NFT has become a buzzword in the blockchain industry ever since the trade of this type of digital asset is capping at billions of dollars. The NFT market is estimated to have a market cap exceeding $41 billion, and a lot of people are hoping to have a piece of the pie. Understanding the intricacies of this industry can help potential buyers and sellers to minimize risk while maximizing profits. How does the NFT trade work? Here is how to buy and sell NFTs for profit.
Conducting prerequisite research
Before jumping into buying and selling NFTs, it is crucial to have a broad understanding of trading these digital assets. The key element that potential NFT traders need to understand is the type of research that they should invest in. Research is an important element before buying and selling NFTs since it provides information that can increase the value of that particular token.
When conducting research, try to learn more about the founding team. The credibility of an NFTs founding team has a direct bearing on the value of that piece. If an NFT has a founding team that has a proven track record of successful tokens, most likely, their latest collection will also be a success. Additionally, find out who is supporting the token. In most cases, tokens went viral because certain celebrities backed them, and that publicity can increase their value.
Just like any other investments, you can either buy in for short-term or long-term gains. The only difference is that the likelihood of profiting more money with NFTs is higher when you flip them. That means holding them for shorter periods and then reselling them to volatile marketplaces.
Flipping an NFT is different from when you flip a house. There are no remodels or renovations that need to be conducted. All you have to do is buy at a low price and sell it for a potentially higher value. After conducting research, you can flip an NFT and profit from the gains made through this short-term investment. Most profits are made by flipping NFTs in this trading market because it is fast-paced, and a token might not be viral or relevant for longer periods.
Holding an NFT
An alternative method to flipping NFTs is holding them for the long haul. In the long run, an NFT might be worth more than the initial purchase price, depending on its category. Before buying and selling tokens, you need to understand that there are viral trends that might be a fad. On the other hand, there are NFTs that grow in value over time from when they were minted.
The best type of tokens to hold is evergreen NFTs that are not based on seasonal trends. For example, the first tweet on Twitter was minted as an NFT and is a perfect example of a token to hold for longer periods. Other tokens that are evergreen include art since most artwork is timeless and grows in value as years go by. Carefully choose tokens that you are going to hold since holding for too long might result in losses at times.
Valuable tokens with unlockables
There are different types of NFTs, and others have inherent benefits that come with it after making the purchase. The best types of tokens with these benefits provide access to groups or associations with limited membership availability. All members of that private group or social club have to possess an NFT of a particular founding team. That token provides access to in-person meetings, virtual discussion platforms, or limited-edition merchandise.
Whatever the benefit may be, as long as it is valuable, it increases the overall value of an NFT. Therefore, consider looking for tokens with valuable unlockables and flip them for a significantly higher price. You can even use the unlockables in the meanwhile if you have not found a buyer yet. In that way, you can get more from that NFT transaction by benefitting from the unlockables and by selling the token.
How to buy NFTs?
NFTs are not just like any other online transaction, but it is protected by highly secure blockchain security measures. Due to this security, there are limited trustworthy marketplaces that you can use to buy and sell NFTs. All tokens must be minted on a platform and authenticated before being uploaded to a marketplace. To buy a token, you must register an account on a marketplace and have a cryptocurrency wallet such as bitcoin or Ethereum.
The cryptocurrency wallet has to have a positive balance sufficient to make the desired transaction. You can choose between minting an NFT or buying it on secondary markets. Minting an NFT has potentially higher returns than trading on secondary markets. The latter marketplaces might have overpriced tokens that won’t return higher profits but instead can lead to losses.
Best categories to choose from
Tokens have different types of categories that you can choose from when trading on a marketplace. The most dominant categories include Art, Music, Video Games, and Memes. There are other categories like major sporting event moments and collectibles available for trading. These categories do not make up the entire NFT market but have the potential of generating high-profit margins for traders. The key to choosing a category to buy and sell NFTs from is understanding your preferences and passions.
Researching tokens becomes much easier if it falls under a category you are passionate about. For example, a sportsperson would understand the most valuable sporting moments that could potentially sell at a significantly higher value. Remember that some categories generally do well than others and it is your responsibility to conduct the research before trading NFTs.
NFTs have the potential to be a highly profitable investment when done right. The key to buying and selling tokens for profit is conducting research before conducting your trading activities. There are various types of research you need to conduct before buying and selling NFTs. The first set of research you have to do is pertinent to choose which category to buy into. Additionally, NFT traders conduct further research into each token and try to find out about the founding team and other related aspects.
Thomas Jackson is a professional freelance content writer working for a professional writer service. He is also into essay reviews and songwriting and is an active member of book clubs in New York. Live concerts and music festivals greatly inspire him, and performing for his family and friends is his motivation booster.