The most profitable NFT investment strategy

4 MINS READ

The very first tweet, cut scenes from Pulp Fiction, an Elon Musk song, and, of course, memes all exist in NFT format and cost a lot of money. What is it, is it possible to create your token, and how to make money on it – let’s understand this together.

 

What is the NFT?

An NFT, or Non-Fungible Token, is a unit of account that creates a digital impression of any unique item. Among them can be paintings, photos, videos, music, gifs – in a word, any content that claims to be at least some kind of uniqueness. They are highly prized among collectors, gamers, and art lovers and are bought and sold through auctions.

These same tokens are stored in the so-called blockchain – a huge chain of blocks containing information. Unlike, for example, servers, where data is stored in one place, these blocks can be located on many devices in various parts of the world. This type of encryption makes the blockchain very difficult to hack because, at best, you will be able to hack just one block of information and not the entire chain. That is why most cryptocurrencies work on the blockchain.

An NFT token is a way to transfer unique items from the real world to the blockchain. Each of these tokens is unique, inseparable, and exists in the singular. In addition, all the necessary information about it is securely stored in the blockchain.

 

What is the NFT Marketplace?

The NFT Marketplaces are platforms where traders can buy or sell NFTs seamlessly. It is also possible to list their newly issued NFTs on the NFT marketplace. Marketplaces for non-fungible tokens play a significant role in bridging the gap between buyers and sellers regarding NFTs.

You should be aware that non-fungible token marketplaces may also offer additional tools to create non-fungible tokens within minutes. Currently, various blockchain technologies are used to develop NFTs, and thus, not all NFT marketplaces provide all types of NFTs for buying and selling. Therefore, NFT developers often choose an NFT marketplace that supports their NFTs for sale and purchase.

NFT marketplaces allow artists or any other creators to list their NFT holdings for sale. Buyers can browse the NFT marketplace for their desired non-fungible tokens and buy the item through bidding, and gets the token’s digital ownership.

 

Where can you buy NFTs?

Now that you know the basic principles of choosing marketplaces, we can give you some recommendations about top NFT trading platforms.

  1. OpenSea

The decentralized platform OpenSea was founded in 2017. It presents all kinds of objects: art, music, domain names, virtual worlds, collectibles, and utilities. The site also acts as an aggregator, placing digital objects in other markets. Supports the Ethereum blockchain as well as Polygon and Klatyn. The site has a lot of helpful information, including a blog, help, seller, and token ratings.

Cryptocurrencies for payment: Ethereum (ETH) / WETH, USDC and DAI.

Supported wallets: MetaMask, Coinbase Wallet, TrustWallet, Portis, Arkane Network, Authereum, and eight options.

Cost of services: transaction fee 2.5% from the seller, gas fee when minting a token.

Royalty: up to 10%.

  1. SuperRare

All SuperRare digital art is unique and created in a single copy, attracting collectors. Any user can register on the site, but you will have to pass an interview with the site’s moderators before downloading the asset. The platform transfers part of the management rights to community members. They can purchase the $RARE token, which grants them the right to curate and vote on updates. The market has a high percentage of commission for the seller.

Cryptocurrencies for payment: ETH.

Supported Wallets: MetaMask is recommended.

Cost of services: transaction fee of 3% from the buyer and 15% from the seller.

Royalty: 10%.

  1. Rarible

Russian entrepreneurs founded the Rarible marketplace in the first half of 2020. According to the founders, they plan to transform the platform into a decentralized autonomous organization. As a result, the platform’s users will manage and make decisions. For this, RARI was developed – the first token for governance in the NFT space. RARI owners vote for platform upgrades, participate in curating assets, and moderating object authors.

Cryptocurrencies for payment: ETH, DAI, ATRI, RARI.

Supported wallets: MetaMask, Gnosis Safe, Authereum, Trezor, Ledger, AlphaWallet, Argent, Rainbow, MyCrypto, Exodus, etc.

Cost of services: 2.5% transaction fee from seller and buyer, gas fee when minting a token.

Royalty: any – from 0 to 100%.

 

NFT buying strategy

One of the essential things for any investor is to clearly define the rules of the game he/she is playing. Most investors don’t understand what game they are playing, so they play every game, but just a little bit. They flip, overexpose, and actively use derivatives. All-in-one investors may get lucky in a bull market, but the long-term results are generally disappointing.

The first task is to understand the difference between investing and speculating. Many people think that you can get rich quickly by flipping NFTs. Some people succeed, but most don’t. Success in quick speculation depends on the shilling and luck, and the price of anything can instantly go to the moon if the right people are engaged in promoting the project. But if you are not such a person, then it is unlikely that you will succeed in flipping.

Investing requires a long-term vision to determine the intrinsic value of an asset. The concept of the uniqueness of a particular product follows from the phenomenon of non-interchangeability. And if the product has no analogs, it costs much more. That’s why original memes and man-made highlights from basketball games are so expensive – the buyer himself determines the degree of their significance and pays for it by his own ideas of artistic value.

