9 min read
10 Powerful NFT Tips to Invest in 2023
After two years of trading and investing in NFTs and learning many valuable lessons, I've compiled a list of 10 NFT tips that I wish someone had shared with me before I started investing. This list is relevant for beginners and advanced investors. Let's dive in!
By: Khristian Flohr
The NFT market is estimated to reach over $231 Billion by 2030. That means the upcoming years will have great investment opportunities for creators and collectors. In this article, I'll share my tips and experiences learned after trading and investing in NFTs for two years.
When I started buying NFTs, I found it challenging to determine which ones could become successful investments. The number of options was overwhelming, and I couldn't make sense of all the hype. During the previous bull run, I heard many people talking about how much profit they had made from NFTs, but to me, it just looked like buying expensive jpegs with no clear understanding of the value. Initially, I made the beginner's mistake of investing in NFTs solely based on speculation and hype, resulting in many bad investments and emotional ups and downs. Eventually, I learned how to distinguish better projects from worse ones. I invested in a few NFT projects, such as The Bored Ape Yacht Club and other high-value projects that became lucrative investments in my NFT portfolio.
While there is no winning 'formula' when investing, there are a few things that you can do to increase your chances of being profitable. Investing in NFTs (and other digital assets) is a game of probability. In other words, you need to set yourself in a position where your odds of winning are higher than your odds of losing.
In this article, I'll share useful tips to help you increase your radar for detecting blue-chip NFT projects to increase your chances of successful profits. While it is not a guarantee that you will make a profit, it will give you an idea of what to look for in projects and how to spot those red flags that will help you avoid costly mistakes.
10 Powerful Tips to Invest in NFTs in 2023
1 - Community
Before investing in an NFT project, it's crucial to engage with the community first. I use Discord to analyze the project's community. Joining the Discord channel is an excellent way to determine if the creators are active and responsive and if the community is discussing exciting topics. A project's community can be considered as its marketing department. A loyal, active, and engaged community is a significant plus for any NFT project. Twitter Spaces is also an excellent tool to interact with NFT communities. Listening to the creators and community members of a particular NFT project will help you gain insights into the people behind the project.
2 - Trading Volume
As you start exploring a new NFT collection, checking its trading volume is crucial. You can do this by reviewing the buying activity and history, which gives you an idea of how many people are buying and selling NFTs in that specific collection. If a collection has very few sales, it might be difficult to sell your NFT in the future. On the other hand, a high trading volume doesn't always mean better returns. It could indicate that the NFT is overvalued, which can lead to a price crash. It's also an indicator of the hype surrounding the NFT collection. In case the collection is not released yet, you can look for Twitter activity to gauge interest levels.
3 - Utility = Value
When purchasing an NFT, it's crucial to analize its utility or purpose for owning it. As an investor, I ask myself how holding the NFT will bring value to my life. Only if the answer is clear and I see personal benefits will I consider investing. Exclusive community access, event admission, or digital artwork are worthwhile investments only if they genuinely add value to you. Avoid investing based on hype and speculation, as these projects will likely fail. Instead, prioritize projects that prioritize utility as the primary goal to provide valuable benefits to their holders. NFTs with creative ways of implementing utility might dominate the industry.
I would like to share an example of a recent trade to emphasize the importance of NFT utility. In 2023's bear market, I invested in a Porsche NFT due to its valuable utility. Porsche provided NFT owners with various benefits such as factory visits, exclusive networking events, and test-driving opportunities, among others. These perks made purchasing the NFT from Porsche worthwhile for me, with a mint price of 0.911 Ethereum. A few months later, the NFT's value increased to 2.2 Eth, resulting in a 140% gain. This is a remarkable return on investment during a bear market. The lesson to learn is that a strong and useful utility can significantly increase the value of an NFT project over time.
4 - Invest in People
NFTs are a relatively new technology, it's hard to predict their future, but you can increase your chances of success by investing in people with successful backgrounds who have proven to adapt to changes in technology. To minimize risk, it's important to analyze the experience of the team running the project you plan to invest in. This will help you see their track record, both successes and failures, which is a good indicator of future success. Check their Twitter accounts and find out what they were discussing before. Look for the creators on LinkedIn and research their previous projects. If the creators are anonymous, it might lead to a higher risk. Take your time and invest wisely in the right people and team to maximize your chances of success.
