This poorly photoshoped realistic crypto punk has nothing to do with the article... well almost nothing, I made it myself for fun, and mostly wanted it to get your attention, hope it worked! Now the the article:
Buying NFTs cheap and selling them higher is not so different from trading altcoins, even though it doesn't look like it at first glance. On one hand we have jpeg files that sell for absurd amounts of money and on the other hand we have a crypto currency which you need to do technical analysis for before buying in. Looking from the surface, that's what it looks like for most people but that is not the case when you want to be a strategic and profitable trader.
Here's how trading NFTs is the same as trading altcoins:
• Research the project you want to invest in
• Figure out how it stacks up against other projects on the market
• Figure out which projects are the most successful right now
• Figure out which projects are the most successful that do the same things your project does
• Look up the team who made the project and their past accomplishments
• Get in early
• Avoid scams
Looking at this, you won't be able to figure out whether I'm talking about an NFT project or just a cryptocurrency coin, when in fact I'm talking about both, and it's traded the same way from the fundamental perspective.
Here are the 10 things I wish I knew before buying my first NFT
1. The gas fees
Gas fees is the fee you pay when creating an NFT, not to get too technical for explaining NFTs as I have other articles explaining it in more detail
Gas fees can be a real problem when trading with NFTs, especially when taking into consideration that I said trading altcoins is the same. Yes, from a fundamental analysis perspective it's the same, but when trading altcoins, there are no gas fees.
When the Ethereum network, where currently most popular NFT projects and websites are, gets too much traffic it gets congested and those who pay the most for gas fees get their transactions done the fastest. So in short, a congested ETH network could give you a gas fee of $150 for minting only one NFT, which presents a real problem when trying to flip NFTs with a small budget
2. Ethereum is not the only network with NFTs
As I started learning more about NFTs, I realized the ETH network isn't the only one that hosts NFTs, it's just the most popular option right now.
Other networks that host NFTs include Solana, Cardano and a few others
Trading NFTs on Solana or Cardano makes the gas fee not matter at all, since there's a lot less congestion to those networks, while Cardano also works on a proof of stake algorithm, making fees almost obsolete
3. Minting an NFT rather than buying from the resell market
When you buy an NFT from someone, you pay the full asking price, which is most of the time a lot higher than the minting price.
Bored Apes mint price was 0.08 ETH while now the lowest amount a Bored Ape NFT goes for is 20 ETH
When an NFT project announces 8888 NFTs from their collection to be minted for 0.08 each, they invite people to go on their website and pay the gas fee + the cost of the minting in order to own a totally random NFT. When I say random, it gets random traits which vary in rarity, the more rare the traits are the more the NFT sells for.
4. Not every NFT will get sold
This is something I wish I knew before going into NFTs, as most people look at the NFT hype and buy the most ridiculous NFTs they can find in order to sell when they appreciate in value. What they don't know is that most of those NFTs will never get sold.
NFTs from collections get sold easier because of many factors, one of which is the trust factor, they know it comes from a reputable source.
5. No copyright protection
There's nothing stopping someone from downloading your NFT and uploading (minting) it as their own. That's why most people buy NFTs from verified collections, such as crypto punks, bored apes etc.
6. You pay for gas multiple times along the way
You pay for gas when minting, when listing the sale & when you want to actually sell. If you want to change price at any point, well that requires paying for more gas fees. As anything you do with your NFT you have to interact directly with the blockchain.
7. Get in early
Getting in early is the best and most risky way of buying NFTs.
It's risky because of the point I made before, most of NFTs will never get sold
It's the best way of buying NFTs because the mint price is always much lower than resell price for a collection that people invest in
On the other hand if people don't want to buy those NFTs, then you don't even have a resell market and no people to sell your NFTs to
- NFT websites for research & analysis
There's websites like rarity tools that allow you to analyze the next project you want to get into
On said websites you can search for which projects have the most money invested, which ones are upcoming, who has how many followers on social media etc.
9. Research is king
Making money from NFTs involves a lot of research to get it right, you don't want to be a bag holder of 100+ NFTs but not be able to sell any of them
As long as you do your research right and get into a project that has a decent amount of followers, a decent amount of money and cool pictures for their collection, you probably found a winner. The problem is finding such projects early
10. Minting NFTs is extremely fun
When there's only 8888 NFTs in a collection and you get in early, minting an NFT without knowing what exactly you will get fuels a sort of excitement inside of you, it probably has that gambling element to it, without the actual gambling (as long as you do your research)
These are just some of the things I wish I knew before… All that being said, I've managed to sell my own NFT, that wasn't part of a collection, I made it myself in photoshop and put it up for sale. Never expected it to get sold, but you never know what the right description and good timing will bring. Hope you all are having fun with NFTs out there!
Thanks for reading.
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