How To Choose Your First NFT To Invest In
Today everyone knows about NFTs, many have already tried to invest in them. Some have managed to make super profits, while others have been completely disappointed. This is the first article in the series, which will help you not to make a mess of things.
According to Google Trends, the number of search queries on this topic renewed its historic high, now it is at close to record highs. Despite the extreme popularity of NFTs nowaday some experts believe that this is an absolute House of Cards built by the people who sell NFTs.
What is so special about the industry?
Demand and prices for tokens grow like a bubble and then burst, as they are supposed to, but that does not mean that you cannot make money on it. Promising projects attract the attention of NFT-enthusiasts, as well as venture capital and crypto funds.
Another important addition to the risks and challenges is the difficulty in determining the value of NFT. NFT valuation is highly dependent on the scarcity and perception of owners and buyers, as well as the availability of distribution channels. It is hard to predict the identity of the next NFT buyer or the factors that will affect demand. Thus, the value of NFT will depend largely on how the buyer perceives the price, which leads to strong fluctuations.
When to enter?
In order not to miss your value and income, it is essential to enter the project in the right period of time. It is not necessarily in the very beginning of the project as not everybody can recognise the rising star.
But when the collection is already very well promoted and attracts thousands of people it is not worth investing in it. So the best strategy here is to find projects while they are still growing before the peak.
There are two ways of finding such a project: follow influencers in the NFT industry or check the related feed in Twitter.
Types of NFT collections
1. Utility collections — the most important thing about such collections is utility — which benefits NFTs give to its holders.
2. Art collection — art piece itself and the name of the artist are important — utility of the token is not important.
3. Memes — the priority here is social engagement and how it is forced in social media — the art and artists are not so important.
4. Gaming NFTs and collections — a perfect combination of all the factors is essential here. Collection must have a trusted team working on it, quality engagement and community in social media and enough utility to use it in-game or out of it.
DYOR: Main strategy for success
Before investing in NFT you should Do Your Own Research. This step is essential for everyone who wants to invest in NFTs with less risks.
If you are a newbie in the crypto and NFT-market it might be hard to understand what to start with while analyzing collections.
The first thing you better do is to enrich your news feed in social media — it is 50% of your success at NFT. Getting quality and up-to-date information is critical in the NFT industry:
- If you want to understand if the collection or project is at its peak or not you can check it with a free tool like Google Trends — it is a perfect indicator of the public opinion and insights on a topic or keyword.
- Or you can check the statistics of sales of the certain collection. The number of NFT sales helps investors identify past and present interest in an NFT collection and identify the trend.
- Right timing is not the key to success, although it is crucial. You should also know how to evaluate the potential of the NFT project or art. And we prepared the guide to help you deal with it.
Also consider the thorough research of the points below.
The first crypto-enthusiasts were anonymous (Satoshi Nakamoto, for example), but now the time is different, you need to avoid anonymous teams.
Usually projects represent their whole team on the website or in the project’s presentation. Pay attention to the number of people in the team (1–2 specialists are not enough), check their socials, ensure they have relevant experience and professional recognition.
Study how many projects and companies have already provided support and who they are. If the sponsor/partner/investor is Binance, Coinbase, or another large company, there will probably be serious infusions into the project in the future. If there are no partners, or if they are newcomers, it is quite risky to invest in this collection.
Most people neglect the community when researching a project or token, however it is one of the most essential points and key to the success of any NFT project. It is the community that determines the Floor price (minimum price) of the project NFTs.
How to find out if the community is good?
- First of all, how many people are there on Twitter and Discord — these socials are the major ones for the crypto world?
- What do they communicate about?
- Do they communicate at all, or do they just write the same kind of messages and spam?
The community managers should be active and friendly, communicate effectively, and regularly update the community.
Roadmap and Whitepaper
It is very important to understand if the project has clear plans and deadlines for their implementation. Pay attention to the long-term plans — if they are real and achievable and check if the past activities were held accordingly.
Make sure the development of major parts of the project are mentioned: the underlying blockchain(s), core business applications, tokens, affiliated services and applications.
Another important point here is security and audit. Pay attention to the companies that made an audit for the project — it would be great if you find one of these: Quantstamp, SlowMist, Halborn, CertiK, Zellic, Bramah, Soteria, Chainsulting.
Rip-off or not
Rip-off in NFT is a collection that is made by copying another collection. For example, Crypto Punks, BAYC and Cool Cats have an endless number of similar collections that tried to copy their success. Rip-off can’t come close to the original design and popularity in 99% of cases.
Try to find the collection that is not like anything else that has been done before. For example, BAYC was the first in their 2d art in NFT, changing the pixelated trend to 2d illustration. CoolCats, World of Women and almost all other blue chips were first in their characters’ design.
When you’ve researched the collection and checked that it is worth considering for investing, the next step is to estimate the NFTs themselves.
It is the lowest-priced NFT within an NFT collection. Floor price is a good gauge of how well the NFT project is perceived by the community. If demand increases, the floor price will increase. If you’ve just started investing, buying the floor will be a good entry point.
Total volume of trade determines if an NFT project is currently in demand. The higher the volume, the more liquid the market tends to be. Liquidity predetermines how easily you can enter and exit NFT positions.
The number of NFTs in one collection, this criteria affects how the value of a collection is perceived. Collections with high supply tend to have a lower market value for each NFT. Collections with low supply often have higher floor prices due to the rarity and scarcity of each piece.
It shows how you can use your NFT in the real or digital world. The highest utility now lies in gaming projects NFTs. You can use skins, weapons, resources and items for upgrading your character to earn more coins.
Another option is real world utility — for example, you can get tickets to the concerts, premium content or merchandise.
Rare and valuable NFTs are more in demand and are more likely to bring more income to its owner — they often attract more buyers and are sold for higher prices.
If you want to invest in NFTs and start earning money — join Liquidifty marketplace and explore the great variety of NFT projects and arts. The entire team is working on the projects’ review and ensuring that they are trustworthy.
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The unique NFTs will be exclusively created for the anniversary, and all the holders will participate in the raffle with a reward pool of valuable NFTs estimated at thousands of dollars — don’t lose a chance to get them and other great gifts!