Total transparency and publication of data on all transactions without exception provide an increased value of NFT. You declare your “acquisition” of the same gif with a cat to the whole world, and, once published, this information cannot be changed in any way.

Thus, NFTs can perform several functions at once: a means for claiming rights to a digital object or work, an object of exchange and speculative trade, as well as a kind of virtual exhibit – a digital token, due to its properties, can store data about a work of art indefinitely and acquire additional value over time.

There are three games in the NFT space that an investor can play:

  • Future Distribution
  • Benefit
  • Cultural Significance

All three categories create a range of investing, from purely financial investments to social currency investing.

The best projects have an idea of how to combine all three areas, while the value of the future distribution is increased by the cultural significance and/or usefulness of the work.

 

Future Distribution

NFTs, which are characterized by the distribution of other assets, are closest to stocks because they offer a stream of “dividends”. Understanding how to evaluate the team and future cash flows is necessary for such projects. This is similar to any equity investment.

NFTs can create a dividend stream in the following ways:

  • Cryptocurrencies
  • Future profit streams
  • Other NFTs
  • Cryptocurrency distribution

Some projects are giving away new fungible tokens to NFT holders.

PUNKS tokens represent partial ownership of a vault of 16 Cryptopunks. Once trading begins, it is reasonable to assume that there will be a liquid market for these tokens, given the storage cost. But not all projects give away tokens associated with a vault with valuable assets. Some projects create tokens that can only be used in a specific environment.

When investing in NFTs that distribute crypto dividends, an investor needs to estimate the asset’s future value.

It is easier to estimate the value of blue-chip fractionated assets than the future expected utility of a gaming token. But both can bring valuable dividends.

 

Future profit streams

Sending new fungible tokens to an NFT holder provides an abstract dividend. However, some projects go the route of sending a portion of the profits to NFT holders. Good examples are users who have NFT songs or videos. The royalties and advertising revenue generated from the asset can be received by the owner or owners of the NFT. Investing in NFTs with a specific future income stream is similar to investing in stocks. In such a case, the value of the NFT can be defined as a discounted cash flow.

The biggest problem with investing in NFTs is that the SEC will treat them as securities with almost 100% certainty. Trading in such assets will require regulatory compliance by both the issuer and the exchange on which such investments are traded. There may be exceptions for some, but investors should be aware of the potential regulatory risks when investing in any project that offers future profit streams. Most of them can avoid being considered securities if they are associated with interest in some non-dividend NFT or a utility other than money.

 

Distribution of other NFTs

Distributing new NFTs, rather than fungible cryptocurrencies, to holders is probably the most ingenious distribution method that can solve the regulatory problem. As part of this mechanism, projects either drop new NFTs to current holders or provide private access to a minute of new assets at a low price. Those investing in projects that distribute additional NFTs should assess the potential value of these future NFTs. The value of most of these new NFTs depends on the cultural value of the projects they launch. This creates an efficient cycle in which culturally significant projects that use the distribution of other NFTs become more valuable.

 

Cultural Significance

Owning something with cultural significance has always been a status symbol, and the usefulness of a culturally significant asset lies in the expression of identity. Identity is a valuable thing, and in a sense, it is priceless because it is intangible. There are no specific cash flows that come from any particular person. Because cultural relevance is intangible, the price someone might be willing to pay for NFTs may have nothing to do with the rational realities of future distributions. Culturally essential things become more culturally significant as their value increases, and therefore their value.

Cryptopunks are trading for over $300,000 because they have become culturally significant in part because of their price. The more the price rises, the more people talk about them. Money makes things more meaningful, whether you like it or not. If you are playing the Cultural Relevance game, then you are betting that the importance of the NFT will increase. Investing in punks now requires the belief that they will become more critical over time. As the cultural significance of any asset rises, the demand for ownership of that asset also increases, and assuming the asset is scarce, prices will rise accordingly.

Four factors fuel cultural significance:

  • Painter
  • Aesthetics
  • History
  • Community

These four factors can manifest themselves separately. However, enduring cultural relevance is often the result of a combination of all four.

These factors are inextricably linked with each other. All great NFT projects have their own unique aesthetics and communities that embrace aesthetics as a beautiful form and promote it.

 

NFT buying bots and how do they work

Ok, at this moment, we know that the most common way to get NFT is through the NFT market, but what if I tell you there is another much more accessible method? And it is an NFT purchasing bot.

NFT buying bots use automated software to get to the front of the queue and purchase NFTs from the moment they go on sale. This is something a lot of people have come to know and expect when buying, for example, limited edition digital collectibles.

NFT trading bots help investors to be the first to get valuable NFT, also getting a lot of tokens simultaneously. This allows investors to earn a lot of money using the methods mentioned above of investing and NFT and combining them with NFT buy/sell bots.

Exio.Tech provides the NFT Trading Bot solution, which will develop your finances. We develop profitable bots to boost your NFT collection and save your time.

 

FAQ

  • Do people use bots to buy NFT?

Yes. It saves a lot of time and gives a bunch of financial opportunities.

  • What is the best way to buy NFTs?

One of the best ways to buy NFTs are NFT trading bots.