Non-fungible tokens (NFTs) swept the globe in 2020 and continue to do so in 2021. Some NFTs fetched millions of dollars for their owners. In addition, many celebrities and leaders around the world jumped on the NFT bandwagon. Sporting organizations also rolled out NFTs for their fans as an extra income stream.
With the world still recovering from the scare of the pandemic, the crypto world provided new methods of earning money. Concepts like GameFi let gamers get rewards for playing games. But, NFTs appeared to provide the biggest funds for people. Digital artists were the biggest gainers from the NFT surge. These artists received huge payments for their digital crafts, almost more than they would have earned in most traditional auction houses.
What Are NFTs?
NFTs are digital assets that symbolize things like music, art, in-game tokens, or videos. While NFTs have a vast use case, they have mostly excelled in the art market. These assets reflect the original version of a digital object. Sometimes NFTs can take the form of plots of land, digital houses, or reels. The biggest perk of NFTs is that they are original and non-fungible. Their use cases have spilled into the medical world, e-commerce, and fashion. So, it’s safe to call NFTs another asset class of the 21st century.
People are moving to join the NFT bandwagon, as with every emerging trend. Although NFTs are fun, navigating the industry is no piece of cake. First, you’d have to do proper research. So far, many experts believe that these digital pieces are not a fad. Also, it’s most likely not going extinct anytime soon, so now might be the best time to step into the NFT arena.
Why Invest in the Digital Asset?
Before diving into mistakes to avoid when investing in NFTs, it’s important to understand why you’d want to purchase an NFT. Since NFTs are built on the blockchain, they are linked to cryptocurrency. For example, many NFTs reside on the Ethereum blockchain. As a result, most people buy these assets hoping to benefit from the token’s appreciation.
Furthermore, some buy NFTs for the fun of it. Since it’s a social trend, many people would simply identify with the digital trend for the assumed prestige that comes with it. These days, people can use NFTs as their profile pictures on Twitter. So, if you are getting into the space for social relevance, that’s okay.
Another reason people invest in NFTs is to support their favorite artists. So many fans have pledged their loyalty to their favorite celebrities, and having their NFTs is just one way of sampling their die-hard commitment.
In addition to all these, one of the biggest reasons people invest in NFTs is the economic advantage they hold. NFTs have sold for thousands and even millions of USD. That’s an incredible way to make money. Most people are making a career by building a collection of rare NFTs. Here’s the thing – the rarer an NFT is, the more likely it is to rake in more funds for the owner.
We have several articles about NFTs, so if you’d like more details, just peruse what’s already been written. But for this article, we’ll look at a few mistakes to avoid when investing in NFTs. Just a quick reminder – NFT investment isn’t a one-way trip to fortune. This means that not everyone gets it right. It would help if you did some due diligence. There are also some bad players in the NFT space. Here’s what you should know.
Cheap Might Not Always Be Safe
The first thing to avoid is ridiculously cheap NFTs. They could be a scam or have no real value. This does not suggest that you break the bank for an NFT. However, things of value aren’t common. That’s something to keep in mind.
Several blue chip NFTs are traded for a few hundred ETH, equivalent to thousands of dollars. As a result, newcomers browse the rankings page and purchase inexpensive NFTs at lower prices. Later on, these newbies realize that they have just purchased a dormant project.
No Knowledge About Blockchain
This is arguably one of the biggest mistakes to avoid. Most people dip their fingers into NFTs without the slightest knowledge of how blockchain works. It isn’t easy to separate NFTs from the blockchain. To enjoy your investment, knowledge is key. You must know about blockchain transactions, processes, and marketplaces. Even in traditional investment, knowledge is always a safety net.
Furthermore, try to stay away from the fear of missing out. An investment done out of fear will most likely lead to tears. You do not want to regret throwing your hard-earned money to the wind. Take the time to learn about blockchains and digital transactions. There are some courses online. You can also go through the Altcoin Buzz YouTube channel for useful tips.
Avoid Scam Links
Scammers are littered around the digital world. Unfortunately, the NFT world isn’t spared either. One major mistake to avoid when investing in NFTs is buying from scam links. Fraudsters sometimes exploit the excitement surrounding an NFT collection. They put out phony links to mint or sell NFTs. Unsuspecting buyers swarm to these links and have their wallets depleted. However, it would help if you exercise caution when dealing with swindlers. Only use links shared by a project’s team on their official social media accounts to stay safe.
Short-Term Gain
Going into the market for short-term gain might not be the best idea. With short-term thinking, you’ll most likely make some mistakes. It is best to invest for the long term. That way, you are sure to do your research, weigh your options, and make your well-timed move.
Finally, the NFT space is still developing despite its popularity in the last few months. As a result, lots of things are still in the framework. NFT investment is a good deal. But, start with proper research.
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