NFTs have become a household name and seem to have penetrated even the most conservative industries. Crucially, many view NFTs as a marvelous investment opportunity capable of bringing substantial revenue to their holders. But how true is that?
Non-fungible tokens are in the limelight and digital creators, collectors, and speculators across the globe have eagerly joined this much-talked-about movement. According to the forecasts provided by Jefferies Financial Group, NFT market capitalization is expected to hit $35 billion in 2022 and even rise above $80 billion by 2025.
NFTs have proven to be a promising investment vehicle that is moving at breakneck speed and welcoming everyone who wishes to jump aboard. These days, one can find and choose to embrace NFTs in a variety of categories and backgrounds including sports, fashion, digital art, video games, and entertainment — and the list goes on and on.
But is it really a good (and smart) idea to invest in NFTs and, if yes, what should you consider before embarking on this adventure?
Check out this article for the answers to these tricky questions and to get a better understanding of NFTs and their specifics.
What are NFTs used for and what makes them special?
Though non-fungible tokens have been around since 2014, they surged in popularity in 2021, sparking genuine interest among millions of enthusiasts and generating about $25 billion in sales.
World-renowned celebrities, influencers, and athletes are rushing to embrace NFTs and enjoy considerable returns on investments in crypto-collectibles. Leo Messi, Mark Cuban, Snoop Dogg, Elon Musk, and Shawn Mendes are just some of the NFT craze followers.
But how did NFTs manage to climb so high?
Well, apart from being a hyped trend that’s luring literally anyone to join, NFTs come with a multitude of extraordinary benefits and boons. Below we will take a closer look at some of them to see what makes NFTs so valuable and special.
NFTs boast a number of use cases
NFTs are versatile and applicable to different domains.
Despite their novelty, NFTs already boast several use cases. So, for instance, NFTs can be employed to represent invention patents and serve as access to different events.
What is more, NFTs have made inroads in logistics and supply chain: they can be assigned to goods or other unique items to track their journey to the end consumer.
NFTs allow you to own something unique
First of all, the most distinct feature of non-fungible tokens is that they provide their holders with an opportunity to become the sole owner of the desired digital item. This might be a digital image, an audio clip, a video fragment or meme, etc.
Chiefly, thanks to the specific functionality of blockchain and advanced smart contracts that underpin NFTs, these digital assets come with public proof of ownership and are immune to replication.
NFTs serve as the facilitators of the creator economy
If you have not heard about the term “creator economy” — now is the time to bridge the gap.
The creator economy allows content creators, such as bloggers, influencers, TikTokers, and so on to generate revenue from their creations. As of now, there are about 50 million independent content creators around the world and the number is growing by leaps and bounds.
As for the role of NFTs in the creator economy, it is important to highlight that non-fungible tokens help democratize content creation as well as make it possible for digital innovators to monetize their works by converting them into profitable digital assets that can be sold in the form of NFTs to eager devotees and enthusiasts.
NFTs can help diversify your portfolio
If you are a crypto investor, you should know that you will have a greater chance of making a substantial profit if you invest in several different coins and tokens.
NFTs, for their part, have the ability to contribute to the diversification of your financial portfolio. However, if you are a beginner in the NFT space, you should initially experiment with a couple of NFT campaigns to properly assess their viability and examine which NFT category to invest in further.
NFTs bring about greater market efficiency
Another prominent advantage of NFTs is that they empower digital creators to directly engage with their target audiences. This means that artists will no longer need to resort to agents and physical galleries to assist them in reaching out to customers.
In the long run, this can help drastically speed up processes, cut down costs, and contribute to the smooth communication flow between NFT creators and buyers.
Should you invest in NFTs after all?
It is quite challenging to provide a direct answer to the question since opinions regarding NFT feasibility are split.
However, there is one thing no one can cast doubt on: the NFT market is attracting more and more participants which consequently means that the demand for NFTs is growing too. Now let’s delve into the chief reasons why you can start thinking about investing in NFTs.
Ample monetization opportunities
At the moment, NFTs offer a gamut of monetization opportunities. For example, you can choose to invest in an NFT token itself or consider other viable options, such as an NFT marketplace or GameFi and metaverse platforms and projects that are reliant on NFTs.
Notably, the popularity of custom NFT platform development has been on the rise. Lots of NFT fans and entrepreneurs are bringing forward ground-breaking ideas and are willing to develop their own NFT platforms focusing on particular NFT categories.
With an NFT platform tailored in accordance with your requirements, you can not only generate revenue but also establish a global presence and have a competitive edge over other NFT investors.
