How to Invest in NFTs
Not sure what NFTs are and how to get started investing in them — or whether you should do so in the first place? Here’s what you need to know for your first investment in NFTs in 2022.
NFTs have been around for a while now but there is still so much confusion around them.
An NFT token, in technical terms, is a trusted property right to any digital object – images, animations, video, audio and other assets. Thanks to blockchain, this right cannot be forged. It can only be sold or transferred as cryptocurrency.
So why are so many people having a hard time with trusting this new wave of innovation while others are jumping in head first claiming this is the future.
True, NFTs have turned conditional pictures sent over the Internet into tangible objects of law. Not to go far for example; the most expensive NFT, Pak’s ‘The Merge’ consisting of 312,686 total units of mass, was sold for $91.8 million on Nifty Gateway. Or an avatar used on VK, Facebook or Twitter like NFT sold for over $7 million.
What’s the scale?
Turnover on the largest NFT marketplace, OpenSea, approached $828.6 million this August. Although a month ago, in July, it was four times lower at $284.2 million. And in June, OpenSea could only boast a turnover of $125.2 million. Total sales of indivisible tokens on all online venues in the first 6 months of 2021 exceeded $2.5 billion. For reference for all of 2020, NFTs totaled $95 million in sales. That is, 26 times less.
NFTs have opened up limitless possibilities not only for people in the creative professions. On the one hand, with non-interchangeable tokens, you can directly sell your own works. On the other hand, users who buy NFT automatically become the owners of unique digital content, the right to which is confirmed by the blockchain. In the future, this asset, like any other work of art, can be sold much more profitably.
NFTs give us the opportunity to invest in assets that were never available or the thought of investing in them was completely out of reach. Of course, NFTs have their digital rarity, like a rare card or a legendary item in the game. Their price is also based on that, and it is a valid investment. Finally, it should be noted that, as with any investment, you need to be careful when investing in this new trend.
Here is what you should look up before investing in NFTs.
Let’s dive in.
Determine your goals and finances
While it’s easy to get carried away by the crypto craze, before you embark on any investment journey, you need to take a hard look at your finances and emphasize how much you really need to invest. Many people suggest that new investors make sure they have enough savings set aside for a rainy day (a few months’ rent) before putting money into the market. You don’t want to invest money you can’t lose.
The way you should spend within your means, you should certainly invest within your means. Once you’ve pinpointed exactly how much you need to comfortably invest, you can think about investing in NFT or any other investments.
Evaluate your risk appetite
Before you invest in any investment, whether it’s the stock market, real estate, cryptocurrency or any other form, be sure to ask yourself what level of risk you think is acceptable. This kind of ties in with our previous point about knowing how much you can safely lose, and about spending within that range.
Every form of investment comes with a bit of a level of risk, and as anyone who has watched the cryptocurrency market for a while can attest, cryptocurrencies and other emerging technologies are about as volatile as it gets. If you’re short on money and looking for a way to grow your wealth with minimal risk, you may want to consider more stable investment methods such as index funds, retirement plans or high-yield savings accounts before investing in NFT.
Become an expert on cryptocurrency
They say you should never invest in something you don’t understand. One barrier to entry that many investors looking to enter the cryptocurrency market face are the information asymmetry it presents to newcomers.
For those who are not tech-savvy, understanding the ins and outs of cryptocurrency should be the number one priority before even thinking about investing in NFTs. The market has become increasingly complex as blockchain has evolved in recent years and has begun to serve many uses beyond simply acting as virtual currency.
Understanding how this technology works will inform you about each individual blockchain and cryptocurrency, helping you evaluate their merits accordingly. Without extensive knowledge, you won’t be able to tell the difference between an alternative coin with no future and a shiny blockchain with a bright future. This is especially important because when you bet on NFT, you are also betting on the currency that helps power the decentralized network in which it is hosted.
If that suggestion didn’t make sense to you, then you need to do more research. Never rush it.
Take security seriously
Decentralized networks like blockchain are actually much more secure than centralized servers and any other system that depends on trust and a third party. But the individual user, you, is not safe. You can fall victim to phishing and other fraud schemes using social engineering to convince you to give up important details. You may not protect yourself from malware, such as keyloggers, that can expose your sensitive information.
