How to Invest in NFTs: The Only Guide You Need
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Curious about how some people 10X their ROI in NFT? Are you looking to invest in NFTs but don’t have a clear vision or strategy? In this guide, you’ll discover all the techniques, tools, and strategies you need to conduct your research and make the right decisions.
By using these techniques, you’ll be able to easily filter through fake or scam NFTs, and know how to invest in NFTs successfully.
The purpose of this article is to provide you with everything you need to minimize risks and maximize your profit in investing in NFTs.
So grab a coffee or tea, and let’s talk about how to invest in NFTs.
Why Should You Invest in NFTs?
Do you know how to start investing in NFTs? Let’s discover the market.
It’s essential to know that the market is quite volatile. This means that a successful investor has a huge potential to more than 10x their ROI in a very short period of time. And, yes, it’s real!
Of course, investing has its risky and negative sides as well. We all know that there’s a possibility of losing money, so don’t invest in what you can’t afford to lose.
Investment Alternatives to Consider
Being curious and critical, you may ask yourself if there are any other investment options to consider.
There are many options, including the following:
Traditional Real Estate – Here, you need a bigger budget to invest in. To 2x or 3x your ROI, it may take 10–20 years or even more. One of the downsides of real estate investments is bureaucracy.
Index Funds – These are considered low-risk investments where you don’t invest in a single company but in a package of companies. An example of index funds is the S&P 500. It’s a package of fortune 500 USA-based companies and is the simplest and lowest-risk investment strategy that anyone can get into. It’s mostly suggested for beginner investors; however, it requires brokers, third-party companies, and bureaucracy. It’s nearly impossible to 2x or 3x your ROI, and if you do, it may take quite a long time.
Cryptocurrency – Cryptocurrencies can be used to buy and sell goods and services, but they are most commonly employed as investment vehicles. Cryptocurrency is also a crucial aspect of the operation of some decentralized financial networks, where digital tokens serve as a transactional tool.
While some cryptocurrencies, such as Bitcoin, can be purchased with US dollars, others require bitcoins or another cryptocurrency to be purchased. You’ll need a “wallet” — an application that can store your cryptocurrency — to buy cryptocurrencies. Generally, you open an account on a cryptocurrency exchange and use real money to purchase cryptocurrencies like Bitcoin or Ethereum.
Opportunities Investing in Cryptocurrency
- Cryptocurrencies are decentralized, which means they don’t require government or any third-party involvement. As a result, investors have control over their funds.
- Cryptocurrencies are widely used and recognized around the world. They are not bound by any geographical boundaries.
- Investors can trade cryptocurrencies at any time because they are available 24 hours a day, seven days a week – unlike stock markets, which have set hours.
Risks of Investing in Cryptocurrencies:
- Cryptocurrencies are not backed by any government or financial institution and are not regulated in any way. As a result, there is no authority to protect and serve the interests of investors.
- The cryptocurrency market is recognized for its tremendous volatility, making it a dangerous investment. If the price of a token suddenly declines, an investor stands to lose a lot of money. Many investors are unable to cope with the severe ups and downs.
- Cryptocurrency is new. Not everyone is computer adept or knows how the system works.
As you can see, traditional investment requires bureaucracy and your personal data, whereas NFTs and cryptocurrency are decentralized and community-based. Let’s talk about how to invest in NFTs.
Benefits of Investing in NFTs
NFTs (non-fungible tokens) are currently all the rage in the digital world. Everyone has heard of NFTs and is eager to try them out to see what all the fuss is about. This has resulted in a trade revolution in the digital community. Owning NFTs is now a highly popular practice. Not only is it popular and respected in the community, but it also provides a tremendous opportunity for people to view NFTs as investments.
Consider these benefits of investing in NFTs:
- NFTs are a new powerful tech solution that will be with us for a long time.
- The market is booming. Every day we see an increasing number of NFT investors, collectors, and new artists.
- Investors gain full ownership over the asset, verifiable via blockchain.
- NFTs are easier to trade or use differently than any other assets.
- By investing in NFTs, you support the growth of the metaverse and Web3.
- NFTs are immutable, which means metadata on the token can never be altered by anyone. Neither can it be erased, misplaced, or removed from the blockchain.
- NFTs are rare in the sense that only one of each can exist, and they’re not easy to fake.
- NFTs are secure as they are based on blockchain.
Another key reason to invest in NFTs is passion. People who buy NFTs are passionate about technology, crypto, gaming, blockchain, and the metaverse. Are you one of them?
What Are the Risks of Investing in NFTs?
When it comes to every type of investment, you need to know that there’s a risk. NFTs are an entirely new type of digital asset. The market is quite volatile, implying the probability of fluctuations in the NFT ecosystem.
Thinking about how to invest in NFTs? Consider the most common types of risks:
- The NFT market is incredibly speculative and volatile. You should not be investing any money into NFTs that you are not willing to lose.
