How To Invest In NFTs

How To Invest In NFTs

NFTs, or non-fungible tokens, are some of the newest additions in the world or investment opportunities. Whether you're interested in the innovative NFT blockchain technology, an enthusiast for NFT artwork, participate in the tight-knit NFT communities, or just want in on the potential to make a decent profit, buying your first NFT is easier than you might think.

With so many options for how to get into the NFT game, you likely find yourself wondering how to invest in NFTs and if NFTs are a worthwhile investment. While hobbyists and collectors may not be in it for the profit, learning how to invest in NFTs puts you on the cutting edge of digital investment trends and technology.

Want to find out more about the world of NFTs? In this guide, we'll detail everything you need to know about NFTs from what they are and why you should invest in these digital assets to all the factors to consider before adding NFTs to your investment portfolio. Discover how to invest in NFTs and start your next investment venture!

What Are NFTs?

Before you rush into NFT investing, it's essential to understand the basics first: what is an NFT?. NFT stands for non-fungible token. What does that mean? To break it down, we need to get a little technical. 

Digital tokens are simply digital assets that have value on the blockchain. Blockchain technology provides assets like digital collectibles, NFTs, and other digital tokens with an immutable digital ledger visible to others without being able to be hacked, overwritten, or corrupted. This distinguished ability of blockchain technology is part of what makes an NFT valuable, as its authenticity cannot be faked.

To understand the term non-fungible, let's first look at the meaning of fungible. Fungible means totally interchangeable. For example, every fungible token that represents 2 bitcoins holds the exact same value and you wouldn't be able to tell the difference between these tokens. In terms of real-world materials, it’s just like how every fifty-dollar bill is the same and represents the exact same value.

A non-fungible token, conversely, is totally unique. This means there is no other token that is the same on the blockchain and one NFT is not perfectly equal to another. NFTs are one-of-a-kind! These non-fungible tokens allow users to add a distinctive string of data to the blockchain to show their unique ownership.

Think of an NFT as a digital certificate of an asset's ownership, meaning they aren't just meant for original digital artwork, but can also be used for legal documents, deeds to a car, tickets to events, and even real estate.

How Collecting NFTs Is Similar to IRL Collecting

For all of history, people have been collecting art, toys, stamps, comic books, or other memorabilia and displaying them in the corner of their homes for visitors to admire. Often, these physical collectibles (especially rarer ones) appreciate in value over time. When it comes to digital objects like NFTs, it makes perfect sense that they’d also have the potential to exhibit the very same price appreciation.

As explained above, NFTs are completely unique, so collecting digital art is the same concept as collecting art in real life. In both cases, you'll be the only one to own a specific piece. The primary exception with these digital collectibles is that you can't physically touch it unless you decide on printing NFTs. The difference between the physical and digital experience of each is why some people have had trouble understanding the concept of what NFTs are.

That said, people may be more willing to purchase non-tangible digital items than they’ve realized! For example, over $54 billion was spent on in-game content like cosmetic items in 2020. Most of those gaming cosmetics weren't even unique or tradeable like NFTs!

Do You Own the Rights to Your NFTs?

Before NFT technology and NFT marketplaces came about, digital art and other online creations were extremely easy to copy and share. The supply for them was unlimited, making them fungible assets. Thanks to blockchain technology, NFTs provide a solution to this by allowing original digital creations to be uniquely owned, creating scarcity.

For example, if you decide to purchase an NFT of a rock (yes, an NFT of a rock was bought for AUD$1.7 million), then you are the sole owner of that digital asset. Regardless if someone tries to copy it or share it elsewhere, you have an immutable ledger proving its authenticity and string of ownership that cannot be faked.

With all NFT purchases, transactions are registered on a network of computers, and the owners are given access codes. Every digital asset has its own digital signature, so it can't be exchanged for another (unlike crypto).

Some projects give you IP rights to your particular NFT, each with their own different set of stipulations. This means sometimes you can use them commercially, like creating an animated show using your NFT, or building a brand with your NFT as the logo.

That said, there are some rights you do not inherently own when buying an NFT. For example, anime NFTs are extremely popular with collectors and investors. When you’re learning how to sell anime NFTs, however, you need to be mindful of copyright infringement if you try selling fan-made art as your own. The copyright for the anime characters is retained by the original creator minting an NFT and is not inherently passed on via sale.

