NFTs are a byproduct of the blockchain technology: their authenticity and ownership data are stored on this chain. As known, NFTs have become quite popular in recent years, and more and more creators (and collectors) started to take advantage of this technology.
NFT is short for “non-fungible token”, and it is a digital asset that represents a unique item. This can be any item that can be digitalized: art, music, photos, and even virtual items in games, such as https://7slots.casino/tr/games/demo/gatesofolympus.
But how can you invest if your goal is to make a profit instead of collecting? What kind of risks and opportunities should you expect? And what are the best strategies to follow? Below, we will talk about the art of investing in NFTs and share some tips to help you in this new and dynamic market.
What Are the Benefits of Investing in NFTs?
Multiple advantages come with NFT investments, especially if we compare them to traditional investing forms such as stocks or bonds. These benefits include:
- Access to a global and diverse market. NFTs are digital assets that are stored in an online database, so anyone with an internet connection (and a digital wallet) can access them. This means you can buy and sell them from anywhere in the world, with no restrictions. NFT markets are open 24/7 and it is possible to find them on different platforms and marketplaces. This also means that the NFT market is quite diverse: you can reach the creations of artists and creators from different regions and cultures. From the United States, for example, you can buy NFTs from an artist in Africa. In fact, you can purchase them from well-known artists like Banksy or Steve Aoki.
- Potential for high returns. The value of NFTs can change significantly over time, depending on the demand and supply. Some are worth millions of dollars. For example, for the “Every Days: The First 5000 Days” NFT, a buyer paid $69 million in March 2021. This price made it the third most expensive artwork ever sold. Crypto Punks is another example: this is the name of a collection of 10,000 pixelated characters. They were originally given away for free in 2017, but now they are worth nearly $3 billion.
- Ownership and control. The prime advantage of an NFT is the full ownership and control it provides. You are the sole owner of that digital asset, and you can prove your ownership with a unique digital signature, which is stored on the blockchain. This means it cannot be changed: just like money transactions, NFT data is secured and encrypted. Nobody can tell you what to do with them: since the blockchain is not controlled by a central authority, you can freely use, display, or transfer your NFTs without asking for “permission”. It is also possible to earn royalties from them: every time your NFT is resold, you can get a royalty payment. For example, if you own an NFT of a song, you can sell it to someone, and if that someone sells it too, you get a percentage of the sale price. This will keep happening every time that song is sold.
- Creativity and innovation. NFTs offer new ways to express creativity and innovation. Each one represents a different style and vision. As for new ways, they can be used to represent new forms of art and media, such as interactive and animated images. This is not only important for art lovers and collectors. New types of art may gain value beyond predictions in the future. Perhaps an NFT owner holds a piece of art that will be considered valuable as the Mona Lisa in 50 years. Of course, not every new art form will be valuable, but some can make millions for those who keep them.
But such an investment of course comes with some risks, and if you’re not prepared to take them on, they can be quite devastating.
What Are the Risks of Investing in NFTs?
Investing in NFTs comes with several risks, which can be said for any form of investment. However, you should learn more about them beforehand. These risks include:
- Volatility and uncertainty. NFTs can be as volatile as cryptocurrencies. This market is still young and keeps evolving – it may not become stable for years to come. NFT prices can drop or rise in an instant. There is no guarantee that your NFT will become more valuable in the future. In fact, you cannot even expect to retain its value. Yes, some NFTs were sold for millions, but some became Unfortunately, there is no specific strategy to use here: this is a new way of investing. and traditional tools are inadequate to analyze the market correctly. The best thing you can do is keep your investment low (an amount you can afford to lose).
- Scams and frauds. NFTs are secure digital assets but are still vulnerable to scams and frauds. Someone can fake an NFT on a blockchain used for testing purposes only. There are phishing attacks that target your credentials. Your digital wallet can be hacked. In other words, there are lots of cyber security risks involved. Since there is no regulation or authority, you are on your own when it comes to protecting yourself. Always use reputable platforms and services to purchase an NFT. Verify the authenticity of the NFT and use a secure wallet with two-factor authentication.
- Technical issues and glitches. NFTs are built with complex technology, and technical issues and/or glitches can happen. These problems can also affect the functionality or appearance of your NFTs. Make sure to back up your wallet keys and NFT data because you are on your own on this matter too.
NFT investments can be a suitable option for investors who are not afraid to take risks and know how much of their capital they need to risk. However, if you do not have enough experience, know that this market is very volatile, and at least for now, more stable options may be a more suitable choice for you.