If all NFTs have one thing in common-that is uncertainty. You can never be 100% sure of what will happen to a project, it may grow 10 times in a week, or it may fall apart in the next week. The value evaluation of NFT is completely different from ordinary cryptocurrency. You need to follow a relatively new method to evaluate the value of NFT as accurately as possible.
NFT’s low liquidity, artistic diversity, and rapid changes in the market structure make the valuation of NFT more complicated, but this does not mean that you cannot find early golden opportunities. This article will help you understand the value of NFT and the factors you need to consider when buying any NFT. I hope it will be helpful to your investment.
NFT investment basis
If you want to get a decent return by collecting NFT, you must understand some basic principles of NFT investment. Some of them can help you acquire rare art, while others can help you discover fast-growing niches in the market. For NFT, you should consider the following five basic principles:
- Explore different vertical areas of NFT
Many people still believe that NFTs are limited to digital collectibles or paintings deployed on the blockchain. In fact, the NFT ecosystem has become very large and rich, with nearly many different vertical fields, each of which is satisfying different user needs. In recent months, the following areas are worthy of attention:
Top series like Cryptopunks and BAYC make millionaires almost every day. Using it as a personal profile avatar has become a symbol of online status, so people are willing to spend hundreds of thousands of dollars. Earlier, NBA star Curry also spent 180,000 US dollars to buy a BAYC avatar. Most collectors want to get an avatar, because this is a digital expression of their identity and personality.
Never underestimate the potential of blockchain games. We have seen that Axie Infinity has become one of the best NFT-based blockchain games that adopt the play-to-earn model. NBA Top Shot is still getting more and more popular, and Gods Unchained is also on the rise. As more active users and network activity grow, NFT games may become one of the most profitable opportunities in the crypto world.
Watching digital art works through VR provides a completely different experience and presentation. The details and dimensions are very clear, making it more special in the eyes of the viewer. Now imagine that you can perform the same operation in Metaverse. Projects such as Sandbox and Decentraland are working to create the most interactive meta-universe, which creates great value for their plot owners.
- Find the profitability of NFT assets
NFT valuation largely depends on the profitability of a particular collection or asset. It can be in the form of cash flow or other economic benefits. If you are a creator, your source of income comes from licenses and royalties, which can be adjusted to fair market value after balancing total liabilities.
Your NFT should also provide you with passive income, such as staking. NFT Staking is accomplished by allocating governance rights and determining the token economic model. This will not only attract more buyers, but will also increase liquidity.
- Choose projects with high liquidity premiums
When assets are difficult to convert into standard currencies, additional compensation will be made in the form of liquidity premiums. Since NFTs are also difficult to trade, you need to consider those with high liquidity premiums. If demand increases, the premium will get higher and higher.
Rare artworks are difficult to sell at ideal prices because it is extremely challenging to evaluate them from a general perspective, so instead of comparing valuations, make sure to check the sales history to determine the liquidity premium.
- Understand market sentiment
Believe it or not-most NFT collections are driven by hype or community support. In both cases, if you understand the market sentiment for a particular project, you will benefit a lot. For example, the generation of profile pictures and the art done by algorithms are key drivers, so the next time a similar project appears, you will know how the market will react.
The best way to crack market sentiment analysis is to explore more NFT markets and monitor why people are investing in new projects. This method may not be suitable for long-term price changes, but it will help you identify short-term and profitable price trends.
- Only invest in losses you can afford
When it comes to NFTs, you may have done everything you can do right, but you may still lose everything. This is the speed of market development and change. Long-term holding of promising and valuable NFT assets is the best strategy, because it provides enough time for the market to mature and create more buying interest around NFTs.
FOMO should not be the reason you buy NFT. If a project is too complicated, if you do not fully research and understand a project, you should not invest your hard-earned money and hope that it will bring you astronomical returns. Although this is not impossible, it would be a bad choice to invest most of your savings in NFTs.
How to evaluate the true value of NFT
It is difficult to invest in assets without proper historical data. But with the advancement of current cryptocurrency and blockchain technology, we can verify the value and demand of NFTs, taking into account the market economy and sentiment.
Although it is almost impossible to predict the precise value of any NFT, the different factors that drive high valuations can still be considered. The following are four main driving factors to help you find sustainable NFT projects:
If something is out of reach, it will gain more value over time. The unique NFT has attracted thousands of financially strong buyers who want to acquire rare value. Rare features and characteristics add great value to any type of NFT collection. It is not limited to legendary or super rare artworks. If you find that there are few unique characteristics that NFTs have, you can make a good deal.
- scenes to be used
NFT mainly derives value from rarity, but if it has high utility, it will have higher value. For example, if you buy a battleship from a famous artist and he is also creating a space battle game, if the same NFT is allowed in the game, then the price or value of that display rack will definitely be higher. Therefore, look for NFT collections that are interoperable and allow collectors to participate in exclusive events.
- Ownership history
If NFT tokens created by famous artists or celebrities with strong personal brand effects are issued, they will bring more traffic and sales. Even with the help of on-chain data, any previous owners of NFTs are difficult to track, but they add a lot of future value. Celebrities and athletes bring so many people into the NFT world, so if your NFT is strongly supported by influential people, it will be more valuable.
Nothing can compare to a strong community. In the world of NFT, almost everything depends on the community, and they will be the ones who get huge returns. There is no better way to evaluate the value of NFTs than to join the Discord server and talk to people who have been there since the beginning of the project. By understanding the past journey of any project, you can evaluate its future development.
- Artist background
When you plan to buy your first NFT, be sure to get a deep understanding of the artist’s background. If he or she works with top brands and has a good influence on social media, then this is a good sign and adds more value to the NFT.
Top NFT markets in 2021
It is undeniable that OpenSea has developed rapidly in the past year, and it has undoubtedly become one of the most mainstream and well-known NFT trading markets. In August alone, sales reached $3 billion. The interface is great and the process involved is super simple. Anyone who is not used to the NFT market will effortlessly explore the digital world and purchase their first NFT.
Rarible is a decentralized NFT market that makes buying and selling digital collectibles a unique experience. The intuitive design and interface are steadily attracting more active participants. Since Rarible is based on Ethernet Square of NFT market, Gas costs are unpredictable. It can become quite high on the day of casting. In addition to this, the platform is user-friendly, allowing everyone to participate. The live auction is exciting and unique. Creators can also receive high royalties of up to 30%.
Foundation is a P2P NFT market for creators only. Artists can create their profiles and connect their accounts, and then start auctioning their works. The main goal behind Foundation is to return control to creators who continue to create value. As a community, it is one of the best. As a platform, it is interactive and responsive. If you are a creator who wants to tokenize your art, you should start using Foundation.
When people say that 99% of NFTs will go to zero, this is true and certain, because most collections are not focused on building a community, and they have never added value by providing a unique digital experience for their holders . Sustainable NFT projects will continue to interact with community members and develop a clear roadmap for the future. Value assessment can only help you understand the demand/supply dynamics after considering different factors, but in the end, you should buy what you like and hold it for a long time.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/nft-valuation-how-to-find-potential-projects/
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