Non-fungible tokens are a hot topic in the digital world right now. Everyone has heard of NFTs and is anxious to put them to the test to discover what the hype is all about.
As a result, the way people trade on the internet has changed. NFT ownership is currently a fashionable and well-regarded activity in the community; not only is it fashionable and well-regarded, but it also represents an ideal opportunity for individuals to invest in and consider NFTs as investments.
This blog describes the entire structure of NFT investment approaches and includes a thorough NFT investing guide.
For good reason, the market for non-fungible tokens appears to be on everyone's mind right now. NFTs come in a variety of shapes and sizes, and they offer profitable opportunities for both collectors and creators.
Some of you may be wondering how profitable NFT trading can truly be, especially since the ten-year-old gif of a pop-tart cat is still worth remembering.
A total of $70 million was spent. In the early months of 2021, it was the price paid for a piece of Beeple digital art.
You should continue reading to learn everything you need to know about NFTs, how they work, and how to get started with NFT trading.
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What to Look for Before Investing in NFTs?
The method of purchasing and selling NFTs is straightforward. To make this trade profitable, however, one must invest effort in researching new NFT developments.
By the time you notice an NFT project trending on Twitter, it may be too late to invest because prices have already soared.
Spending more time understanding about the project can increase your chances of finding an NFT project.
Let's dig deeper into the principles of the NFT project research by talking about:
1. Market Capitalization
If you're thinking about making a new NFT investment, you should look at the market capitalization. Many NFT solutions can provide you with just the appropriate facts to help you make the best decision.
The market cap is computed by multiplying the total number of holders by the average price of one NFT from that collection, according to the definition.
2. Utility of the NFT
NFTs are important because they can connect the digital and physical worlds. As a result, they can be employed as assets in games to bridge these two worlds.
At the end of the day, each digital item must be useful. It will not be in demand due to its lack of utility. A useful item, on the other hand, may become more valuable over time, based on popularity and other reasons.
3. NFT Scarcity
Although each NFT is unique, they are collected in NFT collections with varying qualities. A collection of varied goods, for example, may contain many items, but the rarer ones are more valuable.
As a result, such things are typically more expensive than other items. Rare NFTs that become popular are more likely to sell quickly and for a higher price.
As a result, many investors utilize the rarity tool to determine the rarity of a specific NFT.
4. Number of Unique Holders
The worth of NFT can also be determined by the number of unique holders and their prospective income. This metric can be used to determine the community that supports NFT projects.
The community determines whether or not to invest in a profitable NFT project. In other words, the larger the community, the greater the likelihood of word-of-mouth.
As a result, the marketing effort becomes more accessible. In summary, a strong community may become the most powerful marketing force on the planet.
5. Reputation of the team
Who is in charge of the NFT project? A good NFT trading strategy must also provide an answer to this question. It is critical to consider the previous work of the developers involved in the project.
No investor wants to invest in an NFT put up by unknown or doubtful developers. Unfortunately, many cryptocurrency projects are advertised solely to defraud investors.
In the same way, NFTs have been marketed to their investors. There may be developers out there who will try to take advantage of you. But you'll do your research and avoid falling into their trap, right?
6. Trading volume
The trade volume is the last but not least significant factor to consider while researching NFT projects.
When the trading volume for a certain NFT collection is large or increasing, it suggests that interest in it is expanding.
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How to Trade NFTs?
NFTs, like cryptocurrencies, are exchanged - purchased and sold using specialized platforms. OpenSea is the most well-known NFT marketplace. To complete a sale, it may not be necessary to transfer the object depicted by the token.
NFTs are exchanged for ownership certificates that are stored on the blockchain. The certificates must be stored in a digital wallet, which can take various forms.
Metamask, a free browser plugin, or a secure physical device, for example, might gain access to the wallet. It could also simply take the form of a printed code. Those purchasing a token on the Ethereum network must have a wallet with enough Ether to purchase an NFT.
