Buying and selling NFTs is done through an NFT marketplace. These marketplaces are specifically built to deal with blockchain transactions. Depending on the rarity of the NFT, they can cost up to millions of pounds.
Here’s a quick guide on how to invest in NFTs.
How to invest in NFTs in 3 easy steps
An NFT can be anything from art to music. Ideally, you’ll want an NFT with high-value potential. Note down when the sale will happen, what cryptocurrency it requires, and how many are going to be sold.
To purchase an NFT, you first need the right cryptocurrency. Most NFTs can be bought with Ethereum. Cryptocurrencies including Ethereum are sold at a specialised cryptocurrency brokerage or exchange, e.g. Coinbase.
- Cryptocurrency brokerage: A firm or individual that acts as a middleman to aid in the buying and selling of cryptocurrencies
- Exchange: An online platform for buyers and sellers to trade with one another
Always consider fees when buying cryptocurrency. Some fees may stay the same per trade while some increase with trade size.
Choose a marketplace
NFTs are bought and sold at marketplaces. Once you’ve chosen one, register and connect your crypto wallet. Crypto wallet requirements vary with each marketplace.
There are two ways of buying an NFT: you can buy one for a flat rate or bid for it. Regardless of the method, make sure you have enough crypto to cover both the transaction and the fees. Consider the fees of:
- Purchasing, transferring or converting crypto
- Gas fees, which are paid to miners for the computing power involved in recording transactions
How do they gain value?
NFT value is based on these factors:
- Ownership history: value increases if the NFT is created by a celebrity or brand
- Future value
- Liquidity premium: the higher the NFT demand, the higher the premium
Should I invest in NFTs?
There is uncertainty surrounding the value of NFTs in the future. Since NFTs are new to the market, it’s hard to judge how well an investment into NFTs will pay off. Caution should always be taken by investors.
You can find more information on the challenges and risks involved with NFTs in one of our blogs.
Are they a scam?
As NFTs increase in popularity, it’s crucial to be aware of scams. There are two common types of scam: impersonation and stolen art.
Impersonation is where fraudsters copy an artist’s work and release something almost identical. Buyers are lured by low-priced, high-quantity collections. To avoid this scam, verify the profile before purchasing. This can be done by checking the creator’s social media profiles, searching other marketplaces or performing a reverse search on the image.
Stolen art is where people have tokenised works that weren’t initially theirs. This scam is harder to avoid as it’s difficult for NFT creation platforms to verify ownership. Unfortunately for many artists, nothing can be done to stop fraudsters from receiving payment for their artwork.
Despite the scams and uncertainties, the future of NFTs holds great potential. It’s important to stay vigilant when making investments as they’re already valuable.