7 Things to Consider Before Buying NFT Art

7 Things to Consider Before Buying NFT Art

To make sure you're investing wisely, research the seller's background, prior sales, and market volume before making an NFT buy. Although it is true that every investment is different, the basics of investing are usually the same. Whether you are buying a piece of art, company shares, a cryptocurrency, or your first NFT, you must understand what you are getting. The average monthly trading volume of NFTs rose from $64 million in the first half of 2021 to over $700 million in the second, causing NFT art marketplace to become a global phenomenon last year.

On digital collectibles, which can include anything from artwork to sports trading cards, people spend huge sums of money. It is essential to look into the following factors if you intend to invest a sizeable sum of money in an NFT. Therefore, what specifically should you check before buying?

The origins of NFTs

First and foremost, it is important to understand how NFTs are made. A minting method is used to produce NFTs. A copy of a file is then produced on the blockchain network by minting NFTs.These decentralised networks maintain irrevocable records of the asset's acquisition and disposal as well as its current owner. The vast majority of these digital works use the Ethereum network, although Cardano and Solana are used as well.

The NFT's creation makes it easier to later buy, sell, or trade it. It is crucial to keep in mind that even if the underlying file of the NFT is copied, the ownership will not change unless the current owner agrees. An NFT cannot be copied with the intention of selling or trading it as the genuine article.

Opportunities for Whitelist

Those of you planning to purchase your first NFT might be familiar with the term "whitelist." So what exactly is a whitelist? The process by which a wallet address is expressly granted access to a specific privilege for a specific NFT project is known as an NFT whitelist. For a limited time, whitelisting gives lower mint price and early access. Whitelists also stop transaction costs from rising.

In conclusion, whitelists may be a great way to increase the revenue from your NFTs, and it's important to understand the many benefits of being whitelisted.

Vision for Future Developments

You must determine as quickly as feasible what the seller believes are the potential outcomes and goals for this specific NFT collection. Would they prefer to sell it to collectors who would then resell it to other individuals? Or do they wish to make a sale to buyers who intend to keep it?

How precisely will the value proposition (utility) be provided throughout time? What are the long-term goals, if any, and do you consider them to be reasonable? If the future vision seems too fantastic to be real, consider the possibility that it won't come to pass.

The NFT's Value Proposition's utility

Determine what the NFT serves, unless the initiative is art-based and its value is restricted to the NFT art sector. For instance, NFT designers can concentrate primarily on the NFTs' visual features.

Is the value only there in the digital sphere, or is it also present in the real world? Utility includes a project's fundamental value. Consider an NFT that is a one-of-a-kind photograph of a particular celebrity and has both digital and physical value. In contrast, a meme template NFT just has digital worth.

Unless your endeavour is completely artistic in character, in which case its applicability will be restricted to the art world only, consider what the NFT can do for you. Is the value restricted to the online space, or does it also apply to the real world? The usability of a project determines its value. While an exclusive image of a celebrity used as an NFT has value in both the digital and real world environments, a model for a meme NFT only has worth in the digital space.

Supply of Rarity

The rarity of the NFT is one of the main aspects that has to be looked at. The distribution may be extremely rare, uncommon, or common. The following percentages of distribution are the most likely:

  • Super Rare - Extremely rare NFTs are frequently the most valuable. Their dispersion is therefore less than 3%.
  • Rare occurrences can have a distribution that is higher than 5%. For rare objects, a reasonable estimate is 5–10%.
  • Ordinary - Common NFTs are widely used. Their dispersion, therefore, surpasses 85%. 88 to 94% of the distribution is most likely.

Characteristics and Market Reputation

NFTs can be bought on many different websites, such as Opensea, Solsea, Super Rare, Binance NFT, etc. To choose the best NFT market for you, you must first respond to the following questions: What is the platform's liquidity level? Finding a buyer in the future will be challenging if there isn't much available. Additionally, your choices for purchases will be limited.

There are currently many different NFT platforms emerging on the market, and not all of them are reliable. It is crucial to conduct research before making any NFT investments and to only work with reputable platforms. By doing this, you will be safeguarded from fraud and given the NFTs you ordered.

One of the aspects you should look for in a platform in this case is transparency. For instance, to make sure no one is offering NFTs for more than they are worth, you may examine if their social media pages are often updated and keep an eye on their pricing every day. Additionally, read the feedback left by prior users of these websites to get an idea of how reliable they are.

