In March 2021, the sale of an NFT art marked a turning point in the NFT world. This was no ordinary digital art. It was a piece by the popular artist Beeple that was auctioned by Christie’s at a whopping $69 million. Besides making global headlines, the event led to an influx of investors, both experienced and amateur, to this rapidly growing non-fungible space.
According to Chainalysis, the NFT market is today worth $41 billion. And it’s fast catching up with the fine arts industry.
And traditional auction houses like Christie’s and Sotheby’s are taking note of this. They’ve already opened their doors to NFT artists in the hope of banking on the lucrative opportunities the space holds.
For centuries, fine art was often confined to the upper echelons of society. But NFTs have made buying art much more accessible and not to mention uber trendy. And looking at some of the record sales they’ve brought in, they could be sound investments, too.
But purchasing an NFT art demands expertise and foresight for it to be a prudent investment. Here are 5 essential tips that every savvy NFT investor knows.
5 Essential Tips to Select a Winning NFT Art
1. Research the artist.
How an NFT art fares as an investment could depend significantly on its creator’s popularity. It could influence factors like secondary market demand and price appreciations.
The elite A-league artists like Beeple, XCOPY, and Mad Dog Jones, for instance, command a massive following. So, many of their work sell pretty fast. And there’s also a higher chance of value appreciation over time. This makes them a relatively safe investment. But remember, higher demand usually means higher price tags.
Then there are up-and-coming artists like Compusophy and Klara Vollstaedt, who’ve earned a reasonable following and some media recognition. Their work would be more affordable, with the potential to grow in value over time. So, if you’re on a limited budget, investing in one of their pieces could be a sensible option.
Of course, that’s not to say that you shouldn’t invest in a new artist. Remember, every elite artist started out in virtual oblivion. But identifying someone who could one day rise to stardom is no easy task. So, you need to do your homework, identify demand trends, and select work from an artist or project that aligns with your findings.
2. Select an NFT art that you connect with.
For many buyers, NFTs are investments—they purchase an artist’s work in the hopes of profiting from a price rise on a future date. NFT flipping is also common, where investors buy and sell within hours for a hefty gain.
So, undoubtedly, finding an NFT with the potential for value appreciation is essential. But selecting a piece that you can connect with is equally important.
When you purchase work you love and can relate to, chances are you’ll explore that genre further. This will help you build knowledge and expertise over time, which will come in handy when it’s time to sell (and even during future purchases).
Moreover, there’s no telling how long it could take to resell what you have bought. But one thing’s for sure—you wouldn’t want to be stuck with an NFT that you don’t even enjoy looking at.
So, invest in a piece that personally appeals to you. Besides, one of the best perks of digital art is the shareable factor. You can flaunt it on social media, use it as your profile picture, or even print and hang it in your home. (Paris Hilton displays hers on digital screens in her Beverly Hills mansion!).
3. Think of storage before purchasing your first NFT.
Purchasing high-potential NFT art could be an exhilarating experience. But keeping it safe is an entirely different matter altogether.
Take, for instance, the multi-million dollar NFT art theft Todd Kramer encountered in December 2021. The lost work, which included eight from the popular Bored Ape Yacht Club collection, were all stored in a reputed software wallet until it was compromised by a phishing attack.
The point is, despite the many security perks of blockchain technology, NFT art is prone to theft, just like fine art. Therefore, keeping them secure should be an important consideration before parting with a sizable stack of Ethereum.
After all, you wouldn’t hang a Monet in your living room without taking proper security measures. So, you wouldn’t want to leave your high-value NFT art vulnerable and unprotected.
Experts recommend cold wallets or hardware wallets for better security. They store data offline, providing greater protection against cyberattacks.
There are various sophisticated hardware wallets available today, like Ledger Nano X and Trezor Model T. But remember, they may not work with every marketplace. So, before you purchase one, find out which wallets your NFT marketplace supports.
Here’s a great article on additional steps you can take to keep your NFT art safe.
4. Make use of presale discounts.
Many collections offer their art at massive discounts during the presale period, giving investors and art-lovers the opportunity to grab a bargain.
Presale is a promotion period held right before minting. Collections often use it to create hype and build a following on platforms like Twitter, Discord, and Telegram, and lock in pre-bookings for brand new NFTs. So, it’s customary to offer discounts during this time, which could sometimes be as much as 80%.
And after minting, the secondary market opens up. This is when you get to sell your purchases, hopefully at a higher price.
Theoretically speaking, when a good is in limited supply (as in the case of NFT collections), higher demand should drive up prices. But how far the price will go up, no one can tell.
Take, for instance, the uber-popular Bored Apes Yacht Club collection. In April 2021, they went on presale for around $190 (0.08 ETH). And today, they’re valued at a staggering $267,000.
Of course, not all NFTs have been lucky enough to see this level of a price surge. But if you’ve done your research and feel confident about secondary market demand, it could still be a good idea to buy on presale.
And if you’re simply buying for aesthetic pleasure, presales would be an excellent option to find art at very low prices.
5. Understand the risks.
As with any investment (including fine art), NFTs have their own inherent risks.
They are essentially speculative assets, and there’s no way to accurately predict how they’ll fare in the future.
Just ask anyone who got a CryptoPunks NFT in 2017. Although given away for free at the time, today, they are fetching millions.
Of course, prices can move both ways, and it all depends on demand. But similar risks exist even with stocks and commodities. But the blockchain’s relatively shorter existence means there is very little data to extract from its history.
So, keeping yourself updated on market dynamics and weighing up pros and cons is essential for a sound NFT investment decision.
To wrap up
With the explosive growth of the NFT market, many have flocked in to grab their very own digital art asset in the hope of big returns.
Blockchain technology has certainly revolutionized how people see art—from how they are purchased and stored to appreciated and traded. With collections like Bored Ape Yacht Club and CryptoPunks selling at millions of dollars, NFTs have already earned their place as a noteworthy asset that commands serious attention.
But this is no get-rich-quick investment, and it’s not for the faint-hearted. So for now, experts recommend you treat it as a prudent option to diversify your portfolio without committing your entire life’s savings.
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