NFTs are a big topic when we’re talking about the current trending means of money-making. With so many people in the industry, there’s bound to be a lot of misinformation when it comes to what to look for in NFTs.
There have been many thefts, accidents, losses, and other undesired outcomes that can be prevented if a balanced amount of accurate information can be obtained. This is why it is important for everyone that wants to get into this industry to be prepared and informed about what they are getting themselves into. Therefore, here are some things to consider if you are interested in investing in them.
If you were to ask a professional how to know if an NFT is good, they would most definitely reply with uniqueness. To determine whether an NFT is a good investment, you need to check its rarity and how much it differs in a good way from its other counterparts.
Since NFTs are grouped through collections, your job is to make sure that the one you are investing in has a low percentage of commonness. Not only does this check the legitimacy of the NFT, but it is also beneficial to have an NFT that has a unique selling point as they would stand out more and have better branding.
2. NFT Liquidity and Market Volume
In order to understand what to look for in NFTs, it is crucial to acknowledge the fact that NFTs work differently than crypto, which is why when it comes to liquidity, people may find it harder to liquidate NFTs in comparison to crypto. The best way to solve this is by fractionalizing the NFTs, which is another word for breaking them into smaller parts to make transactions easier.
Market volume is also something to be considered in this conversation. As NFTs are gaining popularity in a short amount of time, there’s no guarantee that tells us if this fame will be short-lived. If that ends up being true, users need to be quick in their decisions pertaining to their investments.
3. Investing and Researching In Potential NFTs
This has got to be the most obvious advice pertaining to the knowledge of how to know which NFT to buy. If there is something that catches your eye, it’s better to do research about that specific thing.
It is not enough to follow trends and just buy things randomly without proper insight. It is important to identify which NFT you think will be beneficial in the long run and do research about it. This means getting to know what the community thinks of it, the creators’ progress, vision, everything about their products, and the quality and identity of the product itself.
This works almost in the same way as value investing in stocks because an investor would have to make sure that everything suits their criteria. This works because value investors have put the mindset that they are buying the company, the share. This is something to consider when talking about NFT investors because not all of them have or even intend to have this mindset.
A good trick to finding which NFT is worth it is to ask for a second opinion from the community. This may contradict the “don’t trust people” narrative mentioned earlier, but community opinions may be useful if you can find a good and experienced one. Find communities with a good project manager, helpful people, and a fostering environment. If you can establish a relationship with trustworthy people, they have a higher chance of being useful to you in the long run.
4. Other Performances From The Same Seller
Like stocks, it is important for users to be mindful when it comes to investing in NFTs. Just because it’s trending doesn’t mean that it has good quality. We need to collectively check the sellers’ past performances with their other NFTs so we can determine whether the seller is consistent with their quality, value, growth and whether it is trustworthy. Besides those aspects, users can simply check the NFTs prices to determine whether the fluctuations caused are overvalued.
5. Transaction Fees
This may seem like a completely random thing to notice when it comes to the question of how to buy good NFT. However, this has nothing to do about the quality of the NFT itself but more about what to be careful of.
The transaction fees of different platforms should be considered as they would have an impact on the prices itself. Automatically, you would want to pick the platforms with a lower transaction fee so that the money earned by the users would be increased. With all of this in mind, it is important to weigh the pros and cons of different platforms so that users would be aware of what they’re getting into.
6. Investing The Right Amount Of Money
It is important to note that you should not invest more money than you can afford to lose. Since NFTs are relatively new to the market and industry, users’ must be careful in terms of putting in money because it can be just one step away from virtual gambling.
With little to no knowledge about money management, especially in NFTs, you may be putting everything you have in danger since there are not many people around that can also offer you their expertise. This would be an even bigger loss if the project was less valuable than what is estimated. This is why managing and planning finances is also a bigger weapon.
NFTs are speculative in nature; this is why users and investors should put pros and cons at the forefront and actually pay attention to the technical analysis of each NFT. There is no guarantee that the NFT you bought today will still have the same value tomorrow as it fluctuates very easily. This is why you should consider what to look for in NFTs beforehand, not directly jumping into it.