You may needlessly attract unwanted attention from cybercriminals by bragging about your huge profits. If you’re going to invest real money in NFT or cryptocurrency, you need to make security your number one priority. Consider investing in the best hardware wallet in the industry to protect your funds in the long run, and remember to never store NFT or cryptocurrency at any public address that is not exclusively yours.
Know your subject
We’ve said it once and we’ll say it again, you should never invest in something you don’t understand. Even after getting a solid base of knowledge about the technical side of cryptocurrency and NFT, you need to start looking for subject areas where you can understand consumer psychology. It’s a lot like working as a curator of an art collection; you need to understand what kind of art and creations people are drawn to-what will resonate with people like you.
You don’t even need that for pretentious farce. There are all kinds of NFTs. There’s NBA Best Kicks, games like Axe Infinity, meme-culture crypto-art on Rare and conceptual avant-garde 3D art on Foundation.
While NFTs on the major reels for major players on Top Shots currently demand exorbitant prices, if you know In basketball you could pick little-known, promising players who could be the next LeBron James, buy them up on the cheap and sell them at their peak later-just like betting on a good startup. It’s the same with NFTs of any kind. Once you know how NFTs work, you can mix that knowledge with your interests to benefit from a unique understanding of the niche market.
Choose performers over NFTs
They say you should pick good companies over good stocks. This can also apply to NFT; If you find an artist who consistently puts out what you think is quality work, seems to be gaining momentum for itself, but hasn’t blown up yet. Beeple levels of fame, taking a few pieces of their work so that you not only support them, but also make a firm bet on their future, it can be a useful way to frame your investment decisions in the NFT market.
Look at styles that resonate with you without succumbing to cheap imitation; Isolate which elements seem to appeal to buyers and collectors without closing your mind to new ideas.
Keep an eye on the market
This should certainly be a given for anyone thinking about placing or already putting money into NFT and cryptocurrency in general. You should be regularly updated on what’s happening in the blockchain industry in general, the cryptocurrency market and the NFT space so that you can not only capitalize on opportunities, but also prevent potential setbacks.
That doesn’t mean you have to read cryptocurrency news 24 hours a day, but investors in this field would do well to set aside time to study them regularly and, by extension, their money.
Don't become hostage to FOMO
There is an expression among investors “don’t try to catch a falling knife,” warning of the dangers of FOMO. Experienced investors, in many cases, see a drop in the stock price or a dip in the market as an opportunity to enter – even the most fundamentally sound companies have their ups and downs, but good companies can weather the stormy sea and sail to calmer, clearer waters. on the other hand.
Instead of patiently waiting for the price to bottom out, many end up recklessly investing in stocks only to see them fall further or get fixed. FOMO can also encourage users to do the opposite – as they watch prices rise, some investors eagerly jump on the bandwagon right at the peak only to watch their investments shrink along with the natural movement of the market. Patiently make every decision and never rush to catch the bus.
Don't lose sleep
At the end of the day, the purpose of investing is to help you grow your money so you can live in safety and comfort. If your investments are keeping you awake at night or you’re sitting behind the cryptocurrency news like a hawk waiting for the next shoe to drop, you’ve misaligned your decision to fit your risk appetite and are suffering because of it.
Your quality of life should be improved by investment, and your investment, generally speaking, should never be a source of debilitating anxiety. If you put your heart and not your brain along with your money into the market, you are only recharging your emotions before a roller coaster ride that you may not be able to handle.
Consider creating your own NFTs
If you’re thinking about investing some money to use in hopes of watching it grow, it might be worth considering creating an NFT of your own. Rather than betting on someone else, to bet on yourself and see what NFTs you can provide to the market. Even if you’re not an artist or a 3D modeler or developer, there are ways to digitize a lot of products. It’s like starting our own company rather than investing in someone else’s, you can experiment with out-of-the-box ideas in hopes of discovering your own golden ticket.
Who knows, maybe you’ll make the next Nyan Cat.
Join the Discussion
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