How To Invest In NFTs
NFTs have been a hot topic recently, and have brought a lot of people into the world of investing. These unique assets can be a risky investment, but are also a great way to diversify your portfolio and can help you earn big as long as you know what you’re doing.
However, as NFTs are a relatively new phenomenon, you might not even know where to start when it comes to investing in them.
Don’t worry - we’re here to clear up all the confusion! In this handy guide, we’ll take you through everything there is to know about what NFTs are and how you can start investing in them - from the steps you need to take to invest to whether or not they are a sound investment in the first place.
So let’s get started, shall we?
What Are NFTs, Exactly?
Before we can start looking at how you can invest in them, we first need to cover what NFTs actually are. NFTs, or Non-Fungible Tokens, are a type of unique digital asset that is stored on a blockchain (essentially a decentralized ledger). Each NFT is one-of-a-kind; upon purchase of an NFT, a receipt of ownership is given to the owner to prove that they possess the unique NFT.
NFTs come in many different varieties. As a digital asset, there are near limitless forms that an NFT can exist in. Art pieces like digital paintings and online avatars are probably the most common and well-known forms of NFT, although they can also exist as games, collectibles, and even music! Essentially, if something exists in a digital form and can be stored on a blockchain, it can be minted on the blockchain as an NFT.
NFTs gain their unique status by being ‘minted’, where they are assigned an individual identification code and specific strings of metadata that distinguish the original NFT from any duplicates.
NFTs differ from cryptocurrencies through their digital signatures. These make them non-fungible items (hence the name), meaning that they can’t be exchanged or valued as equal to each other. However, NFT investments can still produce value through market demand - basically, an NFT is worth as much as someone is willing to pay for it, and this can increase or decrease on a whim based on the market’s conditions.
How Do NFT Investments Work?
Okay - so now that we’ve covered a bit more about what NFTs are, let’s take a look at how investing in NFTs works. This might seem a bit confusing at first, as every NFT has its own fluctuating value and is purely driven by individual and market demand.
Here are the basics of how NFT investments work.
Like other forms of investing such as stocks and cryptocurrencies, the value of NFTs is affected by market interest. When a person purchases an NFT, they are investing the original value of the NFT into the token. Many NFT owners looking to profit from an investment will hold on to their tokens until the market changes to a point that the token can be sold to an interested party.
However, unlike other investments, NFTs are exclusively influenced by market demand and how much other collectors or investors are willing to pay for the token. While other investments can also be affected by things such as inflation and scarcity of the item, the designed uniqueness of NFTs means that every token has the potential to bloom or plummet in value unexpectedly.
This makes the NFT market extremely volatile and user-driven. It can take a lot of waiting for your token to appreciate in value, and there’s really no guarantee that this will happen at all. Investing might be risky, but if the demand is there then you can earn a lot of money through your investments!
How Do You Make Money With NFTs?
You might be wondering how you actually earn your money through NFT investments. Given how user-driven the NFT market is, it can be a bit tricky to understand.
Unlike most investments, NFTs don’t earn interest. Instead, you earn through buying and selling different NFTs for profit. NFT trading can be a great way to earn money if you know what you’re doing (and we’ll get to that later) - as a result, ‘investing’ in NFTs refers more to holding the tokens for trading opportunities as opposed to simply waiting for their value to increase over time.
How To Start Investing In NFTs
If you’re just starting out with NFT investments, then it can be a confusing world to try and enter. Don’t worry, however - after you make the initial leap and invest, it gets a lot easier to learn the ins and outs of NFT trading and you’ll become more comfortable with how to make the most profits through your investments.
Here’s how to get started:
1) Browse For NFTs
Before you can start thinking about buying an NFT, it’s a good idea to shop around for the ones you want.
There are several NFT marketplaces that you can go through when you’re investing, and it’s a good idea to check around a selection of these to get a better idea of how the various formats and values of NFTs can differ.
Always make sure you’re searching through a reputable NFT marketplace to avoid running into any problems down the road; OpenSea, Crypto.com, and Mintable are all great places to check when looking for potential NFTs to buy.
Don’t worry about buying the NFT right now - there are still a few things you need to do before then. Think of this more as window shopping, where you’re looking for potential tokens to buy as a frame of reference in terms of budget and the format of the NFTs you’re interested in before you commit to buying.
