How to Invest in NFTs: A Beginner’s Guide

Right now, NFTs look like the new gold rush especially as excitement mounts for the metaverse and NFT’s pivotal role in it. The only problem with this gold is you don’t know how to mine it or make money from it. At this point, you’ve probably seen people make hundreds of thousands of dollars from trading NFTs and although it’s a whole new world for many, capitalizing on this NFT boom is easier than it appears. To make money in this emerging market, investors need to understand the basics of how to buy NFTs, how to invest in NFTs, where to buy NFTs, and how to sell NFTs.

Are NFTs a Good Investment?

This guide will break down everything you need to know about NFTs and how any investor can make a killing buying and selling NFTs. But first, it’s important to understand how big this market is and the benefits of getting involved now. Influencers in the tech space like Mark Cuban, Kevin O’Leary, Gary Vee are actively promoting NFTs but it’s more telling that celebrities like Logan Paul, Snoop Dog, Jay Z, and Doja Cat are also already in on it. 

Still, all of this pales in comparison to Facebook’s latest decision to rebrand themselves as Meta – a nod to the future applicability of NFT’s. It seems all major industries are moving in this direction with Nike filing for a patent on its virtual clothing and Microsoft rolling out immersive meetings with 3D avatars. Yet this is only the tip of the iceberg, and many more companies will join the movement as VR and AR technology becomes poised for incorporating NFT’s in a multitude of ways. 

Essentially, we are in the early 90s and the internet boom is about to happen at any moment. Except this time, it’s the NFT boom and a lot of people are about to become very rich from it. With this in mind, its safe to say that NFTs can be good investments. But if you’re wondering where this all could be heading, imagine the movie “Ready Player One” and you’ll get a picture of how important NFT’s will become over the next few years.

What are NFTs?

Before trading NFTs it’s useful to keep in mind that these non-fungible tokens – or units of data – are stored on the digital ledger of the ethereum blockchain. This means each NFT is inherently owned by only one individual and no one else can buy or sell it. The uniqueness of each digital asset is certified by the blockchain – letting anyone make representations of  photos, videos, audio, or any other type of digital files.

Although it’s a relatively new phenomenon, hackers have already begun stealing NFTs from different platforms like the “exclusive digital art platform” – Nifty Gateway. On the other side of the equation, artists around the world have reported that NFT’s of their work have been stolen and sold on NFT sites. This is usually done through automated accounts which sift through social media to find art to make unauthorized NFTs from. 

While these are things all NFT traders should be aware of, it is not a concern as long as you take the appropriate precautions to protect your account and only make NFT’s with the artist’s permission. 

Why NFTs are a Good Investment

To illustrate the potential of trading NFTs, a quick look at two of the biggest names in the NFT world is enough to show how lucrative this can be. For example, Bored Ape Yacht Club and CryptoPunks have quickly become two of the most popular NFT collections.

When BAYC NFT’s were first minted  – or IPO’ed – they went for around 0.10 ETH which was about $300 at Ethereum’s value in April of 2021. But now BAYC NFT’s are some of the most successful projects available.

So far this has been the most expensive BAYC NFT yet, selling for 769 ETH or roughly $3,537,400. But do all NFT projects sell for millions of dollars with enough time? Definitely not. But if you follow these steps, pretty much anyone can make money from NFT’s by getting into the right projects and flipping them for a premium.

Where to Buy NFTs?

The first step is discovering where to buy NFTs as this will also show you which projects have been the most successful. Opensea.io is the best place to start since you can sort projects by the highest last sale. But where to buy NFTs largely depends on the project itself, because almost all projects are available on OpenSea this is usually the best place to purchase them.

Finding NFT projects with a lot of potential is the crucial first step. It’s important to join them early by signing up for their email alerts in order to get on the project’s “Whitelist”. This is when a select few have the opportunity to buy at pre-sale. If the collection is in demand, then getting on the list early will ensure you get the best price before its public sale.  

This is because the price is always the highest between the pre and public sale. Like with any new product, the real price is revealed in the public sale which is why whitelist members get the advantage of minting more than one NFT and buying them before they are released into the secondary market. 

Buying 2-3 NFTs at the cheapest price possible and selling two in the secondary market is a quick way to make easy money. But saving the third in case the project gains popularity like Crypto Punks or BAYC is not a bad idea either. If one NFT collection does catch on, then your foresight will be rewarded with a long term profit in addition to the quick flip. Now the question is, how to find the most profitable projects before they take off.

How to Invest in NFTs

Before looking for projects, you will need to set yourself up with the tools for purchasing NFTs.  

1. A Discord account is essential because you will need it to join any NFT project. This is also where everything about the project and its whitelist criteria is listed.  

2. In order to process the payment on OpenSea you will need a MetaMask and Phantom wallets.

3. Then create accounts on both OpenSea and Solanart to connect to your MetaMask and Phantom wallets. 

4. Put ETH or SOL in the MetaMask wallet. At the moment, these are the only cryptos with blockchains that support NFTs, but whether the final payment needs to be in SOL or ETH depends on the project.  

How to Buy NFTs: Minting

As with any investment, it’s essential to first evaluate the market for an NFT project before buying. Timing and research are the most important aspects to making money and it’s no different when trading NFTs. 

All NFT projects either have art or utility which gives them value, but the best projects to invest in have both. Of course, there are other criteria to consider which means evaluating projects with some flexibility.