5 - Roadmap
When considering investing in an NFT collection or Web3 project, it's important to look at their roadmap to see where they're headed and where they currently stand. Be cautious of collections that promise unrealistic goals based on speculation. Overpromising and underdelivering can cause NFT projects to fail. A good roadmap should be updated regularly to keep the community informed of the project's progress. It should strike a balance between ambitious and realistic goals, with specific and detailed milestones that are achievable. The roadmap should be simple and easy to understand for everyone involved in the project. By finding a project with a realistic but ambitious roadmap, you can increase your chances of success and minimize risk.
6 - Innovative NFT Projects
To succeed in the rapidly changing NFT space, it's important to keep an eye on innovative projects. NFTs are a new technology, and the projects that adapt to changes will survive, even during challenging market conditions. It's crucial to learn from the mistakes of others to create successful NFT projects. In the coming years, we can expect to see new projects that build upon the strategies and methods of successful past NFT projects. These projects will strive to create better NFT collections with unique features and utilities to offer to their holders. By following the innovations and improvements of these projects, we can stay ahead of the game and achieve success in the NFT market. Some projects will use creative tokenomics, and adopt trends to deliver a 'new' experience for their holders. These are great indicators that the team behind the projects is constantly innovating and willing to move at the rate the NFT technology develops.
7 - Investors Come First
Invest in NFT projects that give value back to their holders. The unfortunate truth is that most people that invest in NFTs mainly care about making a profit and a high return on investment. Successful NFT projects often offer airdrops or other valuable rewards to their holders, because they understand that the investors are there to make profits, primarily. People who own NFTs appreciate getting free and valuable rewards or being acknowledged for being part of a project. Projects that have timed their airdrops well have kept their community engaged and motivated, even during market downturns. Look for projects that prioritize rewarding the community as a whole instead of just the creators. By investing in such projects, you can increase your chances of success and potentially earn significant returns on your investment.
8 - Use Analytics & Tools
Using analytical tools will give you a broader view of the financial status of an NFT project. There are loads of them out there, like Nansen, RarityTools, NFTgo, degenz.finance, SolanaFloor, Etherscan, Blur and Parsec to name a few. These tools can give you valuable information to help you make better trading decisions. Seriously, trying to trade NFTs without these tools is like driving through a storm without windshield wipers. Check out our article named 8 Powerful Strategies Top NFT Traders Use.
9 - Buy At The Floor
When purchasing an NFT from a collection, you may come across certain visual traits that make the NFT rarer and more attractive. Buying a visually stunning NFT, such as an ultra-rare golden-skin monkey, can be tempting. However, selling a rare NFT for a fair price is statistically uncommon. If you decide to sell your 'ultra rare' NFT, finding someone who truly appreciates its value and will pay a fair price may be difficult. Selling it quickly might require selling it at a lower cost, leaving money on the table.
Through my experience trading NFTs, I have learned that it is wiser, less risky, and easier to purchase NFTs close to the floor price. If you decide to sell your NFT in the future, you can list it close to the floor price, which would be a fair price, and you will have a higher chance of selling it quickly. It is possible to get lucky and sell an ultra-rare NFT at a high price, but investing in projects at the floor price is likely to yield better long-term results. If you have a big budget, it would be appreciated by the community of that specific project if you purchased a few NFTs at the floor price, as it would increase the collection's overall value, resulting in a win for everyone.
10 - Take Profits or Cut Losses
NFTs have only been around for a few years, and there's still plenty of room for errors to occur before they reach their full potential and are adopted mainstream. As a result, we continue to see new projects emerge regularly, and traders often switch between them based on which project appears to be the most trendy at the moment. Before buying an NFT, It's crucial to have an exit strategy in place. Based on my experience in this field, I've observed that many people have a "paper hands" mentality, seeking to make a quick profit and abandon a project soon after. While long-term investments may be a viable option for mature markets, the NFT market is still in its early stages, and it's crucial to have an exit plan for each project you engage with.
Finding your Guild is extremely important, but we don't always talk about it much. You should hang out (digitally or physically) with a small group of people who invest in NFTs. It's tough to find good investment opportunities in NFTs by yourself. But, if you're part of a group of NFT investors and creators, you might discover the next big project early.
We'd like to invite you to join Flagship's discord community. We can be your guild and help you out!
To Sum Things Up...
Many NFT projects are coming out each month. Most of them, about 95%, don't add much value and don't do well in the long term. However, the ones that keep going and come up with new ideas are the ones that will become highly profitable in the next 5-10 years. Using this list of NFT Tips for investors will increase your chances of making smarter purchases in the world of digital collectibles. Plase invest responsibly and do your own research before investing.
That's it for now! Stay safe!
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Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.