By the end of August 2020, Bitcoin was almost USD $11,500. One year later, it is now worth almost $49,000.
TL;DR – Bitcoin has more than quadrupled in value during the past year.
The massive fortunes of cryptocurrencies like Bitcoin have had an interesting side effect. Owning a piece of a digital asset, such as art, music, and memorabilia is up as well. Over 12 million were spent on NFTs in Dec 2020. In March 2021, people spent over $500 million trading digital assets.
Because of its explosive growth, non-fungible tokens (NFTs) have become red hot in 2021. People want to know whether these NFTs are worth owing. People like you, dear reader.
And that brings us to our newbie-friendly guide to investing in NFTs. We are going to look at the NFT market, what trends to look for, and where can you look for the most promising NFT projects that may just turn you into a millionaire.
Let us begin.
What makes NFTs good?
The good thing is that NFTs are powered by blockchain database technology that deters fraud. You can see the origin of any NFT as well as their ownership. Pretty neat huh? Nobody can sell you a counterfeit version of a CryptoPunk since you get it all verified right there.
Another benefit of using blockchain tech in NFTs is that artists and creators will continue to get royalties on each future purchase of their digital creations, making it an attractive proposition.
Over time, as the value of these creations grows, they will still get a percentage of the proceeds. It’s a win-win situation for everybody.
To sum it up, NFTs:
- Ensure that creators get their royalties,
- Come with anti-fraud technology,
- Will offer advanced features in the future that are not apparent to us just yet.
Here’s the #ParisHilton explanation of NFT that took the NFT world by storm.
— 🟣Samit Max Patel (@iamsamitpatel) August 19, 2021
Does it make sense to invest in it?
While NFTs have been around since 2015, they are now starting to become part of the mainstream conversation. More people are talking about it, and throwing their money at it.
And just like the stock market, it pays to do your due diligence on what projects are worth your while (more on this up ahead).
Remember: Buying NFTs for short-term gains is not a good strategy. It means leaving yourself vulnerable to a market crash.
Still, Should I invest in it?
In a word, yes. Though some cautious optimism is called for.
You will have to think like a venture capitalist here. Here are a few ground rules to consider:
- Instead of putting all your money in one basket, it is prudent to invest in a portfolio of assets.
- Given the highly speculative nature of the market, limit your overall NFT exposure to a small percentage of your total portfolio.
The best way to go about investing in NFTs right now? Think of it as a way to collect stuff that is related to your hobbies and interests. If you love Linkin Park, you’ll be happy to know that Mike Shinoda’s Happy Endings was released as an NFT (pun intended).
But seriously though. Think of NFTs as you could think about getting that rare vintage car. Do your research. Get a collectible that you believe you’d love to own. Don’t forget. They are an amazing way to support the creators, players, and artists you love.
Not all NFTs are over-inflated assets that are waiting to get their bubble burst. In time, the market will separate the wheat from the chaff.
Alright, I’m convinced. Now how do I buy and sell these things?
Ready to take the plunge? Let’s go.
Step 1 – Set up your cryptocurrency wallet
Crypto wallets are like your bank account, only you get to store your cryptocurrencies and NFTs in it.
Once you set up your wallet, you can send and receive Bitcoins, Ether, etc. as well as your NFT assets.
There are many wallets out there. We will be using MetaMask to help you set up yours.
To use MetaMask, follow these instructions:
1 . Open Google Chrome Web Browser on your laptop.
2 . Get the Chrome Extension for Metamask from here. Click on Install MetaMask for Chrome and then Add to Chrome.
3 . Once it’s installed, click on Get Started.
4 . Click on Create a Wallet.
5 . Go through the process, and finally Create Password. Make sure you use a secure password.
6 . Set up a Secret Backup Phrase. This is very important in case you ever lose access to the account.
7 . Write it down somewhere safe. And make sure you don’t give it out to anyone.
That’s it. You are now the owner of a crypto wallet.
Step 2 – Get some Ether (ETH)
Now that you have your wallet, it is time to buy or transfer ETH to it. You will need ETH for those NFTs after all.
With the help of your credit or debit card, you can buy ETH and store it on your MetaMask wallet.
1 . Open your MetaMask wallet from Chrome.
2 . Click on Buy. You will have to go through some prompts.
3 . Click on Continue to Wyre
4 . Now you will have to convert your currency into ETH.
Enter the amount you want to be converted into ETH, fill in your card details, and presto – ETH will be credited to your wallet.
Note: Wyre will deduct the network and transaction fee for the conversion. Those fees are a percentage of the total currency you want to convert into ETH.
Know a buddy or colleague who has ETH in their wallet? Transferring ETH from their wallet to yours is easy.
