How to Invest in NFTs – Step-by-Step Guide

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This is an NFT logo.

Do you know how to invest in NFTs? You probably know them as the weird CryptoPunks or Bored Ape images that fetch millions of dollars. If you’re like most folks, you might assume you can only sell NFTs for profit. This is why many people are looking to make money from NFTs in one way or another.

Buying and selling an NFT by yourself requires a lot of funds that a majority of people cannot afford. There are so many other ways you can make money from NFTs, though. If you use these other methods, you can minimize the risk and maximize the earnings from NFTs. Fortunately, I will tackle each technique in this article.

First, I’ll talk about more details related to NFTs, such as how they work, where you can find them, and their benefits. Then, I’ll explain how to invest in NFTs, from the easiest to the hardest. After that, I will go through the many risks you will face when investing in NFTs, so you can decide if it’s worth it or not.

What are NFTs?

This is an NFT logo.

On March 11, 2021, a digital artist known as Beeple sold his work called “The First 5,000 Days” for $69,346,250. This sparked the ongoing interest in NFTs.

Nowadays, people are talking about NFTs as a sort of get-rich-quick scheme. Yet, many still don’t know what they truly are or how they work. So, what are NFTs, anyway?

An NFT or non-fungible token is a piece of digital media with its ownership recorded on a blockchain or cryptocurrency network. The most popular example is the Ethereum blockchain.

This is why you can find so many NFT marketplaces built on top of the ETH network. Examples include the Axie Marketplace, the Chiliz (CHZ) platform, and the Avalanche (AVAX) network.

They have features that set them apart, such as smart contracts. Yet, they share the same reliance on the Ethereum blockchain to operate.

Moreover, the unique ownership gives non-fungible tokens an exclusive signature that you can find in the many free replicas available, making them one-of-a-kind.

What’s more, they can come in many forms of digital media, such as art, music, and even in-game items. Twitter CEO Jack Dorsey sold his first tweet as an NFT!

Remember the Nyan Cat meme? Someone sold the Pop-Tart cat for $560,000! You can also find NFTs from the famous rapper Snoop Dogg on the SandBox NFT video game.

As you can see, the uniqueness of each token sparks wild price speculation. This is especially true with those that come from famous people. The question is, how can you join the hype?

Ways to invest in NFTs

This represents learning how to invest in NFTs.

  1. Invest in NFT tokens
  2. Invest in NFT fractions
  3. Buy and sell NFT

#1. Invest in NFT tokens

Difficulty level: Easy

You can buy most NFTs from an online marketplace. Visit its website, and you’ll find a wide selection of NFTs. They differ in how they handle the digital assets, though.

For example, the Binance NFT marketplace stores them on the platform. On the other hand, OpenSea lets owners hold theirs in their digital wallets until they buy or sell them.

Most of these platforms have blockchains themselves, and each one has a native cryptocurrency. For example, Binance charges BNB coins for transaction fees.

Those coins go up and down in value, so why not buy and sell those too? You can get them for much cheaper than NFTs. Also, they’re in various cryptocurrency exchanges.

You can purchase at least $10 worth of cryptocurrency on Binance. Meanwhile, NFTs are worth millions of dollars. What’s more, their high volatility allows them to grow exponentially.

Of course, it would be more sensible to wait for these gains in the long run. If you don’t mind a lot of risks, you could try short-selling these cryptos on Binance.

It’s similar to shorting stocks, but you have a greater chance of incurring losses. Still, this proves that holding on to NFT tokens is a great way to invest in NFTs.

Read More: How To Invest In Cryptocurrencies

#2. Invest in NFT fractions

This represents how to invest in NFTs.

Difficulty level: Moderate

Here’s another affordable method on how to invest in NFTs. Instead of shouldering the full cost of a non-fungible token, why don’t you buy a portion of ownership instead?

They’re called NFT fractions, allowing people to invest without spending millions. It’s made possible by various DAOs (decentralized autonomous organizations).

People may pool funds to pay for a certain NFT, such as a piece from Bored Ape. Once they have a fractional NFT, they could hold auctions to sell those for profit.

This will allow you to potentially make a lot of money from spending less on a non-fungible token. Meanwhile, the primary owner also benefits greatly from this arrangement.

It lets them own a large portion of an NFT without paying the full price. This leaves them with more liquidity for other investments. However, it’s not as easy as profiting from NFT tokens.

You will have to hold auctions to sell your NFT fraction. This means you’ll have to find bidders, and that can be difficult. Still, it’s a lot easier buying NFTs at full price to put it up for auction.

Related Article: How to Create Your Own Cryptocurrency

#3. Buy and sell NFTs

This is the OpenSea website.

Difficulty level: Hard

This is how to invest in NFTs for most people. Contrary to popular belief, buying and selling non-fungible tokens is also one of the most difficult ways to do it.

Most of them are digital artworks that are valued similarly to traditional ones. The Mona Lisa is a famous piece, but art historians argue that it’s not that great of an artwork.

It became famous because it disappeared after an Italian worker stole it from the Louvre. That story eventually inflated our impression of the Mona Lisa.

Similarly, your NFT will need something to build hype for it. You can find many NFTs nowadays, so it must set itself apart to become valuable.

This also makes the value of an NFT highly volatile. Unless you’re willing to accept its erratic price changes, you might not want to buy an NFT for long-term profit.

Other tips on how to invest in NFTs

  1. Start by learning all you can about the NFT you want. See who created it and what platform that artist used. Also, check the platform where you’ll buy it, or you might face unexpected costs for your token.
  2. Once you’ve decided, get the best crypto wallet you can afford. You’ll drop a lot of money on your NFTs, so they deserve the utmost protection.
  3. Remember that many NFTs depend on hype to retain value. Unless you truly like the piece you bought, it would be best to sell it as soon as possible.
  4. Look into the other types of NFTs. I focused on digital artworks because most people think about when the topic comes to mind. Yet, there are functional NFTs, such as the pets from Axie Infinity. They let you play the game and earn AXS and SLP tokens you can sell for fiat money.

Final thoughts

This article is not meant as financial advice. Study all you can about assets and plan your investment as best you can. Then, choose the ones that will help your financial goals.

Again, remember that NFTs aren’t just for speculative markets. It’s just that people became more interested in the huge profits it could bring.

You can read more about non-fungible tokens from the other Inquirer USA articles. See their other purposes, such as powering play-to-earn games and helping artists earn a living.