NFTs have evolved from being the punchline of JPG jokes to genuine blockchain applications that may be able to compete with DeFi. Clearly, institutional investors are onto NFTs, and cryptocurrency enthusiasts, retail traders, and casual NFT fans are excitedly stocking up on apes, bricks, and mutants in the hopes of getting their hands on some.
What guidelines should casual NFT traders and investors go by while seeking NFT projects that are likely to succeed or whose assets will appreciate in value? You might benefit from the assistance of an NFT Marketplace Development Company to better comprehend this.
NFT fundamentals and two areas of particular importance
NFT stands for non-fungible tokens, which are exclusive blockchain initiatives with control over the blockchain.
Here is an example to illustrate how NFTs function:
- There is only one $50 bill between us.
- There is no value difference between the two bills; they are identical.
- If a famous person signs your $50, it becomes substantially more valuable and changes entirely from what it was before.
- Similar to how NFT’s value is based on its rarity and the expectation that it will increase in value
At the moment, NFTs’ defining characteristics are uncertainty and volatility. Many experiences a 10- or 100-fold increase in a matter of weeks before they crumble to nothing.
You must thoroughly study and assess initiatives before entering this market. Even if investing in an NFT at this point may involve more work than buying a top token, the benefits of becoming an expert in this field will almost probably be worth it.
NFT will play a significant role in the metaverse, art, collectibles, gaming, DeFi, utilities, and sports in the future, although very few individuals can claim to be specialists in this field.
- Collectibles (e.g. CryptoPunks)
One of the key forces for NFTs entering the mainstream is CryptoPunks, which is regarded as one of the earliest instances of “irreplaceable tokens” on Ethereum.
On November 10, there were $8.15 million worth of CryptoPunks transactions, which is eight times more than there were NBA Top Shot transactions, according to Footprint.
(Total volume, one of the fundamental indicators in the NFT market, counts the total value transferred between users.)
A Punk’s worth is determined by its type, amount of attributes, a combination of attributes, and degree of personal preference. Due to the individuality of each avatar, employing one as a profile avatar has evolved into a mark of online identity. People now pay hundreds of thousands of dollars to digitally display their support for cryptocurrencies or their bank accounts.
Larva Labs’ CryptoPunks is a collection of 10,000 randomly produced pixelated avatars of crypto-punk NFT collectibles and is one of the initial NFT initiatives on the Ethereum network.
When CryptoPunks was first made accessible, they were completely free, but they were immediately grabbed. Punks have now been sold 11,744 times in the previous 12 months.
The most popular Punk right now, according to Larva Labs, is “#3100,” which sold at auction on March 11 for $7.58 million. It is now valued at 35,000 ETH, or roughly $167 million, a 2100% rise. It has the most expensive NFT in the entire globe.
Why are these punks worth so much?
- CryptoPunks will always be the first NFT project in history
- They will always remain scarce
- They are an undeniable status symbol
- NFTs in gaming (e.g. Axie infinity)
With its distinctive economic structure, Axie Infinity offers liquidity based on scarcity.
Players can produce, gather, and trade in-game NFTs like land, objects, and animals called Axies in the game Axie infinite, developed by blockchain startup Sky Mavis in Vietnam. Investors like Mark Cuban and Andreessen Horowitz contributed hundreds of millions to it.
With its play-to-earn economic concept, it offers a look into a time in the future when work and play are merged into one.
How do you spot the following huge NFT project?
NFTs have a completely distinct future trajectory within these niches and span a wide range of industries, such as collectibles, gaming, and the arts.
Instead of making broad assessments of NFTs as a whole, you should evaluate particular projects within their proper context, focusing on the issues they are attempting to address, the distinctive experiences they hope to produce, and the team’s capacity to make their goals a reality.
- Details regarding the project crew
If the founders have knowledge of both blockchain technology and game, this is a team with a lot of promise. For instance, the Axie Infinity team created the Ethereum ecosystem’s most popular game, Kingdom, a virtual pet game. An expert in computer science with a Ph.D. was part of the founding team of CryptoPunks, which has a lengthy history of successful blockchain and app development.
- Investors and partners
A well-known venture capitalist participating will increase the project’s visibility and legitimacy. As an illustration, a16z led the $150 million investment round for Axie Infinity at a $3 billion value.
- Transaction frequency
The top projects are typically those with a lot of transactions per second, such Axie Infinity and CryptoPunks. A rapid increase in participants will be followed by an increase in transaction volume, boosting user confidence. Do not, however, dismiss emerging projects too quickly.
You can determine whether the market’s asset mix is fluid or stagnant by examining liquidity. For instance, if you invest in a particular NFT with a sluggish market, you may find it difficult to sell it for a profit or may need to wait for additional participants. Since the sale price is disclosed in the public NFT sales records, a pattern of slow sales may have an impact on the market value of your NFT.
Also Read: How Are NFTs Useful For Decentralized Finance (DeFi)?
It is crucial to take into account an NFT’s intrinsic worth, which includes the following other values in addition to scarcity when creating or holding one.
- Exchange value: It is the NFT’s purchasing power, or its value when compared to other assets like money.
- Use value: which we define as a good’s ability to fulfill a need, is the quality of a good that includes elements such as amusement value, collector value, social value, production value, etc.
- Value for entertainment: The NFT has amusing characteristics and can be applied to leisure and gaming settings.
- Value to collectors: The NFT exhibits qualities of value preservation, appreciation, and remembrance.
- Social value: NFT products with a significant user base and fan base have social value because they enable users to express themselves, reveal their identities, participate in communities, build trust, or just flaunt their wealth.
- Production value: This NFT has the potential to generate profits.
The user’s ability to use a CryptoPunk to advertise their position within the crypto community determines its genuine value. NFTs in Axie Infinity let players earn extra money while they play and alter the gameplay environment.
It is not unexpected that institutional investors are investing in NFTs given their rapid growth. Smart investors must thoroughly evaluate projects in order to make a value judgment, regardless of whether they are used as a status symbol or as a chance to make money.
Author Bio: Suzanne Dieze is a technical content writer and preferably writing technology-based blogs and articles. I have a few published pieces under Mobile Based Applications, and Data science consists of proven techniques, future costs, and benefits.