5 Things To Look For When Investing in an NFT Project
Have you been hearing a lot about NFTs recently and are convinced you should invest?
After all, investors around the world, including big brands, have been spending over $40 billion in this space over the past year alone.
But what are NFTs exactly?
NFTs ( or non-fungible tokens) are digital assets that represent a wide range of unique tangible and intangible items. The easiest way to understand what NFTs are is to think about them as rare collectibles such as rare basketball cards or paintings. The only difference is that a non-fungible token is a collectible that comes in a digital format.
Each non-fungible token contains specific information, metadata, and identification codes stored on a data ledger that makes it distinct from any other NFTs.
NFTs can be an excellent investment. But that’s if you select the right ones to invest in.
So, to help you select the best NFT projects, we’ve highlighted below five things to look for before investing.
Research The Team Behind The ProjectJust like you would if you were investing in a stock, researching management and understanding the founders’ vision is key to investing in an NFT project.
That’s why the team behind the project should have a public profile so that you can easily read about their background, past work, and experience. Having a strong online presence builds credibility and can help ensure the team is solid.
If the team doesn’t have a public profile, it doesn’t necessarily mean you’re investing in a scam, but it could be a red flag.
Check How Much Traction The Project HasIf you feel like the founders are legit, and the project has potential, the next thing you need to check is how much traction it has garnered so far.
For instance, does the broader community know about the project’s brand? Does the project have many unique holders? Does it have a high-quality social media following? Are people talking about this project?
Discord and Twitter are great platforms to jump on to gather some of this information, so make sure to do your due diligence before buying an NFT.
Invest In Projects That Are More Than Three Weeks OldIf you’re tempted to buy an NFT early on during the minting phase, you might want to think twice. Sure, the price might soar, and you’ll be able to make a hefty profit, but the project could also die in a week or two, and you’ll have lost your money.
It usually only takes a few weeks for an NFT project to die, so try to only consider projects that are over three weeks old from the date they were launched.
Ensure It Has Strong Community SupportCommunity is everything when it comes to NFTs. That’s because the value of an NFT is highly speculative and therefore depends on the number of people that support the project.
Again, the best way to get a feel for the community is to interact with the NFT’s supporters on Discord or Twitter. If the team behind the project makes you feel included and welcomed as you step into their Discord, and everyone is interacting in a positive way, that’s a very good sign!
Assess The Performance of The NFTBefore investing in an NFT, you need to assess its performance over time. And even if you’ve gone through all the other steps and have a good feeling about a particular NFT project, this step shouldn’t be overlooked.
A good way to assess the performance of an NFT is to check whether it has sustained its value even in a bear market. The best projects will still make sales even when the market is down. Why? Because investors see it as an opportunity to buy the NFT at a lower price.
Note that NFT marketplaces like OpenSea will allow you to access this kind of information.
We hope this article has shed some light on how to select portfolio-worthy NFTs. Following these steps will allow you to minimize the risk of investing in a flaky project that will quickly disappear along with your hard-earned money.