Buying and collecting NFTs may sound like a promising investment these days, but are all NFTs valuable? How to identify a good NFT that's worth investing in?
The growing popularity of Non-Fungible Token (NFT) is absolutely unmistakable. It's drawing the attention of thousands of creators and investors to participate in the booming phenomena in order to create unique digital goods and generate money. Over the years, NFT has brought many people from various backgrounds together, ranging from famous celebrities like Paris Hilton and Snoop Dogg to the former first lady, Melania Trump.
However, as the fastest-growing sub-sector of blockchain technology, it is not surprising that NFT also attracts hackers, scammers, and fraudulent project creators aiming to lure innocent collectors. For this reason, it can be a pretty daunting task to identify a good NFT project that could actually help you improve your investment and fulfill your goal.
After all, we must realize that NFT has several use cases and functions in the real world. So, whether you're a newbie collector, digital artist, or crypto enthusiast, you will need to be able to separate promising NFT projects from the less reliable ones. This article will shed some light on the topic and help you choose the best NFT project that suits your needs.
What Makes an NFT Valuable?
To put it shortly, NFT is a non-fungible token that is unique, non-interchangeable, and based on blockchain technology. NFTs are simply used to represent any real-world assets such as pictures, videos, and audio in a digital form.
Typically, NFTs are used as digital collectibles and ownership rights for the owner. The birth of NFTs has helped a lot of creators to sell their artworks online. Powered by blockchain technology, NFTs can be issued by practically anyone. The token is able to lower the barrier for artists to participate, hence allowing them to reach a wider audience and make bigger profits with smaller fees.
But apart from that, NFTs actually have several other use cases. For instance, users can earn NFTs by playing Play-to-Earn (P2E) games. The games also allow them to buy and exchange NFT-based items either for money or other valuable assets. This is part of the reasons why people are buying NFT these days.
Since each NFT is unique and cannot be reproduced, the token is considered a valuable asset. The rarity makes people interested in collecting NFTs at high prices, hoping that the value will get even higher with time. Therefore, if you wish to invest and make profits from NFT, you could buy a rare NFT and try to resell it for a higher price in the future.
How to Identify a Good NFT Project
Finding a good NFT does take a little more time, but if you're willing to do some extra research, your chances of finding a high-quality project will increase as well.
1. Determine Your Goal
First of all, it's important to know why you are interested in buying NFTs in the first place. Realizing your goal will help you determine the next action that you should take:
- If you want to learn, you might want to check out NFT on chains such as Polygon or Solana to save on gas.
- If you genuinely like artwork and want to support art creators from all around the world, then you can browse through the various options in the marketplaces and see which one you like.
- If you want to invest, you would want to take more time to analyze the projects because not all of them are worth investing in. Some "blue clip" projects are expensive, but even that is not a guarantee that the price will rise in the future. With that being said, investing in NFTs is extremely risky. NFT investors should definitely spend some time doing their research and only pick hot projects with good potentials.
2. Find the Right Project
There are many ways to browse through various NFT projects. Here are some of the easiest ones to follow:
- Look for trending projects. Simply head over to NFT marketplaces like OpenSea, CryptoSlam, and NonFungible, then sort the projects based on volume. This is a free and easy way to find a project. If you spend enough time there, you will be able to identify the current market trends, high sales, and recurring collections. Alternatively, you can also use paid tools such as Icy.tools, Nansen, and Moby.gg to find popular NFT projects up to the very last minute. This can make your job a lot easier and highly time-effective but requires extra costs.
- Follow NFT collectors. Top NFT collectors are usually ahead of the race and are often the first people to find new profitable projects. Some tools like Moby.gg allow you to see recent transactions from such collectors.
- Join the community discussions. The Odyssey community is a great place to learn about NFTs for free or you can join NFT communities in paid platforms like Metaverse, FWB, and CPG Club. Another option is to follow discussions on popular social media like Twitter, Discord, and Facebook. This is where people talk about projects they like, dislike, as well as the tokens they're buying, holding, and selling. Their opinions and reviews sometimes can help you gain insight on whether a project is good enough or not. However, if someone tries to send you a DM (usually on Discord) about NFT, just ignore it. This is how scammers usually hunt their targets. Make sure to always be aware and never give any confidential information to anyone you don't trust.
3. Do Your Research
Once you find a project that catches your eyes, the question is how to figure out that the project is really reliable and beneficial. This is why you need to do further research to see if the project's worth your time and has good potential in the future. The following section will explain the details of how to evaluate an NFT project and determine its quality:
This may not sound like the most crucial indicator because even a small project can have a good potential and quickly rise to the top. However, it's worth noting a project with a large community often gets higher recognition and more potential users. Bored Ape is an example of an NFT project that can reach a wider audience due to its large and active community. In order to see the community size of a project, simply visit the official social network page of an NFT and check the subscriber count.
As mentioned before, NFTs have various functions, both in the real world and virtual world. In the real world, users can actually earn profit from NFTs. Some NFTs can even be used to access special events like the Lewis Capaldi NFT Collection which may give you tickets to studio sessions, secret live shows, and other special events. Some also use NFT as collateral for loans and for staking, both of which are getting more popular these days.
Meanwhile, NFTs can also be a great addition to the gaming world. You can check out P2E games that use NFTs such as Axie Infinity and CryptoKitties. These games allow you to buy, exchange, and sell in-game items that are based on NFTs. Some games offer the loot model, which basically rewards users with random valuable items.
Level of Rarity
Rarity is the core value of an NFT and it is what makes NFT special compared to other assets. Each NFT is unique for a reason. Perhaps the token is valuable because it represents a highly expensive real-world asset, or it is created by a well-known artist.
If we refer to the law of supply and demand and the law of scarcity, then the most valuable NFTs must be rare and at the same time, in-demand. If no one's talking about it, then the value won't rise in any way. But if it's on-demand and a lot of people are trying to get their hands on it, the NFT will naturally attract more buyers and might resell at a higher price. Usually, this happens to "hard-to-get" NFTs, such as the first-of-its-kind artwork from a famous artist or a special NFT created by a celebrity.
This refers to the degree of how much the NFT could grow based on its rarity and community size. The growth of an NFT is highly correlated to the supply and demand of the market. In this case, you might want to invest in an NFT with a huge long-term community. This can ensure the stability of the token's value and its relevancy in the future.
Provenance is related to the origin of the NFT or in other words, you need to learn about the NFT's creator. In that case, do research and analyze how promising the creator can be, based on his/her origin, backstory, prominence, and many more. To get the data you need, you can just visit the creator's creative pages and community followings to evaluate their potential for personal growth. The more prominent the creator, the higher the chance that their works will be more valuable on the market.
Last but not least, you also need to consider what you like and what you don't like in an NFT. It's totally okay to pick an NFT simply because you like the aesthetic or if it has a personal connection to your life. This is actually quite important because if you focus more on the "intrinsic value" rather than the "trading value", then the token will remain relevant for you for a long time. Even if objectively the price declines at some point, you would still be okay with that because the personal value remains, giving you long-term and irreplaceable satisfaction.
All the hype surrounding NFT has made the act of buying and collecting NFTs sound incredibly beneficial for many people. If you're just starting your journey, you need to know that finding a good NFT among thousands of collectibles is not easy.
Browsing through all of them would take you a very long time, but if you carelessly pick something up and hope that the price will immediately skyrocket, you'll end up regretting your decision. There's no certainty of the future value of an NFT, but you can minimize the risk by doing a series of research and analyses.
if you are interested in buying and selling NFT, be sure to do it in a safe place, such as Binance NFT Marketplace. It provides an easy-to-use platform for anyone, especially beginners.