To begin exploring the NFT market use rarity and nftcalendar to track upcoming projects. Sites like Instagram, Reddit, and TikTok, also feature NFT projects, but the goal of this research is to discover promising projects using the following criteria as a guideline.


Criteria

1. Art: as with any piece of art, NFT’s should have some form of intrinsic artistic value.

2. Utility: owning the NFT should provide a certain service or membership to the owner. For example, NFTs in the popular Axie Infinity metaverse game give the user access to the game’s world and quests. In the case of BYAC it is the passport to a virtual social club. 

3. Popularity: seeing a thriving community behind a project indicates demand and value which is why most successful projects have 2 to 5 thousand discord users. On the other hand, if there are more users than that it can be a sign that the project’s whitelist may fill up too quickly. Recent comments and engagement on the project’s account is also helpful for gauging whether the project is developing an active following.

4. Supply: the total number of NFTs available should be less than 10 thousand because a lower supply will keep demand high.

5. Mint Price: confirm that the mint price will be equal to its initial public sale price because if the mint price is below it then many people will try to flip the NFTs by undercutting the market. 

6. News: watch for PR events that might lead to a major markup in the NFT’s value if it catches on. 

7. Patterns: projects similar to those that became popular after minting often do well and identifying a pattern or similar theme between projects will make your calls more successful. After becoming involved in a few projects, try to find a particular style that is routinely popular. Test the theory by seeing if the secondary market price for projects with this theme have higher prices than the mint. An of a popular theme are the many ape NFT projects which are modeled after BAYC.

Finding projects that fit these parameters will ensure you have a fair shot at getting on the whitelists for high-potential projects. To show it in action we’ve applied this criteria to two available projects – Knights of Chain and Catch King.


Knights of Chain

Knights of Chain is a project built on the Ethereum blockchain that hits the sweet spot for this criteria

  1. Art: high quality designs that appeal to a wide audience 
  2. Utility: active community launchpad
  3. Popularity: in under a week, it reached 3 thousand members on Discord – a sign that this project is growing in popularity but low enough that there was still an opportunity to make the whitelist. Unlike other Discords which have 10 thousand members or more but lack activity, this project shows a thriving community. 
  4. Supply: total supply is 9,999 which is typical of most popular projects. 
  5. Mint price: same as the public sale price. 
  6. News: the project announced that is getting a billboard advertisement in Times Square which might bring a lot of demand for the NFTs
  7. Pattern: Similar style to ON1 Force which has been flipped from a mint price of around $500 and sold for almost $20 thousand between pre-sale and public sale.

Catch King

The Catch King project on the Solana blockchain is an example of when flexibility can be important to catching an upcoming NFT project. 

  1. Art: pixelated 
  2. Utility: an active nostalgia style game
  3. Popularity: After only a few weeks, the project has around 400 members – giving a a guaranteed shot at the project’s whitelist.
  4. Supply: 5,555 which is well under the recommended 10 thousand cap 
  5. Mint price: same as the public sale price. 
  6. News: none at the time
  7. Pattern: similar projects on the Solana blockchain with functioning games and NFT playable characters have done very well
where to buy nfts
Ninja Protocol

In this case, investing in The Catch King project is likely a good call because of similar NFT projects’ pattern of success. If a collection matches a specific pattern you’ve noticed before, but fails in other criteria, then making an exception could be worthwhile.

Mekaverse

Another example is the MekaVerse project which at the time of its launch had no utility but the art alone made the project very successful. Now the project is outlining plans to establish 3D counterparts and a Meka Multiverse – illustrating that the key to a successful NFT investment is often understanding the patterns in order to know when a project could be worth the risk. 


How to Buy NFTs: Secondary Market

Watching for opportunities for quick flips on the secondary market can be as worthwhile as finding projects pre-mint. But the first step to spotting a flipping opportunity is searching for a pattern of multiple NFTs from one particular project being sold multiple times in a matter of minutes. Usually this is caused by external factors like PR or a shoutout from an influencer, but the best way to know what’s causing the sudden spike in activity is by checking the project’s Discord. As long as the project is selling for higher than its floor price, it could signal a good buying opportunity. 

how to buy nfts
Cosmic Ducks

Check the floor price by clicking on the project’s collection. The price listed at the top is the lowest the NFT is listed for, but to see every NFT listed for sale, sort them from “Low to High” and select “Buy Now” on the left. Look for the difference between the lowest price and the next few prices. 

How to Sell NFTs

How to sell NFTs for a profit can be very simple. For example, if you see an NFT with its lowest listed price at .50 ETH and then two more around .55 before a higher listing at .80, then this could be an easy flip. Because there are only two listings in between .50 and .80, if you purchase the cheapest one and then relist it for .79 ETH there are only two sales needed before your NFT sells.

How to Invest in NFTs: Scaling Up

After understanding the basics of how to buy NFTs, how to invest in NFTs, where to buy NFTs, and how to sell NFTs, its possible to begin scaling. Starting out, aim for 5-10 quick flips a day but projects that show high potential at mint will still be the most lucrative. Profits from these investments can then be funneled into secondary markets like OpenSea and Solanart – providing the capital to flip NFTs every day. However, keeping one NFT as a tail from a few of the projects which were successful at mint could pay off if the project suddenly takes off.

In short, this is definitely one of the most unique money-making opportunities, but as long as the Metaverse continues to be built around us – NFTs potential is endless – creating a once and a lifetime opportunity for many investors.

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