Transaction Costs

When exchanging bitcoin, buying an NFT, or carrying out a similar operation on a market platform, transaction fees are frequently levied. The same is true for traditional e-commerce sites like eBay and Depop, although platform-specific costs are involved.

Before agreeing, make sure you are informed of both sorts of commissions. Some fees are fixed, while others are calculated as a percentage of the transaction. For instance, OpenSea charges sellers a transaction fee of 2.5%, of which 2.5% of the selling price is paid to OpenSea. Nevertheless, buyers incur no transaction costs. This is valid for the majority of NFT markets, such as Known Origin and Axie.

On the other hand, other platforms charge fees on both sides of the transaction, like Rarible, which increases the NFT price for the buyer by 2.5% for each transaction. Before making any purchases, make sure you are aware of any expenses connected with your preferred platform.

Recognize the Threats of Purchasing NFTs

Since NFTs are currently exposed to significant market risks, including as financial and regulatory issues, there are currently a number of risks associated with crypto-collectibles. One of the biggest issues with non-fiat currencies, according to experts, is counterfeiting, which can easily be caused by any digital foundation.

You are in charge of your own security because there is no single institution that oversees crypto-collectibles (unlike with fiat currency, where banks hold your money for you). No one else will be able to spend or transfer an NFT if you lose the private key associated with it (similar to a login). This suggests that you run the risk of losing all of the value in the NFT if you misplace your private key.

Verification by the Seller

After choosing your first non-fungible token, you should view the seller's verification on any online marketplace before making a purchase. Similar to Twitter or Instagram, legitimate vendors on platforms like OpenSea will also have a blue verification checkmark next to their online identity to show that they can be found and are not false profiles. Make sure the NFT artist's profile has been verified if you wish to purchase from a well-known seller like World of Women or Cool Cats NFT.

The verification symbol, however, cannot always be relied upon to validate the legitimacy of the vendor. Many reputable NFT dealers still do not have their verification tick on particular platforms, unlike some social media celebrities. You should verify the NFT qualities if you want to buy from a profile like that that is unconfirmed. Look for a sizable amount of followers on the seller's social media pages, as well as a verification checkmark, as they could indicate the legitimacy of the profiles. To determine if it is an established account or a new client giving your desired yet initial NFT, you can also look at their sales data.

The volume of the NFT Market and Liquidity

The possibility that NFTs may not have the same liquidity as cryptocurrencies must be considered. Anyone looking to benefit from NFTs may face difficulties because they cannot be converted into fiat money as quickly as cryptocurrencies. Many experts advise fractionalizing your NFTs, or dividing them into smaller pieces, to boost their liquidity.

In addition to liquidity, it is important to look at the market size of the NFT industry. The types of NFTs that are frequently obtained determine whether the NFT market volume increases or falls. You may already be aware that the NFT market is still developing. Therefore, it is crucial to always check the market volume and liquidity of your desired beginning NFT.

Price Development of Other NFTs Sold by the Seller

If you want to make sure the NFT you have picked is a wise investment, you must review the seller's profile. To find out how much their items cost, look at their recent sales. After that, you can check the lower ranks to discover how much identical NFTs sold for in earlier weeks or months. The minimum price at which NFTs may be exchanged is the floor price. This will help you understand how NFT values fluctuate and whether or not your chosen NFT will exhibit those values in the near future.

Some platforms provide comparable data as well as other information that could not be offered on the market. Keep in mind to visit NFT Stats and CoinMarketCap if you want to learn more about NFT sales, value, growth, and other topics. It is crucial to assess the pricing success of the seller's prior NFTs before making your initial NFT purchase.

Recognize the risks

Most financial experts advise not investing more than you can afford to lose because NFTs are a new investment vehicle. Not a wise choice if losing the NFT's purchase price will make you anxious or worsen your financial condition.

Be cautious because there is a lot of speculation, hype, and plain fraud in the field of NFTs. There is no guarantee that the values of non-fungible tokens will rise; many of them may even fall. So always use money that you can afford to lose when you bet. It won't be financially disastrous if prices drop. Take your time, enjoy learning about the new world of digital ownership, and enjoy yourself.

Concluding Matters

It's crucial to comprehend NFTs' nature and the factors contributing to their rising value before making a purchase. And you must familiarise yourself with blockchain technology in order to fully understand the risks connected with this type of investing.

Author Bio
Sohail Asif

My name is SOHAIL ASIF, a writer with a flair for storytelling! Life-long learner, a researcher, curating every content with my original touch. While I am not researching, you can find me in my balcony talking to plants or lost in the mountain's story.

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