NFT Investment Guide: Strategies for Success in the Digital Art Market
How To Invest in NFT
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Cryptocurrencies have taken the world by storm over the past few years. The cryptocurrency tokens represent enormous investments for the future, with the industry valued at over three trillion dollars (and still growing).
The NFT craze associated with blockchain technology is immense. The concept of digital items has recently risen to become increasingly popular.
These crypto-assets are quickly finding their way into new games and apps as developers on the market look to offer unique experiences that were not possible before the rise of NFTs. Read on to learn how to invest in NFTs and the most popular ways to buy and sell NFTs.
What are NFT Tokens?
Non-fungible tokens (NFTs) are a specific class of digital assets built on top of a blockchain. For example, most cryptocurrencies, like Bitcoin and Ethereum, are fungible. Fungibility means that each unit is interchangeable with any other team.
Fiat currency is interchangeable. For example, a 30 dollar bill is identical to three 10 dollar bills of the same kind. This feature applies to cryptocurrencies; one bitcoin (for example) is interchangeable with another bitcoin today or next week, or ten years from now. To give another example, If you send someone 10 BTC from your crypto wallet or crypto exchanges, they will still have 10 BTC in their digital wallet no matter when they receive it on the same blockchain.
Non-fungible tokens differ in this aspect. For example, if you send someone an NFT digital art, they will not have your exact digital art token no matter when they receive it.
How Do NFTs Work?
The driving force behind any non-fungible art is unique and contains a digital signature. They come in different shapes and sizes, but they also have other functions. The uniqueness of each token essentially adds value to it and guarantees ownership. Anyone can create NFTs as long as you can digitize the data.
Once you purchase and store NFTs, they're yours forever. No more copies exist on the blockchain and NFT market, and you acquire the ownership rights.
NFTs can exist on two types of blockchains, namely Proof of Work (PoW) and Proof of Stake (PoS). PoW (Proof of Work) blockchains secure public ledgers and store information. However, the blockchains have certain limitations, as they require an immense amount of computational power and energy, making them expensive to operate.
PoS blockchain network secures ledgers and stores valuable information like many NFTs and other digital tokens. Still, since they don't require mining or hashing power, they don't require any electricity or computational power at all. This makes them very efficient on several levels.
How to Purchase NFTs
Buying NFTs purchases can be time-consuming and daunting if you don't know where to begin. These steps will help you buy and sell quickly and effortlessly invest in NFTs.
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Set up an Ethereum Wallet
You will need an Ethereum (ETH) digital wallet address to exchange ETH for a non-fungible token. You can set up your account on MyEtherWallet, Metamask, Parity, or any other digital wallets that you wish.
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Acquire Ether
To purchase your first non-fungible token, you must first acquire Ether. After that, you can purchase directly through an exchange or participate in a mining pool. Coinbase is one of many exchanges that offer direct purchases with bank transfers and credit cards. Once you've figured out which platform offers what pairs, deposit money into your account using your preferred funding method.
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Select The Marketplace and Connect the Wallet
You might find yourself with an ERC721 token that you'd like to exchange for an NFT and generate income. You would use a marketplace or create a custom listing for your desired transaction. These platforms serve as intermediary brokers who help facilitate a crypto exchange between two parties.
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Browse the Marketplace and Place a Bid
Each digital artwork will list the current bid price, starting bid price, initial and final supply amount, and description of what each token offers within its game. Once you have found an asset that fits your needs click Place Bid to submit your Bid.
Once you click Buy, confirm that you have sufficient funds in your account. If you do not purchase any digital tokens, the platform will cancel your purchase, and your physical assets remain unmoved.
What Determines the Price of an NFT?
The value of NFT hinges on factors such as supply and demand. The more in-demand an item, or its services or features, are, the higher its value will be. This depends on several factors, including utility, uniqueness, and application potential. However, you should also note that you can differently value different qualities within one category.
It's essential to research your investment thoroughly before buying into it. Make sure you have an idea of what kind of return you can expect in the future, and carefully watch market movements to ensure you don't buy at a peak or sell at a low. Also, be sure to consult with industry experts; they can offer valuable insight to give you an edge over other investors.
Top NFT Marketplaces
Generally, businesses that participate in blockchain technology can use several marketplaces to sell and buy non-fungible tokens. For example, individuals and companies' most common marketplaces to buy NFTs include OpenSea, Binance, and Raible.
OpenSea.io Marketplace
OpenSea is a decentralized asset trading platform and NFT marketplace. They have added NFTs to their listings, and now users can easily conduct NFT smart contracts of any digital asset for Ethereum on the blockchain.
This gives new investors an excellent opportunity to find quality tokens on a trusted, secure exchange which means more new owners of great NFTs. For investors, OpenSea provides an accessible marketplace to find digital assets that might interest you to acquire.
Binance Marketplace
Binance is one of the world's largest cryptocurrency exchanges and an open marketplace to trade any available digital asset. They feature a secure, simple-to-use interface and top-of-the-line security features, making it an easy choice for crypto enthusiasts to buy Ethereum tokens. The Binance marketplace also allows selling NFTs and trading other digital assets other than just ETH, such as their very own BNB digital tasset.
Raible Marketplace
Raible Marketplace is one of the most popular marketplaces to buy and sell (NFTs). They aim to create a platform that lets users have complete control over their digital assets. This freedom means allowing users to trade on the platform with ease.
Should I Buy NFTs?
Many artists flock to create NFTs because of their unique features that allow content creators to sell their work and guarantee ownership. NFTs can be an excellent option for creators who want to fully control their copyright and sell limited editions that you can only acquire with crypto.
Artists can take advantage of most marketplaces that accept ERC721 blockchain tokens as payment. In addition, they can make complete transactions between themselves and collectors by manually creating special ERC721 contracts.
The value of NFT is on the rise, with some of the digital artwork going for millions of dollars on the market. These factors make selling NFTs a potentially lucrative option for investors now and in the future.