Why Invest in NFTs?

Part of discussing how to invest in NFTs is to also ask the question, “why invest in NFTs?” The truth is, there are short-term and long-term benefits to investing in these digital assets. Let’s explore a few:

Benefits of Short-Term Investing in NFTs

Many people buy and sell NFTs for a profit. If you buy NFTs and flip them (sell them shortly after), this is called day trading. If successful, this can generate decent profits in a relatively short period of time. Some people actually do this for a living!

The number of people buying and selling NFTs is only increasing as they continue to gain popularity and with easier access to NFT marketplaces. With more NFT creators and a wider audience of buyers, there's even more potential for profit in short-term investing.

Another benefit of investing in NFTs is that they are backed by smart contracts on the blockchain. This means they are securely coded and artists will always receive a commission on subsequent sales. This continued income potential increases the number of NFT creators, building a larger pool of investment opportunities for those looking at NFTs for short-term investing potential.

Benefits of Long-Term Investing in NFTs

The biggest benefit of buying an NFT and holding it is purely the potential for it to appreciate in value like physical collectibles do over time. This means if you do your research and choose the right NFT collection to invest in, there's a chance you can make a larger profit in the long-run as those NFTs grow in value.

Not only do NFTs let you own unique artwork for a personal collection, but they make a great investment opportunity for someone starting out in the world of digital assets. These digital tokens can double as collectibles and tools for investing, giving flexibility to how you want to engage with them. 

NFTs that are considered rare can be an excellent long-term investment. For example, CryptoPunk #4156 was initially bought for $1.25 million and then sold later for $10.26 million!

Connecting With Others

When you buy your first NFT, you'll realize that it's not just art. It’s a way to connect with a community of creators, collectors, and investors.

Think about it this way: people don't only communicate through speaking or language, but through a variety of actions, like the clothes they wear, the cars they drive, the places they visit, and the things they associate themselves with.

In reality, consumers actually buy the statement that comes with a material object. The same goes for NFTs. By owning a specific NFT, you are essentially saying that you resonate with either the artist, the brand, the genre, the message, the crowd, or the community. And naturally, like-minded individuals and groups are drawn to each other.

How to Know What NFTs to Invest In

Another major consideration when learning how to invest in NFTs is knowing which ones to invest in. Not all NFTs are created equally nor do they all have the potential for profit. Part of the process for how to invest in NFTs is learning to discern what makes an NFT valuable.

Define Your Investment Goals

The first factor to consider before you begin investing in NFTs is why you want to. What are you expecting to gain from your investment? Whether it's potential profit, a product, being part of a community, gaining access to exclusive content, or a number of other perks of owning NFTs, identifying your investment goals is crucial to your own success.

Why is it important to be specific about your goals? When you have a clear idea of what you want to gain, the better your decision will be when it comes to choosing an NFT to invest in.

Find Projects With Strong Communities

Many NFTs allow owners to join an exclusive online community. For example, with the popular Bored Ape Yacht Club, NFT owners are part of a private Discord group that includes high-profile names and celebrities.

Huge fan bases also exist in the anime realm. There are thousands of amazing anime and manga NFTs on the market with communities to join. More of a toy collectibles person? Those with a history of toy collecting may join special communities after purchasing certain NFTs, as well!

Be Active in the NFT Space

When it comes to making the best NFT investments, it's extremely beneficial to be active in your niche and stay up to date with any NFT communities or projects that you're interested in. You can do this by following their social media content, listening to podcasts, and watching videos to find out as much as possible. In particular, Twitter tends to be very active for the NFT community, making it essential for those with certain niche interests for NFT investing or collecting.

After all, if you wouldn't blindly invest in the stock market, why would you do so in the NFT market?

Research Projects With Stable Floor Prices

Once you've found an NFT that seems like the right investment for you, it's vital that you do further research before making a purchase. You want to make sure that the NFT floor price is stable.

The NFT floor price is simply the lowest price you can buy that NFT for. It also represents the lowest amount for that NFT in a market (also known as the entry price).