If you have some technical knowledge, you can also make your own NFT or mint. Finally, the NFT is merely a digital contract with certain restrictions encoded, such as the number of copies available for purchase. NFT trading can be done in the following ways:
1. Trading NFTs Directly
The simplest and most obvious way to get started in NFT trading is to buy and sell NFTs. To find an NFT for sale in your location, you must use a specialized marketplace or app.
There are various online marketplaces to choose from, each with a unique specialty or set of benefits. To complete the transaction, a digital wallet is necessary, but not just any wallet.
Because not every wallet supports NFTs, you'll need to choose one that does. It must be filled with cryptocurrencies once it has been formed.
You can now use the wallet to buy any NFT with the money you have. Once the transaction has been validated, it will be permanently recorded on the blockchain, and the NFT will be credited to your account.
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2. Investing in NFT Industry
Trading NFT marketplace tokens or cryptocurrencies is the greatest solution if you don't want to get directly involved in NFT trading but yet want to participate in the field.
As a marketplace grows in size, the value of the tokens used to conduct transactions grows. For example, FLOW is one of the major markets with tokens that can be sold on cryptocurrency exchanges.
Similarly, you might trade the cryptocurrencies used for NFT trading, such as Ethereum. As ETH is utilized more frequently for both NFTs and traditional purchases, its value will rise, making resale token earnings more profitable.
Another option for purchasing and selling NFTs is through the virtual reality realm Decentraland. Decentraland's premise is akin to those of science fiction films such as Ready Player One.
There are numerous types of land parcels around the world, each of which is an NFT that you can acquire and claim as your own. You can build anything you want out of packages, from a structure to a game to an advertisement.
As the world becomes more popular and land becomes more rare or valuable, the value of these plots may increase.
Parcels can be sold or rented to other content providers in order for them to place their content in them, providing for a range of NFT trading options.
4. Creating & Selling NFTs
Finally, money can be created simply by creating an NFT that people are interested in purchasing and then selling it.
The creation of the digital item requires no special abilities; for example, if you want to create some digital art in Paint, you can do so with ease. However, converting it to an NFT is a little more difficult.
The majority of blockchains that support NFTs will include templates for use. Ethereum, for example, features the ERC-721 token, which is used to build the vast majority of NFTs.
The ERC-1155 standard is used for tokens that are semi-fungible, such as concert tickets or gaming products. EIP-2309 is a new standard that enables authors to create as many NFTs as they require in a single transaction, which is very valuable for large-scale projects.
Top 8 NFT Trading Strategies
Long have NFT traders sought to enhance earnings by investing in non-fungible assets. Although other methods can help you achieve your goal, we've chosen the five greatest NFT trading approaches to guide your investing decisions:
1. Buy the Floor
Non-fungible tokens, despite their declining popularity, are likely to survive for as long as the market allows. Keeping this in mind, you might want to consider purchasing NFTs at their current floor price.
In the NFT market, the floor price of a non-fungible token is the lowest price that can be achieved for that token within a certain category.
Although it is not advised to buy the NFT just because of its low price, you should select a project based on a category of interest to you rather than a low price.
For example, you could prefer rare NFTs to other possibilities and select the token with the lowest feasible price inside a specific category.
Buying the floor is a fantastic trading strategy because it positions you for tremendous growth if the token becomes more popular in the future.
Simply put, acquiring the floors gives you a front-row seat to the token's rise toward higher growth.
2. Search for NFT’s Google Trends
Even if you are new to NFTs, you can easily determine whether a specific market is still a hot niche by looking at the Google trend for that market.
The Google trend is used to evaluate public sentiment toward a specific topic or keyword, and searches for that keyword are scaled from 0 to 100 to define the trend.
When the rating is high, it suggests that many people are growing interested in NFT collectibles, which implies that now is a good time to buy.
When the search for NFT-related phrases is low, it shows that fewer people are interested in the market, which means you should continue with care.
3. Buy NFT Collectibles With Few Sellers
When there is a high demand for an NFT collection, it is always difficult to sell the token unless you are willing to sell your holdings at a low price to maximize your profit.
This has the potential to severely reduce your profit margin. If you're considering selling an NFT with a big number of sellers, check to see if the prices the sellers have already publicized are greater than recently completed sales.
