Although the first NFT projects were created back in 2014, this market is still barely known. The first NFT appeared on May 3, 2014, when a digital artist Kevin McCoy minted Quantum, a pixelated octagon filled with different shapes that pulsate in a hypnotic way. Could you imagine that this non-fungible art piece was sold for more than $1.4 million seven years later?
Please remember that the success of some projects doesn’t guarantee you will earn a fortune. However, you can try to increase your chances of successful investments by learning NFT trading strategies.
Before you learn some strategies, you may want to sum up basic knowledge you have already had — or learn something new about non-fungible tokens.
A non-fungible token is an asset stored on the blockchain and represented by pictures, cards, videos, audio, you name it. The asset has a unique identification code and metadata. Therefore, it’s called non-fungible, meaning it can’t be exchanged at equivalency.
1. How do NFTs appear?
To create a token, you need to select an item, decide on which blockchain you want to launch an NFT, and create a digital wallet. After, you need to decide on what marketplace you want to sell your NFT, read the rules of the platform, and upload the asset.
2. How do you trade an NFT?
The key steps are:
- Buy a cryptocurrency used on the platform. Most non-fungible tokens are ETH-based.
- Connect your wallet to an NFT platform.
- Fund your account on the platform.
- Buy an NFT. Usually, NFTs are traded in auctions. Therefore, you will need to set a bid price and wait for a seller to accept it.
3. Why are NFTs so expensive?
You may consider NFTs a scam just because their prices are enormous. Can you imagine that Pak’s NFT “The Merge” was sold for $91.8 million?
However, the reason is that every NFT asset is unique. You don’t ask why the Mona Lisa costs millions of dollars. Of course, the Mona Lisa can’t be compared to the monkeys of the Bored Ape Yacht Club collection. Still, you should understand that the world changes, and values change, too.
It’s time to move to strategies.
1# Buy at lows
If you are familiar with investing or trading, you know that the best way to make the most out of the position is to buy an asset at the lowest possible price. The idea is simple. However, NFTs can’t be analyzed the same as trading assets, including crypto and stocks.
To determine a promising NFT with the lowest price, follow these steps:
- Find an NFT project before it’s released and minted.
- Read information about the project on its official website.
- Check what other NFT enthusiasts say about this NFT. You can search for information on social networks and blogs.
- Be sure you like the NFT and believe it will skyrocket. Of course, its price won’t depend on your hopes. However, you should always like the asset you put your funds into.
Analyze the information you get and make a decision about whether the current price is adequate and whether it has a chance to surge.
2# Underpriced NFTs
It doesn’t matter what market you consider; you will always look for an underpriced asset that has a chance to surge in value later.
You need to find an NFT that is being sold cheaper than it was bought for. However, it’s vital to be sure that the low price isn’t because the NFT’s value was reviewed. You should be sure it’s a temporary fall. To confirm this point, check the news on the overall NFT market, search for the latest events related to the project, and check social networks about the NFT you want to buy. Evaluate the factors and conclude whether this NFT has a future.
Even if you are 100% sure the NFT you bought will cost millions soon, you shouldn’t invest all your funds in one asset. It’s important to diversify your portfolio. You never know how the market will behave in the future. Therefore, you should hedge the risks.
You can buy several NFTs from the same collection. Also, you can purchase NFTs from different projects, which is better for diversification. Remember that every investment should be analyzed beforehand.
4# Find NFT collectibles with few sellers
If you plan to buy an NFT and sell it later, you are recommended to consider collectibles with few sellers. Although a limited supply increases an asset’s price, this strategy is focused on the following sale of the NFT.
If you buy a collectible NFT, you should be prepared to compete with these sellers in the future. It’s easier to sell an NFT if there are not many sellers. A limited supply always positively affects an asset’s value.
When selling your NFT, you should analyze the market. There are two types of moods that sellers might be in. First, if you see that there is a gap between NFT prices, it may mean that sellers aren’t in a hurry to sell their assets. Therefore, if you offer a lower price, it’s more likely that they won’t react. However, if the prices are tight, it may be a signal that the sellers are trying to get rid of their assets. By offering a lower price, you may make them reduce their offers. As a result, you may have to lower your price even more. It will affect your potential return. That’s why it’s recommended to sell NFTs in a calm market when there is not a lot of supply.
Although the NFT market seems dangerous and unclear, you just need to spend some time reading about it and try to buy and sell some assets. As there are NFTs with a low price, you won’t risk a fortune when practicing.
Disclaimer: No strategy can guarantee a 100% correct outcome of the trade.