10 Things to Have in Mind while Investing in NFTs

Becoming a good and profitable NFT hunter is not something you can improvise. It will take you some time to understand NFTs and especially to start making money with them. Indeed, investing in NFTs is very different from investing in crypto and fungible tokens.

There are other mechanics involved and other criteria to consider. In addition, it is important to keep in mind that the world of NFTs is constantly evolving. Projects are becoming more and more complex and today, NFTs are more like neo-startups in terms of how they operate.

1. Why invest in NFTs?

There are several reasons that motivate users to opt for NFT investing. These include:

  • Taking advantage of a growing market

Non-fungible tokens are the technology of the future, which is why there is so much excitement about them. In fact, the cryptocurrency market has been in a speculative bubble for months. Indeed, NFTs have been so successful thanks to the excellent performance of Bitcoin and Ethereum. These are mostly the two cryptocurrencies on which the prices of other cryptocurrencies depend.

Surveys and new news have shown that the best sales exploits are recorded in the account of the most unusual digital works. This fact then represents an opportunity for investors who want to add value to their investments.

  • Making the most of your passion for art

It is obvious that NFTs represent an opportunity for artists who were struggling to sell their artworks. Digital art is an excellent opportunity for them to get a direct remuneration, because they no longer need intermediaries to sell their art. Thus, it is up to the artist to tokenize his creations in order to sell them to the highest bidder.

  • The Big Brands are coming to the NFT market

Recent news about NFTs, as well as indicators that NFTs are a market of the future, have certainly piqued the interest of big brands. Indeed, they are starting to look at NFTs, and that’s a good thing. If firms with the biggest financial analysts are investing in a field that is considered new, then it is promising and enticing.

2. Finding the right platform

The most important thing is to find a good platform for buying and selling NFTs, as there are several on the market. It is therefore essential that you choose a credible and secure platform. For example, you can opt for OpenSea, which is easy to use and has a large number of users. There is also Valuables which will allow you to buy and sell NFT Tweets. The Nifty Gateway platform is the one that at the time of writing this article, records sales. To invest in NFTs, the Rarible platform is one of the best.

3. Verify the economic viability of the project (and the usefulness)

Be aware that there are two main types of NFTs. There are those that will make you money on resale on the secondary market like Opensea for example. There, you can make great moves certainly if you choose the right NFT that check all the boxes.

However, many investors (including myself) are looking for NFTs that pay regularly. These projects create utility tokens that holders can use to improve certain functions or elements. We can for example have the possibility to store NFT to earn tokens. These tokens can then be used or sold on DEX. This is for example the case of the CyberKongz project and the banana tokens, the NFT chiccowandbullzz with the MILK tokens or the BlocBurger project and the Baloney tokens.

There are more and more NFT projects of this type with passive income, to sum up the idea. That said, the most important thing is to think about the viability of the ecosystem and the tokens in question. This is where you need to analyze the project. What will the tokens be used for? How will it be used?

All these classic questions must be asked to choose your NFT but it is not enough. It is only the starting point of your selection.

4. The team’s commitment and vision

Well, for an NFT project to last on the long term and gain value, it necessarily needs a clean and determined vision. So you don’t have to look at the background of the team, but rather at their investment and the energy they have to develop their project. That’s what interests me.

If a team is determined to develop its project, you can be sure that it will work. On the other hand, a nice NFT project whose entrepreneurs behind are “soft” has a strong chance to sink after the hype. I order, to observe the team, you must look at the partnerships made or to become. Also look at its involvement in the project, the realization of the steps of the roadmap etc…

In fact, the activity of the founders will impact and strongly influence the most important criterion when you want to invest in NFT: the community. Many founders rely on the community. They think that the community will live on its own. This is the biggest mistake you can make.

5. The community’s quality

This type of project will not last in the long term. Without a community, an NFT becomes a JPEG that rots in its portfolio. You need announcements, new partnerships, and new ideas. In fact, a community is only alive if the project itself is active and developing. This is where you have to learn how to weld the community around a common vision. This means setting up events, physical meetings (yes) and/or creating a sense of belonging to a club. In fact, this is the most important element.

