is a great time to be in NFTs given the hype around this industry, you mustn’t put more money in than you can lose. Prudency is key when it comes to investing in NFTs.
Keep your head
The hype surrounding NFTs means that it is easy to get excited and invest willy-nilly in anything you come across. However, the final tip when it comes to investing in NFTs is the importance of making sure you keep your head and make cool-headed decisions grounded in research and a good understanding of the industry.