The Top 6 Things to Check Before Buying an NFT

NFTs have become hugely popular commodities throughout 2020 and 2021, and there seems to be no end to their continued growth in value and desirability at the moment. However, NFTs currently range hugely in price and can sell for tens of millions of dollars. There are also a worrying number of scam artists throughout the NFT industry looking to make a buck from unsuspecting buyers. This is why it’s important to be vigilant and consider certain factors when purchasing an NFT.

So, here’s what you should look for to help you decide which NFT to buy.

1. The Unique Properties of the NFT

NFTs often come in the form of collections. For example, consider MekaVerse, Bored Ape Yacht Club, or PEACEFUL GROUPIES. These NFT collections consist of individual avatar NFT artworks, all of which have different properties. Sometimes, more properties equal a higher value, but sometimes it doesn’t. Sometimes the simpler avatars are most valuable, such as the basic Bored Ape NFT.

So, if you want to determine whether an NFT is worth buying, you should first check the rarity of the properties it has. You’ll want an NFT with the lowest percentage of commonness among the collection, and you can view these percentages in the Properties section on the NFT’s page, as shown above.

Checking the properties of an NFT is also a great way to confirm that it’s legitimate. A lot of scam accounts upload copies of popular NFTs, but cannot replicate the properties. So keep an eye on this section as a safety measure, too.

2. Seller Verification

Like Twitter or Instagram, official sellers on popular digital asset platforms such as OpenSea will have a blue verification tick next to their account name to prove that they can be trusted and are not impersonator accounts. So, if you’re looking to buy from a well-known seller, like World of Women or Cool Cats NFT, make sure the account has a verification tick.

However, this verification tick can’t always be used to check the seller’s legitimacy. Many legitimate NFT sellers don’t have a verification tick on certain platforms, just like certain influencers on social media that aren’t yet verified. So check the NFT properties as a backup measure if you want to buy from an unverified account.

You can also check the seller’s social media accounts to see if they have a decent follower base and verification tick, which can indicate their legitimacy. You can also check their page’s sales stats to see if it’s a well-established account selling your desired NFT or an account that was very recently opened.

3. The Market Platform’s Transaction Fees

When you exchange crypto, buy an NFT, or perform a similar function on a market platform, you’re often charged a transaction fee. The same goes for traditional e-commerce sites like eBay and Depop, but these fees vary depending on the platform.

For example, OpenSea charges a 2.5% transaction fee for sellers, in which 2.5% of the sale value will go to OpenSea. However, buyers don’t need to pay any transaction fee. This is the case for most NFT marketplaces, including Known Origin and Axie.

However, some platforms charge a fee on both ends of the transaction, such as Rarible, which charges the buyer a 2.5% fee on top of the NFT price per transaction. So make sure you’re aware of any existing fees on your chosen platform before making any purchases.

4. NFT Liquidity and Market Volume

NFTs don’t have the same liquidity as crypto coins, which is important to keep in mind. You cannot liquidate an NFT into traditional currency nearly as easily as you can with cryptocurrency, so this may come as a problem for those investing in an NFT for a profit. Some experts suggest fractionalizing your NFTs to increase their liquidity rates, which essentially involves splitting your NFT into smaller parts.

On top of liquidity, it’s important to consider the market volume of the NFT industry. At the time of writing, the NFT market volume stands at almost $40 billion, and the rise or fall of this number is heavily dependent on the type of NFTs being purchased regularly.

As you know, the NFT market is still very young. Just a few years ago, hardly anyone was talking about NFTs, and we certainly weren’t seeing these digital artworks sell for millions. And, as with many companies or industries that seem to explode overnight, the peak can be short-lived. So it’s important to take this into account if you want to buy an NFT as a more long-term investment, rather than something to own as an art piece or sell in a few months.

5. The Price Performance of the Seller’s Other NFTs

If you want to confirm whether your chosen NFT is a good investment and will reach a higher value, it’s always a good idea to check the seller’s account. Here, you can take a look at their previous sales and find out what price their pieces are selling for. You can then scroll down on the table and check out how much the same NFTs sold for a few weeks or months ago. The bottom end of the value range is known as the floor price, which is the minimum price the NFTs are trading for.

This will allow you to get a good idea of how the NFT prices fluctuate and whether it correlates with what you’d like to see in your chosen NFT In the future.

Other platforms offer these kinds of insights, as well as additional stats that you might not be able to access on the marketplace. Sites like NFT Stats and CoinMarketCap offer interesting data on NFT sales, value, growth, and more, so be sure to check them out if you’re looking for more in-depth information.

Is an NFT Worth Buying? Additional Considerations

There are a few extra steps you can take to ensure that your NFT of choice is worth buying, including checking the utility of the NFT project in question. Some (but not all) NFT projects offer investors utility, as do many decentralized projects in the crypto world. Utility often refers to a value that goes beyond price alone. For example, a project could offer investors discounts, early access to new releases, or similar.

On top of this, you should always keep gas fees in mind. The majority of NFTs on the market can only be bought using Ether (ETH), and Ethereum is known for its hefty gas fees, which are charged to users to make up for the computational power costs incurred when running this mammoth blockchain. So, if you want to avoid frustratingly high gas fees, consider shopping around for NFTs that can be bought with alternative cryptos, like Solana (SOL) or Polkadot (DOT).

You should also familiarize yourself with NFT copyright law before making your first purchase so that you understand what exactly you own when you buy an NFT.

It Always Pays to be Safe When Buying an NFT

While you can certainly make huge profits from buying and selling NFTs, there are many different mistakes you can make in the purchasing process. Cybercriminals are currently taking advantage of the NFT industry, and some NFTs simply aren’t worth buying. So make sure you consider each factor above before completing that transaction.

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