Examine the gap between the listed sale prices to see if the sellers are eager to sell at any price.
Because the prices are so close, if you make a sale order for a less expensive asset than the sellers', they may respond quickly by lowering their price, causing the item's value to collapse even further.
4. Value Strategy
It would be beneficial if you investigated investing in NFTs, which are believed to be extremely lucrative. It is important to employ a web-based tool such as Rarity.
A tool for locating a viable NFT project. Rarity. The tool ranks different NFT projects based on their rarity in comparison to other initiatives.
Even if 10,000 CryptoPunks may be purchased for a high price, the ones displayed in the image below are the most precious since they have traits that the other punks in the collection do not.
When an NFT collectible is scarce, its value is likely to rise because the item's demand will always outweigh its supply.
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5. Buy the Ceiling
Ceiling NFTs are exceedingly rare, expensive, and viral assets. These are generally investment alternatives for traders who have a lot of money to spend on transactions.
These non-profit organizations have enormous development potential, especially when well-known persons such as celebrities or influencers become involved with them.
Ceiling NFTs present a substantial hurdle because to their expensive cost, as they are only affordable by a tiny number of people. Ceiling traders may suffer significant losses if their popularity dwindles and they are compelled to sell at bargain prices.
6. The Market for an NFT Project
This is perhaps the most important feature of NFT trades in terms of NFT investing. It is always crucial to consider whether there is a market for the NFT project in which you wish to invest.
It is a mistake to put too much faith in a small community that lacks marketing plans. It is probably safer to avoid tiny villages totally. Hundreds of fresh projects are introduced to NFT's markets on a daily basis.
Successful NFT investors, on the other hand, may sift through all of those projects and select the ones with a clear objective. Consider NFT projects that satisfy a specific need and, more importantly, have a strong community behind them.
Look for groups with a large enough membership to bring in buyers for your NFTs. In the long run, you might consider promoting the NFTs to assist improve the selling price.
Participate in community activities. By providing a hand, you can assist new potential buyers and collectors in navigating the project's stumbling blocks.
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7. Multiple Buys
It is also possible to purchase multiple NFTs from the same collection. When you select this method, you are essentially diversifying your portfolio, which is something you should do with any investment.
If you sell an item, you are still a part of the collection, thus you are still a part of it.
8. Invest in Underpriced NFTs
Every new NFT investor hopes to find a low-cost NFT on the market. Because the method does not rely on a rising market trend, it can work even when a given NFT collection has relatively little demand.
To make money with this NFT trading method, you must discover NFTs that are selling for a lower price than they were purchased for.
Other considerations should be considered in addition to market prices. It is reasonable to suppose that the NFT value has increased as the general market for a project has improved.
5 Best Tips for NFT Traders
1. Have a Motive for Each Trade
You must understand why you purchased the NFT in order to remain committed regardless of market volatility.
2. Invest What you can Afford to Lose
NFTs are exceedingly risky, with no guarantees for those who invest in them. A cryptocurrency's value can drop by more than 50% in a matter of hours owing to a variety of circumstances, including a regulatory intervention on the cryptocurrency market.
3. Trade Tokens With Good Prospects
Maintain a high degree of effort in all that you do by conducting due diligence to determine which NFT has the best potential for growth.
You can combine the tactics outlined in this article, such as using the Rarity—tool to compare rare projects with similar projects.
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4. Enter Early
Consider yourself the early bird who gets the worm by conducting research on available NFTs and purchasing the tokens.
At the same time, far too many individuals are uninformed that they exist!
5. Diversify Your Investment
Spread your money between at least two to three NFTs so that if the token dips, you are not completely stranded because your other collectibles will make up the difference.
Conclusion on the Top 8 NFT Trading Strategies
Non-fungible tokens are the apex of the digital world in terms of achievements. This platform has matured into a fantastic investment vehicle, and it is predicted to skyrocket in the near future.
The blockchain and NFT have changed the digital world into an ideal investment platform for cryptocurrency and digital experts, as well as business owners and entrepreneurs.