How to Make Smart NFT Investments

How to Make Smart NFT Investments

If you’re familiar with cryptocurrency, chances are you’ve heard of the NFT marketplace and may own an NFT. NFTs are a great way to diversify your digital investment portfolio and store crypto for long-term gain. NFTs typically accrue value similarly to the art market. However, the long-term success of an NFT investment will depend on the sustainability of the blockchain network it is created through. If you’re interested in investing in NFTs, here are a few fundamental insights and tips.

What is an NFT?

Non-fungible tokens, NFTs, are immutable records of ownership over real-world or digital assets. NFTs are encrypted and secured on blockchain networks, making them virtually impossible to tamper with. NFTs can be bought and sold using cryptocurrency and are always held on the blockchain. The NFT marketplace can be accessed through certain apps and sites online that collectors and artists can join to list, buy, sell, and auction NFTs.

What can be an NFT?

NFTs can represent virtually any asset, tangible or digital. If it’s a real asset, ownership is recorded through a contract encrypted within the NFT. For digital assets, typically, the NFT will contain an encrypted copy of the original file of that digital item. Digital artists in all mediums have found the benefits of using NFTs to sell and market their own works. Music, art, videos, gifs, photographs, etc., can all be minted into an NFT and sold along the blockchain network.  NFTs can help to create digital scarcity and verify the provenance and originality of each digital artwork it encrypts. This technology is essential for the creation of a sustainable and secured digital art market.

How to Enter the Marketplace

The NFT marketplace saw unprecedented growth during the pandemic, with a sales jump from $82.5 million in 2020 to over $17.7 billion in 2021. This tremendous growth has lured many investors to endorse NFTs and other crypto projects. Celebrities and artists like Snoop Dogg, Justin Bieber, and Steve Aoki are all prominent collectors of NFTs and create their own NFT collections. You can join the NFT marketplace through a platform like FTX, where artists can easily mint their own NFTs for auction, and collectors can peruse the NFT collections for sale.

The first step to joining the NFT marketplace is to open your crypto wallet and fund it with a cryptocurrency compatible with the NFT platform you wish to use. NFTs can only be purchased using the cryptocurrency that exists on the identical blockchain as that NFT, so NFTs on the Ethereum blockchain, for example, can only be bought using ETH. Once you’ve set up and funded your wallet, you can enter the NFT marketplace and begin bidding and purchasing NFTs. Read about it Types of Cryptocurrency

Before investing in NFTs, research the various collections available for purchase. Some collections are designated blue chip NFTs; these NFTs are considered most likely to maintain and accrue value in the long run. Blue chip NFTs are typically created by artists with large followings, and the collections usually have a high floor price and trading volume. NFT collections and artists with large and active communities surrounding them are typically included in the blue chip designation. However, just because a collection is considered a blue chip now doesn’t mean it will always maintain that status in the future. Keep an eye out for these types of NFT collections and try to get one for your portfolio.

Investing in NFTs comes with risk, like any other investment type. However, you can make strong bets on specific collections and join the NFT hype today. Research the different collections available to you and start investing in NFTs.

Related Posts