NFTs have gained much traction in recent years and exploded in popularity. They became a source for artists to monetize their work and for collectors to invest in one-of-a-kind pieces.
However, with so many NFTs available on the market, it can be difficult to know what to look for when buying an NFT. There are also many scams and frauds that a first-time investor may have to consider before investing in the world of NFTs. So, in this article, we’ll explore some key factors to consider when purchasing an NFT.
The art is as good as the artist, so the first thing to consider when buying an NFT is to check the artist who created it. Just like traditional art, the value of an NFT can be heavily influenced by the reputation and skill of the artist. For NFTs, this may include the social acceptance and community involvement the artist has. You may also consider checking their previous work or any awards or recognition they have received for their previous work. If the artist has an existing NFT project, it may also be worth checking its price and comparing it with the base price to get an insight into the demand for his work in the community. Always remember, buying an NFT from a well-known and respected artist can increase its value over time, making it a valuable investment for the future.
The content of an NFT is another crucial factor to consider. NFTs can include anything from digital art, music, videos, and even virtual real estate. Look for NFTs with high-quality content that is unique, visually appealing, and aligned with your interests. Some NFTs may also include interactive elements such as game assets which can make them even more valuable and engaging. But before investing, consider how the content of the NFT aligns with your personal values and interests.
It is important to understand that many NFT projects are fueled by hype and although they show exponential growth at the beginning, people soon realize that the actual content is total trash, and inevitably the bubble bursts, making the NFT completely worthless. A prime example is the rock NFT which at launch sold well over 1 million dollars. However, because the content was actually weak, after all, it is just a picture of a rock, the bubble burst and now the NFT is priced as low as $17.
TIP: Read also about the pros and cons of NFTs to find out more.
The reputation of the Marketplace
Finally, consider the reputation of the marketplace where you plan to purchase the NFT. Look for marketplaces that are reputable, secure, and have a track record of successful transactions. Additionally, consider the fees associated with the marketplace, as these can vary greatly. Some marketplaces may also offer additional benefits, such as storage and insurance, which can add value to your purchase.
The rarity of an NFT is another key factor to consider. Unlike traditional art, where copies can be made, NFTs are unique and one-of-a-kind. Some NFTs may also have a limited number of copies available, adding to their rarity and value. Look for NFTs with a limited edition or a low number of copies available. Additionally, consider if the NFT is part of a series or collection, as this can increase its value over time.
Authenticity and Ownership
When buying an NFT, ensure that it comes with a certificate of authenticity and that it is registered on a blockchain platform. This will ensure that you are the rightful owner of the NFT and that it cannot be duplicated or forged. Additionally, consider the ownership rights associated with the NFT. Some NFTs may include commercial rights, allowing the owner to profit from the NFT’s use or distribution. Ensure that you understand the ownership rights associated with the NFT before purchasing it.
The demand for an NFT can heavily influence its value. Look for NFTs that have a strong demand in the market or are part of a popular trend or movement. Additionally, consider the potential future demand for the NFT. Look for NFTs that align with emerging technologies or cultural movements, as these may increase in value over time. However, be wary of buying into hype or fads, as these may not hold their value in the long term.
Look out for scams
When buying NFT, you must also be careful of all the possible scams that surround the market. Some possible scams are listed below:
Scammers can create fake NFTs that look like genuine ones and then sell them at a high price to unsuspecting buyers, therefore it is always recommended to verify the authenticity of an NFT project before investing.
Pump and dump scams: This is when scammers artificially inflate the price of an NFT by creating hype in the market and buying up large amounts of the NFT themselves. The scammers then proceed to sell them off quickly at a profit once the price has increased. This is why you should always be wary of any sudden spikes in an NFT’s price.
Scammers may also try to create fake NFT marketplaces or websites that look like the real thing, but are designed to steal your personal information or cryptocurrency. Always verify the authenticity of a website before entering any sensitive information.
Scammers may create NFT investment schemes that promise high returns, but in reality, are unsustainable and will eventually collapse. More often than not, investors are hooked by the promise of high returns and make errors in judgment. Always remember, if it is too good to be true, it is more likely to be fake.
To sum up, yes, NFTs have helped people make millions by trading them on different platforms. But, there is no denying that if you are not careful, you may end up making a costly mistake as well. So, follow our NFT guide and do your own research before you jump on any NFT investment because remember, it is still a very volatile market and the prices of NFTs are fluctuating all the time.