Access to the global market
Another significant aspect of NFT investment in general is that this niche is open to literally everyone, regardless of their financial status and previous investment experience.
Believe it or not, the majority of all existing NFTs cost around $200 or even less. So, if you have long been dreaming of becoming an investor but do not have relevant expertise and large capital, NFTs offer you the chance to jump on the bandwagon and enter the investment realm. Maybe the NFT that you buy will later be worth thousands or even millions of dollars, and you will be among the most distinguished investment influencers.
Disadvantages of investing in NFTs and tips on how to avoid them
All that glitters is not gold — and some controversies exist regarding NFT investment. Below we will consider some of them in greater detail.
NFTs are not absolutely secure
It needs to be said that NFTs are speculative assets and their inherent value is largely set by very subjective metrics such as buyer demand, asset longevity, and even…luck.
What is more, NFTs are not 100% secure. They may suffer from multiple vulnerabilities, including smart contract issues, marketplace and NFT security risks, cybersecurity problems, and NFT fraud.
In addition to this, fake NFTs remain the most pressing concern in the entire space. As a result many NFT adopters are afraid of wasting their money on a fake work and give up on the whole idea.
Luckily, there are viable solutions to this problem, with CheckNFT being one of them. The platform empowers NFT evangelists to avoid unfavorable and dangerous situations. By making use of business intelligence and data visualization, CheckNFT notifies users about risks and red flags including possible fraud, scams, blacklists, wash trades, price manipulation, IPR violations, and NFT duplicates.
NFTs creation is energy-intensive
It is a well-known fact that NFTs take up a lot of energy.
The majority of all non-fungible tokens produced so far are based on the Ethereum blockchain that relies on the proof-of-work consensus mechanism and consumes about 238 kWh per transaction (as of January 2022).
If the environmental aspect is crucial to you but you are still willing to invest in an NFT, you can search for digital assets that are powered by greener blockchains, such as Algorand and WAX or other alternatives that make use of the proof-of-stake consensus mechanism.
NFTs require profound knowledge and understanding
Another big problem is that a lot of NFT devotees mindlessly rush to invest in tokens without even acquiring the most basic knowledge of the industry and market. In the long run, they end up totally dissatisfied with the result and give up on the entire idea of investing in NFTs.
If you are keen to invest in NFTs but fear that this venture will not bring you the desired profit, you may identify your exposure level and start allocating just a small fraction of your investment portfolio to NFTs. Track and analyze the success of your NFT campaigns, and if they turn out to be satisfying enough, proceed further and go big.
If you find it challenging to properly assess which NFTs are worth investing in, you should get in touch with a professional consulting team. They will draw on their expertise in the domain and do research to recommend the most appropriate and prospective collectibles that run the best chance of skyrocketing in the future.
What NFTs to invest in? Overview of the top five popular NFT sales
There is a wide variety of NFTs available on the market.
If you dabble in NFTs and do not know which NFT category to opt for, you should do your best to find out which NFTs will comply with your requirements and interests.
At the moment, the most widely sought-after NFT segments comprise digital art, music, virtual fashion items, memes, sports moments, video clips and fragments, and in-game collectibles.
It’s worth knowing that there are particular NFTs that have long been circulating on the NFT market, drawing the attention of a variety of NFT enthusiasts from celebrities to novice investors. Among them are the much talked-about Bored Apes, Mutant Ape Yacht Club, CryptoPunks, Everydays by Beeple, and Merge by Pak.
#1 Bored Apes
The Bored Apes collection is made up of 10,000 unique images of apes created on the Ethereum blockchain and commonly traded on the OpenSea marketplace. As of writing, their total sales volume is estimated at $1.4 billion, with the most expensive one sold for $2.85 million worth of ETH.
Bored Apes grant their owners access to the unique Yacht Club which offers other cool perks such as an exclusive Discord server where entrepreneurs and individuals can effortlessly engage and interact with one another.
The NFT collection has gained incredible attention across the globe. Justin Bieber, for example, has already purchased two apes, which set him back about $2 million worth of crypto.
#2 Mutant Ape Yacht Club
The brainchild of the Bored Apes, the Mutant Ape Yacht Club is an exclusive collection of about 20,000 NFT apes that were “exposed to a vial of mutant serum.”
In comparison with their predecessors, Mutant Apes are viewed as more affordable NFTs. As of writing, their market cap equals $729.72 million with a floor price of $40.58k.
Famous Mutant Apes holders include Shaquille O’Neal as well as Ethereum co-founder Taylor Gerring.
CryptoPunks have been riding high and are by rights regarded as one of the best and most outstanding NFT projects, with a total market cap of $1.88 billion at the time of writing. The collection comprises 10,000 pixel images, each with their own distinguishing set of features.