- The market is flooded with scams and cheaters.
- As the NFT concept is new, we don’t see a developed ecosystem, tools, or software to put NFT investing at ease.
- Not all teams are experienced and ready to overcome challenges and complete the roadmap goals.
Now that you know the pros and cons, we’ve prepared this detailed guide on how to invest in NFTs. In the next section of this article, you’ll discover where to focus and how to spot high-potential NFTs to invest in.
How to Find Good NFTs With High Potential
As NFTs are new, there is much concern and uncertainty about how to start investing in NFTs. Many people struggle to find valuable and high-potential NFTs, and as a result, they lose money.
Below is a list of criteria we use at NFTDroops to assess projects and you too should pay attention to them. By checking these criteria, you’ll have a deeper understanding of NFTs and their differences.
However, no NFT collection meets all the criteria mentioned. As an investor, you want to prioritize criteria based on your beliefs and values.
It’s a mistake to buy NFTs just because other people are buying and talking about it. Never blindly believe in influencers, YouTubers, and other investors. You may even find your own strategies and criteria by researching and diving deeper. This is how to invest in NFTs.
By the way, you can use all these strategies freely if you are passionate about NFT trading.
It’s worth mentioning that we aren’t financial advisers. We share our experience and what we understand about NFTs. Always do your research!
NFT Collection vs Sole NFTs
Sole NFTs are art drawn by artists. Consider Van Gogh art, but it’s digital and exists on the blockchain. As art is subjective and relative, it’s difficult to appreciate. What’s clear is that the more famous the artist, the more expensive the art.
Collectibles are randomly generated unique avatars. We’ll talk about more on those below.
What Can Art Tell You?
The first thing to look at is the art. This is how you start investing in NFTs with deep research of collections. Take some time to look at collection items. Is the art unique? Does it have its own style? Art must contain something magnetic, attractive, and cool.
You will see many copy or fake projects on marketplaces such as Opensea. You may see tons of copies of apes, but only BAYC (Bored Ape Yacht Club) is unique and original. When looking at NFTs, try to find the original project.
Do They Bring Innovation to the Market?
Another important criterion to look at is the idea behind JPGs. Art that is cool and unique isn’t enough when it comes to NFTs. Try to find if the NFT brings innovation to the market and web3. Do they bring value and innovative ideas?
For example, we can look at CyberKongz, a randomly generated unique collection. People who purchase it receive bananas regularly (CyberKongz that generate money). This is a well-known and successful utility NFT project.
Another example is Sandbox. With 40 million downloads and over one million monthly active users, Sandbox is one of the world’s largest independent user-generated game platforms. One of the top 10 most anticipated blockchain games internationally is the impending voxel-based blockchain version of The Sandbox, which brings numerous new creative and commercial possibilities.
To learn more about the idea and value of the NFT project, visit their website and Discord server and continue your research there.
A Key Factor: The Professional Team
You may see unique NFT projects with cool art and magnificent ideas behind them. However, that doesn’t guarantee it’s a high-potential project. Good projects should have a powerful team. The team is perhaps the most important factor here. They will implement marketing, promotion, minting, and everything else related to the project. Your success depends on the team, so take the time to research members of the team.
To find the team, simply visit the NFT website and find the team section there. Many investors don’t even consider a project whose team members are anonymous. In most cases, those are scam projects.
Why would the team hide behind invented characters if the project is real?
Integrity and Transparency Leads to Success
Integrity and transparency are the keys to successful projects. That’s why when browsing good NFT projects, you’ll see linked social media accounts (Twitter, Instagram, etc.) of founders on their website. With a good team, you’ll have the opportunity to join their community, meet founders in person, and talk with them on Twitter. You’ll be a part of the NFT community.
You can go even deeper and find co-founders on LinkedIn. Our advice is to do as much research as possible, but don’t forget that overthinking will harm you in the long run.
This is how to invest in NFTs with deep research of team members.
Do They Have Any Influencers On the Team?
Going through all these criteria, you may see cool-looking and unique projects that look trustworthy. But how do you know if the team is powerful and able to overcome upcoming challenges?
If you’ve noticed a game NFT whose founders have never had a project before, they will likely not be able to succeed in this ambitious project. But what if the Call of Duty team launches a new NFT project? This is a huge team with a big success story. This means everything in NFT.
A perfect example of an authority team is Fancy Bears Metaverse. Their team includes famous influencers not only in NFT but also in crypto and NCF. One of FBM’s team members is Cryptobirb, perhaps the most famous NFT influencer on Twitter. In addition, they’ve included Floyd Mayweather in the promotion campaign.
Implementing a powerful marketing strategy, the NFT price increased three times after mint. What’s amazing is that it took only two days for this result.
