Investing in Non Fungible Tokens (NFT)

The next generation of apps are integrating blockchain technology and technological advances with the virtual reality space. The reasons are simple: digital scarcity, immutability, trustless verifiability. Each of these is relevant to the digital collectibles space and NFTs in particular.

Investing in the future of crypto is one of the few ways you can make sure you get rich in a way that makes sense. If you’re reading this, you already understand that the metaverse is the foundation for a decentralized internet where digital assets such as cryptocurrencies can be exchanged for goods and services.

NFT is growing with each day. Recently we heard of VISA paying $150,000 for a cryptopunk, Jay-Z auctioning his 25th Anniversary album as an NFT at Sotheby’s, and NBA superstar Stephen Curry buying “a bored ape NFT” for $180,000.

Source: https://www.texasmonthly.com/arts-entertainment/art-blocks-generative-artists/

With the increase of NFTs, the number of investment opportunities in this category increase too. That’s why it’s difficult to choose which NFT are trustworthy and which are only creating hype. Here are 5 tips that investors should fully understand when considering NFT investments:

1. Look for patterns of wash trading. Wash trading is a means to pump the price and create FOMO. Say Bob buys a painting for $10,000 and sells it to John for $50,000 and subsequently John sells the same painting to Sarah for $600,000. Not a bad outcome for everyone. But what if Bob, John and Sarah were the same person? This is quite easy to do in the crypto space since the wallet addresses are all anonymous. Because NFT transactions are openly recorded on the blockchain, a genuine buyer will see these hyped up transactions and possibly “ape in” for $1,000,000. This is a classic mistake to avoid.
2. It’s all about liquidity. Say you bought a random NFT that is a painting of a tree. Let’s even assume the creativity is mind-blowing and you were so thrilled to buy it at a reasonable price of 0.5ETH. But without any liquidity, you will likely have to own it, forever… So make sure you understand the fine lines between investment and personal collection when looking for that first NFT purchase. It’s like buying a watch — do you buy to sell it later or buy to wear it?
3. Get in early and look for new interesting releases. In blockchain, it’s called the genesis block. Similarly for NFT, if you know the release date and can get in the queue for the first limited mints, you are already miles ahead of everyone. Did you know that 10,000 cryptopunks were originally released for free and could be claimed by anyone with an Ethereum wallet? Well, you heard it. Don’t miss it again. Some cool new projects can be found at https://www.artblocks.io/.
4. Don’t fall for the foolish creativity. If you were laughing at EtherRock then you will be amused by “invisible” or “emptiness” NFTs. These are NFTs of a white space… There is no limitation in creativity and it’s up to anyone to pay for the perceived value, but don’t fall for just random ideas. Cryptopunk may look overly simple or plainly stupid but it represents a new artistic era, maybe even equivalent in significance to the Impressionism. Crytopunk is symbolic in nature because it’s one of the first NFTs on the Ethereum blockchain and each one was algorithmically generated through computer code and thus no two characters are exactly alike. So please don’t fall for any random creativity.
5. Make your NFT work. So you purchased your first NFT. Congratulations. Are you going to just sit on it? If you are convicted about the investment and future appreciation, why not stake it and take out a loan? Or perhaps stake it to earn interest? The cash flow opportunities are limitless on Decentralized Finance and we are just seeing a glimpse of these possibilities on platforms such as NFTX.

Blockchain technology has opened up a new market called NFTs. These unique digital assets can represent any asset that you can think of, such as art, collectibles or real estate. There will never be more than one of each of these assets on the blockchain. Think about this for a bit… and don’t miss this generational investment opportunity.

Written by Philip Hur

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