How to Invest in NFTs

Whether or not you’re interested in NFT technology, the cool artwork, and the community, it’s comforting to know that they’re a pretty straightforward way to add to your investment portfolio and enhance your returns.

NFTs are fairly new in the investment world. They can be profitable, but should be handled wisely.

What Are NFTs?

NFTs are non-fungible tokens, which simply means they cannot be changed or replaced due to them holding unique properties. Although NFTs have been in existence since 2014, they are currently much more popular, even though the market has shrunk when compared to the boom in 2021. The projections for 2025 see the market revenue being $608 million.

Non-fungible tokens are, by definition, unique. They hold their own codes and are therefore in limited supply. They can still be viewed by anyone who looks online, which makes people wonder why people pay a lot of money to have access to them. However, it is their unique coding that makes them so valuable and, therefore, helps investors attain a higher return on investment.

NFTs can sell for a lot of money. The record-breaking NFT, ‘EVERYDAYS: The First 5000 Days’, sold for $69.3 million. They are built using similar technology to cryptocurrencies, such as Bitcoin and Solana. However, cryptocurrencies can be exchanged for other items as currency, whereas NFTs cannot. 

NFTs can be bought, sold, and created by individuals. Knowing how to do so will be much easier after reading this guide.

How NFTs Differ from Cryptocurrency

NFTs and cryptocurrencies should not be confused, even though they are built using similar technology. 

The key difference is that NFTs are non-fungible, which means that they cannot be interchanged. On the other hand, cryptocurrencies can be interchanged in replacement for another currency. NFTs, however, can be bought with a cryptocurrency. 

Physical money is similar to cryptocurrency in that they hold an agreed-upon value. One dollar equals one dollar and one Bitcoin equals one Bitcoin. However, in the NFT world, it is very different.

NFTs hold their own unique structure and identification, which makes them intangible and not equal to one another. Hence, an NFT cannot simply be swapped for another NFT with expectations of the same value.

How NFTs Work

Firstly, NFTs exist on a blockchain. A blockchain is a public ledger that records transactions. When an NFT is created, it goes live on a blockchain to be bought and sold, all of which will be visible to the public. This transparency that shows the NFT increasing in value is what creates the excitement to invest. 

The most popular blockchain on which to buy and sell NFTs is Ethereum. However, other blockchains support NFTs too.

NFTs are digital objects that represent the following:

• Music
• Designer sneakers
• GIFs
• Video and sports highlights
• Virtual avatars
• Video game skins
• Art
• Collectibles 

Tweets from Twitter can also count as NFTs. One was sold for $2.9 million by Jack Dorsey.

Essentially, an NFT is a digital collector’s item, whereby the collector is the only person who has access to the unique digital file.

NFTs are used for monetization purposes. This innovation allows artists to sell their digital artworks, which hold unique identification codes. It’s also a great way for connoisseurs to invest and attain a profit. 

How to Invest in an NFT

The most interesting aspect of NFTs is their investment potential. To purchase an NFT you need to access a marketplace, much as you’d use Amazon or Etsy to buy standard products. The difference is that an NFT marketplace is purely for buying this type of digital asset.

To start an NFT purchase, you will need to create a digital wallet. In the wallet, you can store cryptocurrency, which is how you buy an NFT. 

NFTs can be purchased for a final price or via a virtual auction. The virtual auction option is similar to buying and trading cryptocurrency and stocks. Like stocks, NFT prices at auction can change rapidly depending on their demand at the time. 

There are several marketplaces that offer NFT sales, such as:

• OpenSea
• SuperRare
• Rarible
• Foundation

It’s best to buy from a verified marketplace, as some imposters will take advantage of newbies. 

Blockchains

Buying NFTs through blockchains is one of the safest approaches to beefing up your investment portfolio. Likewise, it can increase the value of your NFT over time by reducing the supply of the cryptocurrency.

NFT Marketplaces

Some marketplaces have their own cryptocurrency tokens. Should these tokens increase in value, then so will the value of the NFT. The tokens are designed for rewards and governance. Furthemore, there is the option to invest in NFT stocks, which entails buying stocks with NFT exposure. 

How to Sell NFTs

Of course, it’s possible and potentially quite profitable to sell NFTs. When you buy an NFT, you likely won’t want it forever. Most people want their NFTs to grow in value so they can sell them at a profit. 

To sell an NFT, you’ll first need to choose a marketplace. Most marketplaces will request a small fee for placing your NFT there and selling it. 

When you upload the NFT, the marketplace will need to verify the asset before it goes live for sale or auction. When it sells, the marketplace will handle the transaction and give you your share, which will hopefully include a healthy profit.

How to Create NFTs

Although some NFTs are rare and incredibly valuable, that doesn’t mean you have to be a great artist to create one. In fact, anyone can create an NFT. 

Creating an NFT is simply known as ‘minting’ a digital asset. Once you create one, you simply need to create a digital wallet and upload it to a marketplace. 

There are many software solutions that allow you to generate NFTs; one example is Appy Pie's NFT maker. 

The Pros and Cons of NFTs

As is the case with any investment, there are pros and cons to consider here. The main possible benefits include:

• Appreciation in value. Lots of NFTs have the ability to consistently appreciate in value, which almost guarantees a profit. 
• More buyers and sellers in the future. The popularity of NFTs and the ease of access to marketplaces, suggests that there will be more buyers and sellers in the future. This means more potential for future profit. 
• Smart contracts. Blockchains include smart contracts, which means that coded commands keep NFTs safe. Likewise, it means the artists will always get a commission. 

On the other hand, there are some cons you should be aware of before investing:

• Prices might not remain high forever. Not all NFTs can hold their value indefinitely, so there’s always a risk you’ll lose on your investment at some point. 
• It’s never free to buy and sell. There are fees involved in trading NFTs, so you’ll need to invest more than you bargained for. 
• Environmental impact. Blockchain technology can harm the environment as it uses a significant amount of energy, which in most places is still generated by fossil fuels.

Are NFTs a Good Investment?

NFTs can be a solid investment option for those who are interested in digital artworks, are looking for unique collectible items, or want to gain a return on investment. However, you’re highly unlikely to achieve significant profits unless you pay close attention to trends, invest in high-demand NFTs, and sell at the right time.

Hence, you need to have spare time and patience to make NFTs a worthwhile investment. 

The value of NFTs can fluctuate rapidly, depending on their demand. Therefore, you need a good eye for art and market trends to give yourself the best chance of making a profit. 

Of course, there’s a chance you could make a small profit even if you just buy and hold. As such, they can make a good investment option for anyone who’s just getting started. Not only are they fun, but they also give you an opportunity to own unique artwork if you like. They can be both collectibles and a tool for investing.