Non-fungible tokens (NFTs) have been garnering a lot of attention and investor interest recently, but if you’re like most people, you are wondering how to invest in NFT and if it is even worth your while. NFTs are currently generating a lot of buzz. Still, no one knows for sure if these digital assets represent a long-term, sustainable future of blockchain development or just a passing fad.
One thing is for certain, NFTs have proven to be very lucrative right now. For example, NFTs created by the artist Beeple, former Twitter CEO Jack Dorsey, indie pop artist Grimes, and others have sold for millions of dollars. So naturally, this type of money is bound to garner a ton of interest from investors.
However, it should be noted that we are not financial advisors. Investing in anything, especially NFTs, is highly speculative. Nothing that you read here should be construed as investment advice. We will explain how you can buy and sell NFTs and consider the pros and cons of adding NFTs to your investment portfolio. However, speak with a financial advisor for investing advice and guidance.
This post will not spend a lot of time covering the basics of NFTs. However, if you are unfamiliar with what NFTs are, check out our resource on NFT development.
Investing in NFTs: How to Buy and Sell
Before you can invest in NFTs, you need to know how to buy and sell them. NFTs are built and managed on blockchain technology, much like cryptocurrency. To buy NFTs, you need to have a digital wallet funded with cryptocurrency. You buy NFTs in NFT marketplaces online, and these marketplaces will either require you to create a digital wallet with them or link your existing digital wallet to your account.
There are several popular NFT marketplaces such as OpenSea, Foundation, and SuperRare. There are even niche NFT marketplaces like NBA Top Shot which is owned and operated by the NBA and only sells highlights of players. NFT marketplaces will either list the price of a particular NFT, or it will be up for auction. NFTs that are auctioned off are more volatile in terms of value. Therefore, their price will rise and fall with demand.
When you find a digital asset that you like, you will have to bid on it or buy it outright. Typically, there will be a particular type of cryptocurrency required for purchase. For example, you might have to make bids or purchases in Ethereum, Bitcoin, or whichever crypto the buyer prefers or the online marketplace dictates.
Now that you know how to buy NFTs, you likely wonder how to sell NFTs. Typically people who purchase NFTs will display them in some fashion, keep them in a private collection, or use them in a larger project. However, if you want to realize profits from your NFT purchase, you will have to sell it. This is because NFTs are “static” assets. They don’t generate interest, pay dividends, and their value is entirely subjective.
When you decide it is time to sell your NFT, you will have to list it on an NFT marketplace. You won’t be able to list your NFT on marketplaces that don’t support the blockchain network your NFT was built on. Additionally, you should know that all NFT marketplaces charge a listing or sale fee, much like other online marketplaces like Amazon or Etsy. These fees will vary based on the marketplace’s blockchain network for transactions.
Once your NFT is uploaded to a marketplace and verified, you will have to choose whether to list your digital asset for a set price or put it up for auction. An auction presents a higher risk but also a potentially higher reward since demand can drive the cost of your NFT up. Your NFT will either sell via auction or a set price, and the NFT marketplace will handle the asset transfer to the buyer and cryptocurrency minus the transaction fees to your digital wallet.
All in all, buying and selling NFTs is very easy once your account and digital wallet are set up on an NFT marketplace. Remember, these HiTech assets are like paintings or baseball cards. Their value is entirely subjective and can vary wildly depending on demand and collector interest.
The Pros and Cons of Investing in NFTs
NFTs are not like other FinTech assets like cryptocurrencies that can purchase products and services. NFTs are collectibles, but they have demonstrated that their sale can generate significant revenue, which always interests investors. Before adding NFTs to your investment portfolio, you might want to consider the pros and cons.
The pros of NFTs include:
- Smart contracts (coded commands) in the blockchain can help artists get fair compensation for the ongoing use and resale of their work, which is not possible with physical works of art like paintings.
- The course of human history has shown that collectibles and works of art can appreciate over time. For example, baseball cards, renaissance paintings, GI Joe action figures, and many other types of collectibles have greatly appreciated. NFTs have the potential to appreciate similarly.
- Since NFTs are digital, there is a large market of potential buyers. This creates more opportunities for sellers to see profits from their NFT purchases should they choose to sell them.
Conversely, there are also cons associated with NFTs, including:
- The value of NFTs is completely subjective. While demand is high right now, this demand may wane. Additionally, just because certain NFTs, like Jack Dorsey’s first tweet, generated millions of dollars, doesn’t mean that all NFTs will fetch prices this high.
- There are costs associated with creating and selling an NFT. If buyer demand is not there, these associated fees may be greater than the market value of the NFT being sold.
If you are interested in learning more about NFTs or creating them, reach out to an app development partner. A qualified development partner can help you create NFTs and tell you more about the process of selling them.
Investing in NFTs is not for everyone. If you seek to save for your retirement or earn passive income, NFT investment doesn’t offer dividends or interest payments. Additionally, NFTs are highly volatile, and their value can fluctuate wildly. We are not financial advisors, but we can tell you that NFTs are a high-risk investment option. Successful investing strategies balance risk and reward. Now that you know how to invest in NFT, you can fully explore your options and determine if this is the right investment choice for you.