Are you interested in diversifying your investment portfolio? Do you want to earn higher returns? If yes, you might have thought about high-risk investments, which offer relatively large returns in exchange for a willingness to bear the associated level of risk. One such investment opportunity with a good scope of market growth is NFT. Thus, you might wonder how to invest in NFTs.
In 2014, digital artist Kevin McCoy introduced the first NFT named “Quantum” on a blockchain. Blockchain is a digital ledger shared across the entire network. It facilitates recording cryptographic transactions and tracking tangible or intangible assets.
Blockchain is the technology responsible for creating new investments such as cryptocurrency and NFTs. NFTs have been popular since 2021. Some people think of them as a bubble that might pop at any time. So, it is yet to determine whether these are reliable long-term investment options. However, if you want to enhance your returns, then NFTs can be very profitable.
What you need to do is handle them wisely. This article will help to withdraw your confusion regarding how to invest in NFTs crypto. And how to invest in NFTs for beginners, along with their advantages and disadvantages.
What are NFTs?
NFTs stand for non-fungible tokens. As evident from the name, these are unique digital identifiers representing the ownership of specific digital assets and their related rights. These real-world assets include music, videos, memes, online network, in-game items, tweets, GIFs, or virtual collectibles. Each NFT token is distinctive, meaning it cannot be substituted, copied, or subdivided.
Example:
You can consider a plot of land as a non-fungible asset. As the plot is not reproducible, it cannot have a widely accepted market price and therefore is not exchangeable for equal value.
Similarly, assets such as diamonds or baseball cards are non-fungible due to their unique qualities that add or deduct value. Hence, they are not interchangeable.
When you buy an NFT of an asset, it means the original asset belongs to you. It certifies authenticity and ownership. NFTs have different identification quotes, which sets them apart from one another. Their unique codes make them valuable, which helps the investors achieve higher investment returns.
How do NFTs work?
Before getting into the minutiae of how to invest in NFTs crypto, I suggest you familiarize yourself with how NFTs work and gain value. This way, you can better make them work in your favor.
Like cryptocurrency, NFTs also exist on a blockchain. When Someone creates an NFT, it goes public on a blockchain where people can view it for sale or purchase. Blockchain ensures the confidentiality and safety of a transaction when an NFT is acquired. However, the owner can access it with a given code. Ethereum is the most popular blockchain to trade NFTs.
People buy NFTs because they believe they will hold future value. It is a speculative market where the transparency showing the NFT’s rising value creates the excitement and motivation to invest. Some people may also create or buy NFTs to boast about something by becoming their official owner and enjoying perks exclusively since they are hard to steal.
The value of NFTs will appreciate until people are ready to pay for them. As soon as its value increases, people sell them for higher prices. In 2021, the NFT market reached a $40 billion valuation, still going strong in 2022. Hence, you should analyze the market and only invest if you see possible growth in its value. After all, NFTs have excellent profit potential.
5 basic steps on how to invest in NFTs crypto
The following steps will enlighten on how to invest in NFTs for beginners:
Step 1: Research and find the available NFTs
Thorough research on the potential NFT is of great significance. Some non-fungible token projects sell without the underlying digital asset’s ownership or creative rights. So, you have to be cautious when buying an NFT. You can use Google or Twitter to search for the NFTs. Moreover, the following websites help get the upcoming list of NFT projects:
1. Rarity. tools
This website ranks generative art and other collectibles through rarity.
2. NFTcatcher.io:
It provides the most comprehensive list of NFT drops.
While arbitrating a decent NFT project, you should consider tracking their history, researching their team, the setup, social number, engagement, on-chain or off-chain, execution, originality, artwork, and rarities.
You will need a reputable team that can drive up the value of NFT. Also, avoid investing if they use centralized servers, as they can lose images when the server goes down.
You can join NFT Discord, a community of Crypto and NFT enthusiasts, investors, collectors, and creators. NFT Telegrams groups are also helpful in understanding what others believe about the particular line of NFTs.
Step 2: Select a suitable source to buy crypto
So the first step involved in how to start investing in NFTs is buying cryptocurrency. You are required to have crypto to get the NFTs. You can have two options to buy cryptocurrencies such as Ethereum, Litecoin, Cardano, and others through:
Cryptocurrency Brokerage: any individual or a firm that acts as a middle party to facilitate the sale and purchase of cryptocurrencies.
Cryptocurrency exchange: these are online platforms where cryptocurrency trading occurs following the prevailing market conditions. Examples may include, Binance, Huobi Global, Coinbase, or Kraken.
You must consider the fees for trading transactions on different exchanges. Like, Cionbase charges a 0.5% trade fee with a flat rate of up to $2.99 on every trade. It depends on the amount involved.
You may be required to pay a flat fee or a certain percentage of the trading volume for 30 days on your account. So, reviewing fees based on the sizes of transactions you plan to conduct would let you take up a feasible option.