CryptoPunks have enjoyed great success. So far a large number of famous NFT enthusiasts have been eager to embrace and invest in these NFTs. Snoop Dogg, Jay-Z, and Serena Williams have their own unique Punks.
#4 Everydays: the First 5000 Days
Everydays: the First 5000 Days is an NFT collage consisting of 5000 digital images. The creation belongs to Mike Winkelmann, also known as Beeple.
Back in March, 2021 this extraordinary NFT was sold at Christie’s for a whopping $69.3 million, which still remains the second-highest price that has ever been achieved by any digital artist.
As of now, Merge created by the anonymous artist Pak is regarded as the most expensive NFT. In December 2021, it was sold for $91.8 million on Nifty Gateway.
The Merge NFT boasts a unique approach: it brings together over 28,000 collectors who purchased around 300,000 units in total that make up the entire Pak’s NFT artwork. The more parts (or mass) one buyer has obtained, the larger final mass they get.
Where can you buy NFTs? Examples of the most popular NFT marketplaces
NFT marketplaces allow NFT fans to effectively trade, sell, and buy NFTs.
At the moment, all NFT platforms can be divided into two main categories, namely streamlined and augmented.
Streamlined marketplaces like OpenSea and Rarible provide support to a wide range of NFTs and offer merchants more limited, generic services.
Augmented NFT marketplaces, on the contrary, comply with the requirements of specific, narrower niches, meaning that they zero in on offering specialized services to a particular category of digital assets.
Currently, there are several NFT platforms that focus on a certain NFT category. For example, you can trade virtual land on Decentraland and buy and sell basketball’s greatest moments on NBA TopShot.
Which questions do you need to answer before investing in NFTs?
When you have finally made up your mind to invest in a certain NFT, make sure that you are able to answer these questions:
- How prospective is your NFT: will it still have value over time or not?
- How would you estimate the previous performance of your NFT? Has its price gone up or down?
- How reliable is the NFT creator? Are the previous NFT holders satisfied with the communication and cooperation with the digital artist?
- Is the marketplace where you intend to buy your NFT secure and transparent?
- How much does the NFT marketplace charge per transaction?
How to properly invest in NFTs: the main steps and strategies
We have outlined the core aspects that you need to take into account before starting to invest in NFTs.
Now let’s summarize the key steps and strategies that you will need to follow in order to ensure the success of your NFT investment campaign.
Step one — select an NFT
First of all, you need to choose an NFT to invest in. Decide which one best coincides with your preferences and try to examine whether its value has the potential to increase over time (i.e. whether it will help you generate revenue if you decide to trade it).
Step two — review NFT marketplaces
Once you have determined your NFT category, explore the available NFT platforms and/or check out whether it can be obtained on specialized NFT marketplaces.
Step three — create a crypto wallet
To operate and trade on the marketplace, you will have to set up a crypto wallet which will be used for sending, receiving, and safely storing your NFTs.
When you have completed these steps, you are finally ready to purchase your NFT and become the lucky owner of a unique gem.
Step four — monitor changes on the NFT market
As time goes by, you might want to re-sell your digital asset at a higher price. Keep a watchful eye on the latest news and trends occurring in the NFT space and react to them accordingly. Probably, you have invested in a highly prospective NFT whose value will go up at lightning speed. In this way, you can resell it and yield substantial profits.
What does the future of NFTs look like?
To invest or not to invest in NFTs remains a frequently asked question these days.
Even though there is a lot of skepticism regarding the feasibility of NFTs, one thing is certain: NFTs are here to stay.
Essentially, if done in the right manner and with a good understanding of how they work, non-fungible tokens can offer a sea of opportunities to their holders as well as help bring revenue. What is more, we have yet to explore many more sophisticated NFT use cases and see how the technology will upend the digital space.
However, you are not advised to put big sums of money into NFTs, since they might sometimes be a risky and unpredictable investment venture. Start small, analyze your success (or mistakes), and then move forward. In this way, you will be better off both financially and mentally.
If you don’t feel comfortable to begin your NFT journey alone, we will be glad to give you a helping hand. We at PixelPlex provide NFT consulting and development services that help our clients stay ahead of the game and take their business to a whole new level.
We can walk you through NFT development intricacies, enhance your existing strategies or tailor new ones, and help you develop purpose-driven NFTs as well as build a high-performing NFT marketplace.
Share with us your ground-breaking idea and let’s start your project today!
Disclaimer: The information provided in the article is for informative purposes only. The author does not offer any investment advice or strategies and does not aim to convince you to invest in non-fungible tokens.