Having a perfect NFT trading strategy is necessary for anyone who is looking to get into NFT Market. Non-fungible tokens are climbing up in the trend list as the hype is unreal. Everyone wants to jump in this tremendous buzz ride of NFT. This eventually is revolutionizing the internet community.
NFT is becoming a fashionable method of investment. People are looking to invest in NFTs because of their safe approach and decent profit margin.
Why Invest in NFT collectibles? Is it a good investment?
There are many reasons why NFTs are trending these days in the Cryptocurrency sector; we have highlighted some for you:
NFT Market is Fresh
Although the history of NFT goes back to 2012, the actual effect was observable in the later stages of 2021 when pioneering sales such as Beeple Art (roughly $69million). With NFT being fresh, the odds of the industry surviving in the market are in its favor thanks to Cryptocurrency fans.
So the market being fresh serves individuals on a first come first serve basis i.e. putting your foot in early will set you in an excellent position to reap the rich perks that come in near future.
The value of NFTs is going to grow in near future as more individuals, including investors and content producers will keep engaging themselves in the field.
There have been various reports regarding people who made themselves a fortune by trading in NFTs. Often these tokens are given out without any price. And with time, the value of these tokens gradually increases because more and more people are lured towards the novelty of the assets.
Hence, investors with a proper strategy have more chances of gaining fair returns in both the short and long term.
Promoting Content Authenticity
NFTs allow digital artists and content producers to transform their work into tokens without being afraid of copyright. Further, investing in the asset class gives artists a sense of confidence that their work is safe.
But, recently there have been a few instances where are artists are reporting that their artwork is tokenized without any agreement or contract. Some experts believe that this issue will get sorted in a short period of time because NFTs constantly receive new features that make the NFT marketplace more efficient.
So, before promoting any artist’s work, make sure that the NFT marketplace you are investing your money in has multiple content creators’ validations and proper security credentials.
Reasons to have an NFT Trading Strategy
Nowadays, NFT collectibles are considered a profit-earning investment. But, before you invest in these collectibles it is advisable to have a proper trading strategy that will help you make a huge profit.
So whether you like it or not, the actual purpose of trading any asset is to help the trader earn more, and not having a proper NFT trading strategy will make it difficult for you to sustain yourself in the market.
Benefits of having an NFT strategy:
- The proper approach in different deals
- Provides massive returns on investment
- Helps you keep your focus irrespective of market situations
- Acts as a blueprint and assists you in analyzing your previous performances
Basic NFT metrics
At present, there are different NFT projects claiming to provide investors a fair value for their money. This claim is helpful to a certain extent as it helps retain the fuss around NFTs, but at the same time, it is creating different problems for traders.
The majority of traders are wondering how to select a worthy NFT project from the endless list in order to get large profits from the market.
So, if you think you fall under this group, here are 4 fundamental NFT criteria to guide you through your NFT trading or investing decisions.
1. Estimated Market Cap
Analysis of any project’s market capitalization is a smart move to identify a proper NFT project. The movement in the NFT market cap is not as quick as Fungible tokens i.e. cryptocurrencies because of their way of design. Rarity delivers a thorough assessment of the NFT market cap. So it’s worth checking out such tools.
Further, when an NFT project has a large market cap, it means that there are many owners of NFT who are willing to pay a large sum of money to buy the NFT collection from another.
2. Diamond hands balance
Another metric to examine while NFT trading is the number of holders who are yet to sell their NFT collection. These holders are known to be long-term believers of the project because they are willing to commit to the token regardless of what happens in the marketplace.
The higher the diamond hands’ balance, the more chances that the enterprise has long-term plans. Nansen Analytics is the ideal platform choice for this analysis.
3. Unique holders
The number of unique holders takes a number of addresses that hold NFTs into its consideration. Hence, when the number of addresses owning the token is big it shows a larger community, which will contribute in marketing the product to other potential investors and also increase the token’s value.
So, to verify the number of unique holders for any NFT, the Dune Analytics NFT comparison dashboard might come in useful while NFT trading.
4. Volume Traded
This metric shows us the number of tokens traded for a specific NFT project during a specific time frame. So, the bigger the volume, it justifies that the project is in high demand and popular amongst investors.