Step 3: Select an NFT Marketplace and get registered
An NFT marketplace is where NFTs list for sale. Different NFT platforms will offer somewhat different fee structures and feature sets. Therefore, decide which is apt for you and get yourself registered. The popular NFT marketplaces include:
- OpenSea
- Axie Marketplace
- Larva labs
- NBA Top Shot Marketplace
- Rarible
NFT marketplaces have specific terms and conditions, such as a license agreement that governs the owner’s right to the asset. They aim to protect the intellectual property rights and monetary benefits of the original NFT creators, even after other people buy them. These terms may vary from one marketplace or asset to another. But it is essential to read this licensing draft carefully when purchasing.
Be aware and screen the person you are buying from, as you may also find imitators selling fraudulent NFTs.
Step 4: Create a crypto wallet
Once you get registered, you need to connect to the digital wallet. When you purchase crypto from an exchange, it is automatically held in a wallet. You can leave it like that or create two types of wallets for keeping your crypto and NFTs secured. These are:
Software wallets
These are also called hot wallets. You can access these wallets through the cryptocurrency exchange you use to buy coins, use a smartphone application or download a software program to your personal computer. Most people prefer using software wallets as they are simple and inexpensive.
Hardware wallets
These wallets are also called cold storage or cold wallets. They store your keys offline. They look similar to a USB drive. They are safer to keep digital assets as they are the toughest to hack. They are costly and can take more than $100 to buy.
Read my Articles on Crypto and NFTs
Step 5: Fund your account with crypto
While buying an NFT, you must ensure that you have enough crypto to conduct the transaction. Whether you use a crypto exchange wallet or some other external wallet, you will need to back it with your credit card or bank account. It facilitates you in making crypto to fulfill your transactions. It will involve an identity verification process run by the exchange platform or software.
The transaction/total purchase price of NFT includes:
- Cost of buying and transferring crypto
- Crypto conversion fee
- Gas fee
Gas fees compensate the miners for the computing power and resources they spent validating transactions and including them in the blockchain. This fee is usually high, especially when there is a more complex transaction and traffic on the network. Like during the sale of Bored Ape NFTs, the Ethereum gas fee unrealistically increased to $ 3300. It made a lot of NFT enthusiasts miss out on the sale.
Watch this video, How To Start NFT PROJECT | CREATE NFT & Sell Fast Collection
Buy NFT
Now that you have met the requirements concerning how to invest in NFT’s crypto, you can finally buy the chosen NFT. You must follow a particular procedure that the NFT marketplace will lead you afterward. It is somewhat similar to purchasing something from an e-commerce platform like Amazon.
The popular and reliable NFT marketplaces that I suggested earlier are a great option, to begin with. There you can find NFts ranging from zero to those worth millions of dollars simply by browsing through the lists of thousands of NFTs. They may sell the assets by holding an auction or flat rate through a “buy now” option.
Remember, when you own NFT, it does not necessarily include the ownership of the copyright on the underlying asset. The right is reserved with the NFT creator. Therefore, you are neither allowed to reproduce it nor can you sue any person for copyright infringement.
How to invest in NFTs without buying NFTs?
They say, where there is a will, there is a way. If you have no money and wonder how to invest in NFTs without buying NFTs? You can earn free NFTs through the following ways:
Play-To-Earn Games
These games stimulate the trading of NFTs and support the mainstream adoption of tokens. Some games may charge you an initial payment before you can play and earn NFTs. However, there are some free NFT games too, such as Gods Unchained, Splinterlands, Chainmonsters, etc.
Giveaways
It is a promotion tactic. When NFT projects offer new collections, they run a campaign in which they announce to give free NFTs through Reddit, Twitter, and Discord Servers. It helps them rapidly gain a following of interested NFT collectors, though some may earn a free NFT that may be valuable in the future.
However, you must be extra careful while making any NFT proceedings online, as scammers may be involved. There is a chance that you will find this free NFT non-existent in the future and merely a strategy for gaining new followers.
Watch this video:
Pros
- NFT tokens are accessible to everyone. When converted into an NFT, the assets’ ownership is more easily and efficiently transferrable among people worldwide.
- The blockchain technology used to record NFT makes an asset’s ownership more secure and transparent.
- Due to their historical reliability, there is a potential for a similar appreciation and valuation of digital art as the artists get for their physical collectibles.
- Smart contract technology has automated the transaction’s execution, control, and legal documentation without any intermediary, saving time and resources.
- It gives you the advantage of having a diversified portfolio by investing in different NFTs offering distinctive benefits and qualities.
Cons
- NFTs are not like stocks. They are static assets and will only generate income subject to an increase in value, escalating with the buyer’s demand.
- The way NFTs are produced is highly energy-intensive. The proof-of-work method operates the minting of most NFTs, which uses electricity in large amounts. Hence, it negatively impacts the climate through carbon dioxide emissions.
- Although the reliability of a blockchain is incontestable, the non-fungible tokens may link to duplicitous reproduction. Hence, some people use them to perpetrate fraud.
Conclusion
I believe this detailed overview must have helped you to clarify how to start investing in NFTs. So, if you are in the market for an easy investment or want to attain a unique digital artwork or collectible, make your move and start investing. An early investment may generate your desirable profits rather than coming late into the league. You may start with a small amount of money and reinvest it to buy further NFTs.