If you’re an investor, you may wonder whether NFTs are something you should add to your investment portfolio.
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The growth of NFT
The total value of NFTs in 2020 was $100 million and the total value of NFTs in 2021 was $21 billion.
NFTs have taken the media by storm. More and more people are getting NFTs even celebrities like Justin Bieber and John Cena.
However, you should not do something just because someone famous is doing it. Let’s take a closer look NFTs.
What Is an NFT?
NFTs are non-fungible tokens which are basically pictures and videos that people sell. Sure, you can just download any pictures but you don’t own it. If you own an NFT you have an irrefutable way to claim the piece of media as yours.
An NFT can take the form of a screenshot, an art, a soundtrack, a video, etc.
Who can sell NFTs?
Anyone can sell NFTs. Many artists who already have an existing fanbase sell NFTs.
There are also new artists that have made a lot of money selling NFTs although most of these new artists who made quite a bit of money with NFTs typically are unique in some ways (such as being a handful of 10-year-olds selling NFTs) so was able to attract an audience from the ground up.
In order to sell NFTs, people have to pay a gas fee. The gas fee can be between <$1–200+ If they don’t make any sales or don’t make enough sales, their revenue can be negative.
Where do you buy an NFT?
You can buy NFTs at platforms such as OpenSea, Solsea, MagicEden, etc. There are different types of NFTs. NFTs that are bought and sold using Ethereum called Ethereum NFTs and NFTs that are bought and sold using Solana called Solana NFTs are two examples. Each type of NFT has its own platform to do the transaction.
How do you buy an NFT?
In order to buy an NFT, you’ll need to have cryptocurrency. It could be Ethereum or Solana or other types of cryptocurrency. Depending on the type of NFT you buy, you will need to have different types of cryptocurrency.
You’ll need to buy NFT from a crypto exchange platform such as Coinbase or Newton (if you’re in Canada).
Then, you’ll need to transfer the crypto from the crypto exchange platform to your wallet. A wallet is where you store your crypto and NFTs. If you’re using OpenSea for your Ethereum NFTs, the most popular wallet option is Metamask. If you’re using MagicEden or Solsea for Solana NFTs, the most popular wallet option is Phantom.
You’ll go to your select NFTs exchange platform and connect your wallet to the platform. Once you are connected, you can start buying and selling NFTs.
What is the gas fee in NFTs?
When you buy and sell NFTs, you’ll have to pay a gas fee. This is the fee for the energy you used up when you made your purchase. When cryptocurrencies are being exchanged and transacted, it requires a lot of energy (not the energy from your home so you don’t have to worry about paying an extra energy bill) so you’ll have to pay the gas fee to cover the energy you used.
Ethereum NFTs can take up a lot of energy and the gas fee can be quite high sometimes $2000+ if a lot of people are making the transactions at the same time. To make it worst, the transaction may not go through so you’ll lose the $2000 in transaction fees and end up with no NFTs to hold or flip for profit.
I recommend starting with Solana NFTs as the gas fee is lower. Oftentimes <$0.1. For this reason, Solana NFTs are much more beginner-friendly. It wouldn’t leave your wallet empty and you learned nothing because the gas fee took all the money you have in your wallet.
Are NFTs legitimate?
OpenSea announced that the majority of the NFTs they sold on their platform aren’t authentic meaning someone probably took the pictures from the original artists and put them up there to sell.
MagicEden however, requires all the uploaders to authenticate first before it is allowed to be displayed on MagicEden so the chance of you buying a stolen piece of art is lesser.
Are NFTs investments?
An NFT can be an investment although most NFTs will probably be worthless in a few years. If you’re wondering why to go check out this article. Will most NFTs be worthless in the future?
NFTs can make you money in different ways. You can hold it and hope it goes up in value and then sell it for a profit or, you can quickly flip it. Just like you would with a house. You’d fix the house up and then quickly sell it soon after you bought it. You can flip NFTs for profit very quickly within minutes or hours or days of you buying them.
There are some NFTs that are so successful and famous like the Bored Ape Yacht Club that may be worth more in the coming years so there are values to holding it now. If you’re thinking of buying one, the cheapest one right now costs roughly $400,000.
NFTs can be great investments as they can be worth a lot more than you paid for in a short period of time but you’ll have to be careful with selecting your NFTs.
People have gone broke buying and holding NFTs that become worthless in a short period of time.
Should you buy NFTs?
You can certainly make money with NFTs by flipping it quickly so if you’re wondering whether you can make money with NFTs, you can. However, you’ll have to do your own research to decide whether you should play with NFTs Don’t put any money that you aren’t willing to lose into NFTs.
When it comes to whether you should hold NFTs for the long term. Most NFTs will be worthless in a few years so I wouldn’t suggest you to do so of course, I’m not a financial advisor so you must do the research on your own.