Look for authoritative figures on the team. Check their profiles and see if the media has written about them. You need to be able to spot high-potential projects from scams and amateurs. This is how you invest in NFTs by minimizing risks.
Investing in NFTs means you’ll be a part of the community. Get to know the project well and dive into their community by joining their Discord Server. You may see Discord servers with 120K members, yet this doesn’t mean they have a strong community.
Check what people talk about on the Discord server. Many people buy NFTs to flip and make money from trading. Such projects don’t have big potential for a long-term perspective.
An example of a powerful community is the Bored Ape Yacht Club (BAYC). In BAYC, you may see celebrities, athletes, and singers such as Snoop Dog, Eminem, Steve Aoki, and many more. People gather around ideas and new metaverse adventures.
Many of those who can already afford an ape aren’t looking to make money.
What Does Their Social Media Look Like?
Twitter is the main social media platform where NFT creators and collectors hang out. To research NFT projects, check their Twitter profile. Don’t just pay attention to the number of followers. Try to see if there’s post-engagement from real users. Do people like and comment on posts? Who retweets their posts? Are there celebrities and authority figures related to the NFT project?
With the same logic, you can check their Instagram or other social media accounts.
How to invest in NFTs by analyzing roadmaps?
Every successful NFT project must have a clear roadmap, with detailed goals and timeframes to implement them. As a curious investor, you’ll want to check the steps in the road map and try to understand if it’s realistic to accomplish.
Usually, the scam projects set big and unrealistic goals that are impossible to implement in a short timeline. Sometimes, you will find projects that don’t have a roadmap at all.
Don’t consider projects without a clear roadmap, as it’s usually a sign of a scam or an amateur project. Avoid investing in such NFTs.
Utility: What Use Cases Are There for That NFT?
What value are they adding to the project, and what use cases are there for that NFT on top of the art?
A perfect example of a Utility NFT is VeeFriends by Gary Vaynerchuk (by the way Gary is one of the most experienced investors and by listening to him I’m sure you can learn a lot about how to invest in NFTs). VeeFriends are all about utility and access. Here, each NFT investor will have access to the different levels of activities and events based on the Smart Contract.
Based on different forecasts, 2022 will be the year of utility NFTs. Compared with collectibles, utility-based NFTs have bigger potential for the future.
Indicators of the Marketplace to Pay Attention To
There are certain indicators to consider when buying NFTs from the secondary market. You can check this data via analytics tools which we will cover soon.
The first and most important indicator in the secondary market is the Trading Volume. The bigger the volume, the better. You can find data about NFTs by searching it on secondary markets. Enter the NFT profile, and you’ll see them.
Another essential factor to pay attention to is sales frequency. High potential NFTs are always in trend. Whenever you see NFTs with high sales frequency, consider it a good sign.
Holders to Supply Ratio
Next, it’s important to pay attention to distribution. Check the number of supplies and holders. Be wary of projects with a large number of NFTs held by a few people because this means that only those few people have a significant impact on the market.
Good news! Imagine a tool that does all this time and energy-consuming NFT research for you. Sounds great, right? All you need to do is browse NFTs inside the calendar. NFTdroops is an NFT drop calendar with better UX. Here, you’ll see an already filtered list of potential NFTs before mint. Join hundreds of users who know how to invest in NFTs successfully using our calendar.
Should You Mint NFT or Buy It in the Secondary Market?
Now you have basic knowledge on how to invest in NFTs yet you may have questions and uncertainties. One of the key questions is when to buy NFTs. Should you participate in mint or purchase NFTs from the secondary market? If the project is successful, the price of NFT will increase within a short time. It may only take a few days. In this case, the one who participated in the mint gains.
At the same time, it’s risky, as no one is sure if the project will succeed or not.
This decision is up to you and your strategy. If you are careful with your actions, we’d recommend not hurrying and tracking NFT’s activity. But if you are brave and aggressive with your strategy, you are free to mint.
If you decide to mint, you should join the whitelist, where you’ll be able to mint first at a lower budget. For more information about this, check on the NFTs Discord server.
There’s no magic bullet or exact steps in investing. You need to research different strategies and cases. Don’t consider how to invest in NFTs guides where people say that everything is easy or they provide one formula that makes them a millionaire.
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Rarity Factor: Which One to Buy – Rare or Affordable?
NFTs from the same collection may look similar, but in reality, every NFT is unique and has its rarity score. The rarity score is calculated based on NFT traits. The rarer the NFT, the more expensive it is.
Let’s take a look at BAYC, for example. This is the second rarest Ape in the collection because of its traits. If you look at the data below, you’ll see only 26 mouth traits (Bored Unshaven Pizza) from 10,000 items.
To check the NFT rarity, there’s a wonderful tool called rarity.tools.
Once you set up the extension, enter Opensea and update the page. This time, when browsing NFTs inside Opensea, you’ll see the rarity score automatically. The lower the score, the rarer the NFT. Know how to invest in NFTs by accelerating your research with these tools.
