Investors will always seek opportunities to make money because where there's a will, there's a way. You may have recently noticed a lot of discussion in the news concerning cryptocurrencies like Shiba Inu or Bitcoin.
But just as you thought you might have started grasping these concepts, yet another crypto asset has joined the club. The art world has been shocked by the millions of dollars of non-fungible tokens (NFTs) that have been sold in online marketplaces.
You might want to think about investing in NFT assets because non-fungible tokens and cryptocurrencies don’t look like they’re going away any time soon. However, before you do so, here are 5 things you should consider:
Do your own research. Research is the most crucial thing investors have to do before entering the NFT market.
You must be aware that any type of investment comes with a risk of losing your money. When it comes to making better decisions in the NFT space or crypto in general, you need to understand what you’re getting yourself into.
To avoid spending money carelessly due to fear of missing out (FOMO), make sure you have a solid understanding of how NFTs work. Before making an investment, here are a few things you should ask yourself:
- What is the vendor's background and reputation?
- Have they been part of other projects? If so, how did those projects turn out?
Vendors who have little to no favorable information should be avoided.
2. Changing Trends
Over the past few years, NFTs have rapidly increased in popularity, and it can be challenging to predict whether this trend will continue.
At present, it seems that only those who have previously invested in crypto assets have shown a keen interest in NFTs. While some famous people have participated in NFT sales, the ultimate test of success will be when outsiders make an effort in joining the digital community.
For instance, we can be more certain that NFTs will last for the long haul and are more than a fad if more traditional art collectors, venture capitalists, or regular people include digital asset investments in their portfolios.
If you decide to invest heavily in NFTs and they turn out to be a fad, you could lose a lot of money.
3. Digital Art Theft
You must proceed with caution. While we don't want to deter anyone from investing, it's important to be aware that scams are frequent.
It is practically difficult to control all of the over 18,000 cryptocurrencies and innumerable NFTs. Every day, people fall prey to scammers, so you must be prepared to accept that there may be some risks when you enter the market.
While it is extremely unusual for ledgers to be altered and blockchains are nearly impossible to hack, digital art theft should not be entirely ruled out. Blockchains and ledgers are not the only things that could be broken; fake artwork is also a very real possibility.
Before investing in NFTs, it is crucial to take into account the risks associated with blockchain ledgers that may not be prominently highlighted.
4. Evaluate the community behind the NFT
One of the most crucial elements in the long-term feasibility and success of any project in the crypto ecosystem, and particularly with NFTs, is the strength of a community.
The shortage of projects compared to the typical cryptocurrency means that the small group of owners must cooperate to make sure that their project stands out and stays relevant in an industry that is becoming more competitive.
Joining NFT Discords is an excellent method to acquire in-depth knowledge without doing all the legwork, as well as to learn why other people prefer a project. Just keep in mind that in a community, quality truly matters more than quantity since loyal community members will support you no matter what.
If the Discord group isn't particularly active or is primarily discussing price floors, take it as a hint that it's time to move on to your next considered project.
5. Crypto Background
It’s not required for you to be an expert in crypto. You don’t need to be a crypto trader to invest in NFTs, but it will be a big help if you understand the basic concepts of crypto. Since NFTs are based on blockchain technology, they are based on crypto.
You don’t want to purchase an NFT one day and be surprised by the $100 gas fee that needs to be paid. You need to know the costs associated with NFTs and the class of crypto network you will use for that NFT project.
And because it’s based on crypto, you must be aware that the price of crypto is volatile. You have to take that into consideration if you want to invest safely in order to succeed in your NFT investment game.
NFTs are increasingly appearing every day since the concept of distinctive digital assets has been popularized. Nevertheless, you shouldn't just purchase an NFT because you can.
Not all investments will be worthwhile in the long run because the future of NFTs is still unclear. Between the time you buy an item and the time you wish to sell it, the cryptocurrency involved in the transaction would have also evolved.
It is not impossible for buyers to be scammed on the NFT platform. Thus, it’s important to be part of a passionate and knowledgeable community with like-minded individuals.
For all these factors, it's essential to do extra research on the NFT you intend to buy to guarantee it will be a wise investment for you.