Just like you need to give your bank account number for transfers, cryptocurrencies need a wallet address to do so.
A wallet address is made up of numbers and letters, and completely unique for each wallet. You can safely share it with others for transferring and trading purposes.
To find out your wallet address, check this space on your MetaMask wallet:
Step 3 – Register yourself at an NFT marketplace
You’re almost there! Once you’ve set up your crypto wallet and added some balance to it, it’s time to pay a visit to an NFT marketplace.
There’s plenty of marketplaces. We will list some of the most popular ones here:
1 . Rarible – an NFT marketplace for rare collectibles such as art, memes, and more.
2 . Decentraland – A virtual reality-powered world supported by the Ethereum blockchain for creating and monetizing content and apps. You can buy virtual land, participate in trading rare digital collectibles, and more.
3 . NBA Top Shot – the National Basketball Association’s officially licensed blockchain app for trading sports collectibles. You can find video clips of extraordinary sports feats as well as player statistics. Strictly for NBA lovers.
4 . OpenSea – more than 50 categories of rare assets, which include domain names, virtual land, digital art, and more.
To start using an NFT marketplace, you will have to register an account there. It’s pretty straightforward, just like making an email account. However, you will need to connect your crypto wallet with the platform, so make sure you go ahead and do just that.
That’s it. You are now ready to buy an NFT. Maybe you should check out those Doge Pounds or CryptoPunks.
Protip: Look for a blue ‘Verified’ checkmark when searching those NFTs for the genuine article. That’s one way to stay away from fake NFT collections.
Step 4 – Buy an NFT
Buying an NFT is pretty straightforward. Still, it doesn’t hurt to outline the whole process.
1 . Open your NFT marketplace. We used OpenSea as an example.
2 . Click on the NFT you want.
3 . Like what you see? Click on Buy Now.
4 . You will have to Review Total and finally, Check Out. Follow the prompts.
5 . Pay the Gas Fee.
The gas fee is basically the transaction fee you pay every time you purchase an NFT. The gas fee rate varies, depending on the traffic on the Ethereum network. MetaMask will show you the total gas fee at checkout.
Wait a second. What’s this about varying gas fee rates?
We’re glad you asked. Because it can get too high at times.
Expect to pay a gas fee of 15-40 Gwei usually. If it is higher than that, you can come back later to complete your transaction. You can check the ongoing gas fee here.
NFT Trends to Watch
Before you line up to get that hottest NFT you’re hearing about on social media, let’s take a look at the market trends.
One of the ways NFTs have exploded in popularity is because of how they took the digital art industry by storm. In a world where social distancing and work from home have become the norm, the marriage between NFT tech with digital art couldn’t have come at a better time.
According to Sascha Gianella, who founded a visual artist support platform We, The Muse:
“NFTs allow us to trace provenance, exhibition history, and the authenticity of ownership in digital art in a secure and permanent manner.”
Smart contracts tech also makes it possible for artists to profit from secondary sales via royalties.
The digital art space is inundated with countless creations. Established creators and newbies alike are churning out content. It makes sense to stick with established artists since their work will always be valued more.
It is best to limit your overall NFT exposure to a small percentage. The way the market is going without checks and balances, it pays to be cautious with digital art.
The sports memorabilia sector has embraced NFTs like no one else. The NBA got into the NFT game itself, and with great results. The sports body partnered with Dapper Labs, a Vancouver-based company that uses blockchain to create permanent ownership certificates which cant be deleted or copied. The result of their collaboration – NBA Top Shot.
Forging an NFT is hard, but not impossible. A person with multiple accounts can still artificially inflate the price of an NFT by trading across their accounts. This is why officially-backed platforms like NBA Top Shot are preferable. Other professional leagues and teams are working on their own NFT platforms, hoping to replicate the success of the NBA.
Digital Real Estate
Fancy owning a piece of virtual land where you can undertake development works or just walk around? Yep, they are actually a thing. Most recently, Decentraland sold a piece of land for $900,000, one of the most expensive sales of NFT land yet.
Unless you’re fabulously wealthy, it is best to avoid investing in digital real estate. They are seen more as status symbols if nothing else. Their volatility means that you could even end up losing the whole value of your investment in a single day!
Change is the only constant. For now, NFTs might feel like a fad, but it is also important to acknowledge how our digital lives have become an extension of who we are.
NFTs can be anything – a collectible, a new asset class, or just a representation of our digital selves and lifestyles. The future can be a very exciting place.
So, will you be investing in an NFT soon? We want to hear your stories.
Like this guide? Make sure to check out our feature on CryptoPunks for more NFT goodness!