Tips for investing in NFTs

3 Mins read

Cryptocurrencies have come a long way since Bitcoin was introduced in 2008. 

And now what was once regarded as a curiosity has become something of a mainstream investment. As can be seen in 2020 and 2021, cryptocurrency prices have consistently set and broken new records. 

Because of this, interest in digital assets is at an all-time high with thousands of investors looking to get in on the action.

Besides cryptocurrencies, NFTs or non-fungible tokens have also slowly but surely made their presence known. 

What are NFTs?

To the uninitiated, NFTs are tokens stored on a digital ledger i.e. blockchain. These tokens are entirely unique and not interchangeable.

NFTs are oftentimes used to represent files such as documents, images, videos, or music. This allows NFTs to be used as a type of digital signature or unique identifier. 

Also, it is impossible to counterfeit an NFT as the blockchain is maintained by thousands of computers around the world.

Because of this, people have begun using NFTs to sell digital art. This is done by basically linking ownership of a piece of art to the holder of a specific token.

For example, while a piece of digital art can be copied and shared a million times over, the person who actually owns it is the holder of an NFT.

To some, this may sound ridiculous, but to some, the value from the NFT is derived from the satisfaction of ownership. It has to be noted that every notable NFT project used a specialized crypto ad network, such as Coinzilla.

How do NFTs Work?

Most NFTs are based on the Ethereum blockchain – but there are other crypto blockchains that can or already have implemented NFTs.

Unlike the ETH token, NFTs do more than facilitate the transfer of funds or act as a medium of exchange. Rather, an NFT holds the proof of ownership of a particular file i.e. something like a certificate.

This has given rise to a market where punters exchange NFTs with the hopes of striking it big. You can check here in this Tezro article the best marketplaces that serve to trade NFTs and crypto art:

Given the potential for rapid growth, it’s easy to see why even amateur investors are tempted to get their hands on NFTs.

So, if you want to tap into the NFT market, then keep on reading:

Tips for Investing in NFTs

1. Do your homework

If you want to invest successfully, you need to first do your own research.

Remember: there’s no point investing in an asset if you don’t know anything about it. Take the time to get to know what you’ll be investing in.

This allows you to make better, more educated decisions. Also it allows you to determine how real-world events can affect your investment’s performance.

From here, you’ll know whether to jump in with two feet or pull out fast.

For example, changes in your government’s policy towards cryptocurrencies can have a negative or positive effect on your assets. 

2. Diversify your investments

Investing in the crypto sector can be risky… So this is why you need to take steps to safeguard your investment.

As a rule of thumb, you want to always diversify your portfolio… Invest in cryptos, NFTs, and real-world stocks.

When you do this, you’ll be able to minimize your risk exposure and avoid overexposing yourself in some areas. While you may miss out on large returns, the reduced risk is more than worth it.

3. Don’t invest emotionally

As an investor, it’s perfectly natural to hope for higher returns. But this doesn’t mean taking on unnecessary risks.

Make a plan for your portfolio and keep to it. Don’t get greedy and start gambling with your investments. 

Instead, focus on meeting your objectives and know when it’s time to cash out or cut your losses. 

Investing in NFTs and cryptos doesn’t have to be a risky affair. In fact, it’s much simpler than you would initially expect.