You can assess various NFT trade volumes on a prominent marketplace such as OpenSea. OpenSea helps you notice if the project is in high demand. Also, if you are using a different platform, this data is generally accessible on the data page for the NFT.
Factors for Evaluating NFT collectibles
Because people still interpret NFTs as a new crypto industry, analysis is going to be a hugely challenging task. So here are five critical variables to help you evaluate your NFT collections.
Age of NFT
The NFT industry has been around for a while now, however, NFTs became popular late last year but still, there were few projects that survived the storm unleashed at crypto-related ventures over the years.
NFT collectibles existing before the popularity of the sector are generally known as digital assets with a high value than others.
On-Chain or Off-Chain
NFT collectibles on the basis of On-chain mean that the token’s metadata is uploaded to the network’s smart contract they reside on. Further, this provides a degree of validation that they will exist as long as blockchain technology is still in existence.
Contrarily, Off-Chain NFT collectibles are tokens that store the information separately because of storage restrictions.
In short, On-Chain NFT collectibles are more valuable compared to launched Off-Chain.
Background Information on the Project
Nobody is willing to invest in an NFT made by developers with a questionable history. Hence, thorough background information on a project developer is important. Doing this is risky because a developer may put up an act to convince detriment investors.
Even though there is diversity in an NFT collection, those with rarity are regarded as more valuable than others. So, buying rare NFTs is more costly than a random item in a collection.
Top 5 NFT Trading Strategies
The purpose of trading NFTs is to get an enormous profit, while there are several approaches to achieve this goal, here are the top 5 NFT trading strategies for traders:
1. Buy the Floor
Non-fungible tokens are gaining popularity day by day so chances are they will continue to exist for a long time. With this in mind, you may want to consider buying an NFT at their floor price.
Just because an NFT has a low price doesn’t mean you should immediately buy it, you need to choose a project of your interest. For example, you may go with rare NFTs above others and select the token with a floor price inside that category. Buying the floor is a smart move in NFT trading. It sets you up for enormous growth in the near future.
In short, purchasing the NFTs at floor price will help you book an early seat in the NFT token’s path of higher development.
2. Search for NFT Google trends
Whether you are new to NFTs or not, you can quickly evaluate the market popularity by analyzing Google trends.
The Google trend is useful in analyzing public sentiment regarding any term or subject. Searches for words are scaled from 0 to 100. Further, when the rating is high, it shows us that many people are showing interest in NFT collections and indirectly indicates a good time for buying.
However, when the search trend is low, one needs to tread cautiously because fewer people are showing interest in the market.
3. Buy NFT Collectibles With Few sellers
When there are different sellers for an NFT collectible, it becomes difficult to trade tokens unless you are willing to dispose of your holdings at a low price. This will surely reduce your profit margin.
However, if you’re thinking of selling an NFT that has multiple sellers, examine the seller’s previous prices to see if they are put above recently completed transactions.
Further, check the space between mentioned sale prices and see if sellers are showing any anxious behavior to sell at a particular price. If prices are close enough, it shows that the seller may respond quickly to decrease their price if you make a selling order lower than theirs. This further lowers the value of the asset.
4. Value Strategy
While doing NFT trading, one should consider buying an NFT that is highly valuable. To identify an NFT value, you will require a tool like Rarity, that analyzes different NFT projects and defines their rarity over others.
Whether there are 10,000 Cryptopunks selling at a high price, the ones in the image above are most unusual because they have traits that other punks in the collection don’t have.
5. Buy the Ceiling
Ceiling NFTs are uncommon, costly, and very popular assets. Investing in these assets is mostly for traders who have tons of cash to spare. Further, these NFTs have great scope for development, especially when popular figures like celebrities or influencers associate themselves with them.
One obstacle with ceiling NFTs is that very few people will be able to afford them due to high prices.
By now we hope you got a fair assessment of how to approach NFT trading. With the support of Blockchain technology, NFT trading is going to transform into an excellent investment platform using top NFT trading platforms.
But, don’t get carried away with these NFT trading strategies, they may appear simple but pose significant challenges. So, trade carefully!
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NFTHI does not recommend any kind of Investment in NFTs or NFT trading. All the strategies are merely educational references.
Conduct thorough research before you start with NFT trading.