How to Build a Lucrative NFT Investment Strategy?

If your Google search is mostly about NFT investment opportunities or related stuff, then your Google surprises you every day with the hot updates from the industry. Have you been there? Welcome to the Twenty Twenties, where NFTs are experiencing a boom. By the end of this decade, everyone around you will invest in NFTs and make bucks out of them. So, are you among those enthusiasts contemplating investing in NFTs soon? Then there are a few things that you might need to know. That said, we won’t dip you in the pool of tokens. Rather make you familiar with the whole journey into NFTs. Sounds good? Let’s get started then.

NFTs (Non-fungible Tokens, aka digital assets) are art forms mostly stored on Ethereum Blockchain and traded in the NFT Marketplaces. Cryptocurrencies are used for trading NFTs on these marketplaces. Creators capitalize on NFTs for various purposes like protecting their work from copyright infringement, and bootlegging. Collectors and investors are earning a fortune from NFTs through reselling. Now you may wonder how people everywhere benefit from NFTs. Do they have an investment strategy?

Stocks and mutual funds have become old-school methods of investment. With cryptocurrencies being legalized in several countries, NFTs are flourishing as one of the best investments in 2021. How are you embracing this trend?

By now, you must be –

  • Active on NFT investment groups on Telegram and Discord
  • Reading a bundle of white papers and blogs on NFT investment strategies
  • Following crypto investment and blockchain companies on Twitter
  • Subscribing to newsletters
  • Downloaded a crypto investment mobile app

Would you consider these to be sufficient for intuitively investing in NFTs? Sorry to break the news — only to a certain extent. You’ve been crawling so far, and before taking that baby step towards your NFT investment, you should understand the evaluation process of NFTs. It is as simple as getting to know the intricacies of real estate investment before buying a home. Several factors determine the price-worthiness of an NFT like Utility, Ownership History, Appreciation Value, Liquidity, and Rarity. You can learn more about the basics of fair price estimation of NFTs here.

Apart from the above, what are the other factors involved in evaluating an NFT collection?

1. The NFT Market Cap

Not all NFT projects prove lucrative. So, it is crucial to understand the NFT Market Capitalization so you can choose a performing NFT project for your investment. NFT Market Cap varies from project to project. Whenever the NFT Market Cap for a particular project is higher, it clarifies that many buyers are interested in the project and willing to pay a high price for the NFT collection.

NFT Market Cap is also referred to as NFT Price Floor/Ceiling. So, technically, Low NFT Price Floor is the cost of the lowest-priced NFT in the collection. If you are to invest in the secondary market, then you can buy the floor. When you buy the low-cost NFT in the collection, the NFT collection as a whole becomes popular. You can further list the NFT below the floor price, and sell it when the floor of the collection increases again.

Another intriguing tip is to buy the peculiar or the ceiling. Just like how the most flashy and quirky costume turns heads around at a party. The demand for unique NFTs in a collection is always in the surge. The NFT can also be an expensive or renowned one in the entire collection.

Further, always choose to buy more NFTs from the same collection. If only one NFT is bought, you might be out of the community if you sell that NFT.

2. Volume Traded

Yes, you guessed it right. Higher the volume of tokens traded means higher is the demand for a specific NFT collection. The liquidity in the market also allows easier entry and exit of NFT positions in the marketplace. To know this, you should keep track of the trade volume for 90 days from the current date in marketplaces.

3. Number of Unique Holders

The different numbers of addresses that own an NFT from a collection is another criteria that can help you determine its worthiness. It is referred to as the owners to items ratio. The factor needs to be higher, indicating that larger communities are actively involved in promoting and marketing this NFT collection. The token value of the NFT is said to increase when these processes sync.

4. Number of Long-term Holders

If an NFT is associated with a wallet address for a very long period, then the NFTs are likely said to be created or sold by holders who have been in the community for quite a brief time. It further increases the credibility of the NFT collection for an investor.

5. Age of the NFT

NFTs like Crossroads, Nyan Cat, Crypto Kitties, My first Tweet have been widely discussed by the community for a few years now. It makes more sense to invest in evergreen NFTs rather than capitalizing on a collection that rose to fame in the past few days or months.

6. On-Chain & Off-Chain

As you all know, NFT minting, storing, and hosting NFTs on Blockchains is costing a bomb. Speaking of minting, the metadata of certain NFTs are added to the same network the smart contract is hosted on. It assures the existence of the collection in the blockchain almost forever. These on-chain NFTs are more valuable than those having the metadata elsewhere for storage limitations.

Another downside of off-chain NFTs is that they can be vulnerable to scams, manipulations, and threats. So, watch out for this closely when such NFT investment opportunities come your way.

Apart from staying informative about the factors that can influence your NFT Investment Strategies, you are also bound to know the risks involved.

Risks of NFT Investments

NFT and Crypto Investments belong to the high-risk, high ROI category. So, dear friend, you are already walking in a gold mine on high heels if you have made your NFT investments. However, with hefty returns, it is okay to take risks. Here are a few risks of investing in NFTs you should watch out for.

1. For many newbies, NFT Investments are like shooting in the dark. Therefore, the possibilities of getting scammed are ample. Fake and unverified sellers and identical marketplaces are the common NFT scamming methods.

Joining authentic NFT communities and buying from verified sellers can help you counter this risk factor when you are a rookie.

2. As NFTs are digital, they can be easily copy-pasted and sold in the marketplaces. The marketplace you invest or buy from should have a proper bootleg identification tool to ensure the authenticity of their collection.

Marketplaces like Rarible use blockchain analytics tools like Crunch DaVinci to identify copycats.

3. How could you invest 2X amount in buying an NFT, which is actually .5X only? Is there any price evaluator for NFTs with marketplaces? Indeed, every marketplace should have a fair price estimation tool. It can help investors, collectors, and creators to a significant degree to learn about an asset’s real value.

4. You just read about price inflation in the previous bullet. Like the stock market, wash trading is quite common in NFT markets too. Beware of wash trading news, patterns, and methods in NFT marketplaces before making a call with NFT investment.

So are you all set to make your first move exploring NFT Investment Opportunities? We’ve made it simpler here at Unleash NFTs. Stay constantly updated about the NFT Market Cap of different NFT Collections, Scams, Washtrading Patterns, and Numbers.

Wherever you are in the NFT ecosystem, you're just a click away from securing and valuing your assets, and getting smart data insights.
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