Find Utility That Matters to You

Utility refers to the NFT’s true value in the real world (as well as its tangibility). For example, some NFT projects offer physical products, exclusive memberships, services, and even access to private events. On the other hand, however, some NFT projects do not offer anything valuable other than being a digital collectible. It’s important to research any additional perks an NFT may come with before deciding to invest.

For example, Vampire in the Garden digital card collectibles offer NFT owners the opportunity to participate in exciting games and quests, ways to collect exclusive items that could be valuable in the future, and owning one of these digital cards lets you continue the Netflix anime story produced by WIT STUDIO.

Support Up and Coming Artists

NFTs truly work to empower digital artists since unique ownership on the blockchain allows creators to create digital art and sell them as original pieces.

Artists take a big risk by choosing to create NFTs as they cost money and time to mint. Additionally, because the buyer pool may be limited for a certain niche, NFT buyers greatly support digital artists and allow them to continue creating.

How to Invest in NFTs

Now that you know the basic fundamentals of how to invest in NFTs, let's look at how and where you can buy your first NFT.

To purchase an NFT, you will need to go through an NFT marketplace (a similar concept to using Amazon or eBay to buy goods). In most cases, you’ll need to create a digital wallet and have some cryptocurrency stored beforehand. This is the currency you'll be using to buy an NFT unless you select a progressive platform like UCOLLEX, which allows users to purchase NFTs with a credit card; no crypto needed! 

NFTs are either sold at a flat price or via an online auction (which is just like trading stocks or crypto, where the price changes constantly).

How Do NFT Marketplaces Like UCOLLEX Work?

UCOLLEX provides an innovative NFT marketplace where users can buy exclusive and limited edition NFTs  ranging from toy collectibles to pop culture.

The platform is widely accessible to all members of the community, and it's extremely easy to buy NFTs without having prior knowledge of cryptocurrencies, blockchain, or digital assets. All you need is your credit card!

Digital collectors may even have access to exclusive NFT content like interviews with artists, amazing 3D artworks, and VR experiences.

Buying NFTs With Crypto

OpenSea is currently the biggest NFT marketplace, with most NFTs selling via virtual auction. The prices are listed in Ether (which powers the Ethereum blockchain), not USD, as sales are made using cryptocurrency, not fiat money. Because artists on this platform mint and sell NFTs using crypto, the process involved in buying NFTs there is more complicated.

The steps to buying NFTs with crypto are:

  1. Opening an account with an NFT marketplace like OpenSea or Rarible.
  2. Creating a crypto digital wallet and buying Ether. (you'll also pay “gas fees”)
  3. Connecting your crypto wallet to your NFT marketplace account.
  4. Beginning to bid on NFTs.

If you're planning on going this route, you can buy Ether through any of the main crypto exchanges like Binance, Coinbase, or Kucoin. Purchasing NFTs with a credit card, however, simplifies the task and doesn’t leave you open to potentially decreased purchasing power of reserves of Ether left unspent if the market shifts.

Buying NFTs With Credit Cards

A major advantage of buying an NFT on the UCOLLEX marketplace is that you don't need to own any crypto to get started. Unlike other platforms, you can just use your credit card and make the purchase in your preferred fiat currency.

Being able to buy NFTs with a credit card makes it possible for everyone to purchase their first digital asset and experience the wonderful world of NFTs without relying on crypto funds at all.

How Much Do You Need to Invest in NFTs?

The final part of learning how to invest in NFTs is asking how much you need to get started!  Is it true that you need a lot of money to invest in NFTs? Certainly not. 

Anyone can buy an NFT. Just like with stocks or cryptocurrencies, NFTs can be valued at a wide range of prices, meaning there’s no exact barrier to entry in terms of minimum cost. Each holds a different value, so one NFT could cost you just a few dollars, while another could cost you a few million dollars. It’s up to you to do your research and ensure you’re getting a fair price for your investment and making a wise selection.

Learning how to invest in NFTs may sound complicated, at first, but with new platforms like UCOLLEX removing the requirement for using cryptocurrency for your purchases, it’s becoming easier for anyone to dive in. The most important aspect of how to invest in NFTs is making sure you’ve done your research for the short-term and long-term potential. Making a profit from NFTs requires shrewd decisions, but can be extremely rewarding.

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