Now that you’ve done your research, browsed, and finally discovered the relevant NFT, you are ready to buy one. You may be confused about what NFT to buy. Should you buy a cheaper NFT or Rare NFT?
There’s no exact answer, as it depends on your budget and goals. But if you are patient, eventually, you’ll find rare as well as affordable NFTs.
As you can see in this example, you can buy a rare Doodles NFT that ranks #4777. It’s even cheaper than one which ranked #7134.
The Best NFT tools
As this is a complete guide on how to invest in NFTs, we’ll provide you with all the relevant tools you need to automate and accelerate your work.
NFT Analytics Tools: Data in Your Hands
- Solanafloor is a Solana NFT data analysis platform with on-chain information about token distribution, price development, and NFT data.
- Dune is a free crypto and NFT analytics tool made by the community.
- NFTdroops is a calendar where you can easily browse top upcoming NFT drops.
- Nansen examines and categorizes the activity of over 100 million Ethereum wallets.
- DappRadar is your NFT portfolio tracker. Here you can also find the hottest NFT collections, marketplace rankings, and real-time sales.
- Moby will give you real-time data and visualizations that update the second it happens on the blockchain.
- With Whatsminting, get actionable insights on trending NFT projects.
- Freshdrops is a custom software tool that helps supercharge your NFT collection.
- Icy.tools is the NFT floor price tracker. The platform lets you track sales volume, history and find trending projects too.
The Best NFTs to Invest in
Bored Ape Yacht Club
Eminem, Jimmy Fallon, Stephen Curry, Snoop Dogg. What do all these famous people have in common? They’re all members of the Bored Ape Yacht Club, an elite collection of 10,000 ape avatar NFTs with various attributes and traits.
What distinguishes BAYC as “prestigious”? For the time being, the entry fee is 74 Ether.
You’ve undoubtedly seen a Bored Ape Yacht Club NFT if you spend any time online, particularly on Twitter. These serve as avatars as well as membership cards for an online social group. Owners of BAYC are either crypto-savvy enough to be early to the NFT boom or affluent enough to buy in now that the collection has garnered cultural weight.
Doodles is a collectible NFT project driven by the community. Doodle NFTs have about a hundred unique traits such as faces, hair, hats, bodies, and backdrops.
Holding a Doodle allows you to contribute to the Doodles Community Treasury’s coordination. Holders can vote for Doodle-related experiences, activations, and campaigns.
The road map for Doodles is collaborative and is decided by Doodle holders.
The project’s 20,000 avatars each have a unique combination of traits designed by Murakami. The assets purchased can be utilized in future NFT-based games, AR filters, Zoom meetings, and metaverse platforms. RTFKT also promises more Clone X wearables, in-person item drops, and members-only experiences in the future.
Nike has announced the acquisition of RTFKT, a virtual footwear creator, to launch branded NFT collectibles. The sportswear giant has stated that it does not desire to reveal the terms of the agreement.
Decentraland is a 3D virtual world platform that is open-source. Users can use the MANA cryptocurrency to purchase virtual parcels of land on the platform in the form of NFTs. It was first opened to the public in February 2020 and is managed by the Decentraland Foundation, a decentralized non-profit organization.
The NFTs were created in collaboration with Bored Ape Yacht Club, Punks Comics, and GMoney (a pseudonymous crypto enthusiast). Purchasing an NFT grants owners access to limited-edition tangible items, such as hoodies and the tracksuit worn by Adidas’ Bored Ape, as well as planned digital experiences.
People who own special Adidas Originals tokens, GMoney tokens, Bored Ape Yacht Club NFTs, Mutant Ape Yacht Club NFTs, and Pixel Vault NFTs were given early access to 20,000 of the NFTs, making an already difficult-to-get NFT available to a small group of people.
Fancy Bears Metaverse is a collection of 8888 unique bears.
Artists, athletes, influencers, celebrities, and Nobel Prize recipients can all be found here. You may attend concerts, pool parties, and play tennis with your favorite creators at the Metaclub.
The annual lottery prize fund will receive 30% of all royalties. They will give away Ferraris and a variety of other prizes, including vacations, 50 pairs of some of the rarest footwear, expensive artifacts, and cash in March 2022 (and once a year thereafter). Hundreds of thousands of dollars will be up for grabs in the prize pool.
The announcement of honorary member Floyd Mayweather was the most recent important news in the Fancy Bears metaverse.
Today we talked about how to invest in NFTs and identified tools, techniques and strategies that will accelerate your research and overall investing process. Did you get all the answers you had? Any concerns? we’d like to hear from you.
Never forget to do your own research and invest money that you are ready to lose.
* DISCLAIMER: All information is provided merely for informational purposes. NFT Droops does not provide investment advice.
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