6. Take into account the development time

This may not be a real criterion but I wanted to talk about it anyway because it can influence your investment. Some projects, as we have seen, take more and more time because they are real companies. Naturally, this type of project is in a really long time horizon. And, this is quite normal. You have to get used to this type of project now.

Sometimes, it is also the founders behind who open the sales a little too early. There are too many projects nowadays and investors are really scattered. I see it for myself. There is only one sale a day and the projects are getting more and more interesting. And, you don’t have unlimited capital to invest. In fact, there are projects that are very interesting but haven’t given themselves time to build a strong community before opening sales. This is something I often see and it is normal because the NFT world has just taken a new turn (big media coverage, new projects every day etc).

So you need to be aware of the time dimension before investing. Some projects will explode quickly and others will take time. It’s up to you to choose projects according to the capital you have and especially the time you have before investing. I have sometimes resold NFTs too early and a few months later, they have increased in value. My impatience caused me to lose money. Don’t make the same mistake and only invest where you can.

7. Media coverage and visibility (increase the desire to belong)

We come to the most important criterion that can have an incredible impact on the price of your NFT. Here, when I talk about media coverage, I am talking about visibility in a general way. It can be the fact that a notorious collector is interested in the project. A celebrity or a crypto influencer. It can be critical if outsiders with some credibility or influence or visibility are interested in the NFT project.

In general, the media is interested in very innovative projects or those with remarkable sales. A media outlet usually becomes interested after the success of an NFT is proven. The visibility of a project also shows the marketing work of the project. The more a project knows how to get the word out, the more likely it is to attract traffic and light to the project.

For me, this is the criterion that consolidates my investment. When I see that a project is mentioned in several media, blogs, YouTube videos etc., I always think that the team knows how to work.

8. NFT, what are the risks of scams? Spoofing and replica sites

According to a study released in March 2021 by Bolster, a fraud prevention platform, there are five areas of scams or fraud that are booming with the NFT bubble. These include replica NFT stores, fake NFT stores, counterfeit or fraudulent NFTs, fake NFT gift drops (airdrops), and social media scams.

“Cryptocurrencies along with NFTs have captured the notice of digital scammers,” said Shashi Prakash, CTO of Bolster, in an email. “Those who are involved in such marketplaces must exercise extreme vigilance since there are very limited privacy and security protections available for those who get scammed.”

Fake stores, on the other hand, are similar to replicas, but do not rely on proven brand names. Instead of trying to replicate the OpenSea NFT marketplace, for example, these fake stores simply sell non-existent NFTs. Spoofing is when a cybercriminal sells work that does not belong to him. For example, making an NFT of a Banksy work and trying to sell it on the market. The main platforms try to fight against this practice by setting up a “verified” status, whose presence should be checked.

9. Where do I store my NFTs? Can they be stolen?

Like virtual currencies, NFTs are stored in digital wallets. These wallets must specifically be NFT compatible. As with cryptocurrencies, there is no third party. You will have to be very careful not to misplace your password and especially your seed phrase, the 12 or 24 words allowing the recovery of a cryptocurrency wallet. And of course, never give your password to anyone else.

The vast majority of cryptocurrency thefts come from users who willingly provide their passwords or their 12 words to crooks. Don’t make this mistake! The other, much smaller danger comes from the sim swapping scam, which consists of taking control of your computer and phone tools by swapping two phone Sim cards. Beware.

10. Should I worry about keeping my NFTs for a long time?

The issue of file durability is an important one in a world of programmed obsolescence and relentless technological progress.

Will the current technology and your treasure in the form of NFTs stand the test of time? Well, the problem of bit rot is a reality: image quality decreases, data files become unopenable, websites crumble, and people lose their wallet passwords, all reasons to question if you can leave your NFTs to your descendants. To put your mind at ease, physical art is also extremely fragile.

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