2) Set Up A Crypto Wallet
If you’re going to buy an NFT, then you need to be able to pay for it. NFTs aren’t bought and sold using regular tender like dollars. Instead, NFT trading uses cryptocurrencies such as Bitcoin and Ethereum (which often use the same types of blockchain to protect their value).
This means that you’ll need to set yourself up with a crypto wallet before you can buy your NFTs.
An Ethereum (or ETH) wallet is your best bet, especially if you’re just starting out with NFT investments. Once you’ve set up your crypto wallet, you need to fill it with your crypto. You can use regular legal tender for this, which is then converted to crypto and placed in your wallet.
Not all NFT marketplaces (or the NFTs themselves) use the same cryptocurrencies, so it’s important to make sure that you’re buying into a compatible form of crypto with the NFTs you’re considering. It’s no use buying up Ethereum just to find that the token you want can only be bought and sold using Bitcoin!
With this all done, connect your crypto wallet to the digital marketplace you’re hosting through. This will let you see your available balance and information about the NFTs you’re interested in, as well as letting you buy and sell them through the marketplace.
3) Buy The NFTs You Want To Invest In
With your desired NFTs chosen and the money free for you to use in your crypto wallet, it’s finally time to buy your NFTs! You should have already chosen these earlier, but if not, now you have the extra knowledge that will help you make the right choices for your investment.
You may need to also pay a transaction fee along with the actual payment for the token.
Once you’ve committed to your purchase and it’s gone through, congratulations - you’re now the owner of your NFT and its unique digital signature has been transferred onto your crypto wallet.
4) Sell The NFT When The Time Is Right
Now, all you need to do is wait for the opportune moment to sell your NFT in order to make a profit. This is probably the hardest part of NFT investing and is a step you’ll need to take the initiative on.
A great offer isn’t just going to fall into your lap; you’ll either have to put the NFT back onto the marketplace at an increased price, or you can sit on your investment until you know its value has increased and you’re willing to find someone who will buy it from you. It will take some time and effort, but this is where you can start to make money off your initial investment.
As a user-based economy, it can take a while for your NFTs to appreciate in value enough for it to be worth selling them. Likewise, dips can last for a while and continue dropping. With how difficult it is to predict the NFT market, knowing the right time to sell is almost entirely up to your judgment and intuition.
Are NFTs A Good Investment?
As we mentioned before, the NFT market is volatile and hard to predict. You never really know how the value of your investment will be affected over time, and it is entirely down to changes to the market.
This is what makes NFT investing difficult to approach at first - its unpredictability makes it difficult to profit from your NFTs if you aren’t sure what you’re doing, and it’s easy to lose out big time if things go wrong.
However, don’t let this discourage you! While there are risks associated with buying and selling NFTs, the same goes for pretty much any other form of investment out there. Because of the market’s volatility (with the same going for cryptocurrencies), it’s possible for a shift in the market to earn you the big bucks!
That is part of the reason why NFT investments can be so attractive despite the potential issues you may face. It’s high-risk, high-reward; if you know how to play the game right and are willing to put in the time and effort necessary, NFTs can be an incredibly lucrative investment.
How Safe Are NFT Investments?
NFTs aren’t the safest investment - far from it, in fact. However, this is made up for by their potential to bring big returns over time. Safer investments like an S&P 500 index have far fewer risks associated with them, but it’s harder to earn decent returns without already having a lot of money for an initial investment - meanwhile, NFTs can be far easier to get into with much more lucrative results.
So while they might not be the safest form of investment, if you’re willing to take the risk and invest in NFTs, then you might find yourself sitting on a nice little nest egg if things work out well for you! It can feel like guesswork at times, especially if you aren’t familiar with the NFT market, but this gets easier with practice and dedication. It’s a good idea to start small until you get a feel for NFT investments, at which point you can start progressing onto larger trades. If you’re uncomfortable with the risks at first, invest in other ventures such as stocks and mutual funds along with your NFTs so you have a more predictable source of passive income should things go awry.
Investing in NFTs might be a complicated and daunting task to approach, but its rewards can be incredibly lucrative if things go in your favor. Working the NFT market is difficult and unpredictable if you don’t know what you’re doing - by using the information in this guide, you’ll have a much better understanding of how NFT investments work and how you can use them to earn big in the long run.
So now that you know a bit more about how to invest in NFTs - from how to get started to how to sell your tokens - all that’s left for you to do now is to put your new-found knowledge to the test! With enough time and commitment, you may just see yourself earning big from your NFTs.