Let’s take a closer look at why NFTs might not be the best investment for everyone.<\/p>\n\n\n\n
Why Are NFTs A Bad Investment?<\/h2>\n\n\n\n
Most NFT projects and brands will fail because the creators aren\u2019t capable of executing their roadmap properly in order to build a long-term and sustainable business. Many NFT projects are simply a quick cash grab with no real value or utility<\/a> backing the digital asset.<\/p>\n\n\n\n Similar to the internet craze crash in 2000<\/a>, a majority of NFTs and other various digital assets will come crashing down hard! And not just temporarily, but permanently. The problem with the NFT marketplace is that the supply currently outweighs demand, as does the lack of actual value and utility backing most NFTs.<\/p>\n\n\n\n As large corporations, brands, and innovators begin to explore NFTs and incorporate the technology themselves, many will begin to realize what a valuable NFT looks like<\/a> in comparison to all the worthless NFTs currently flooding the markets.<\/p>\n\n\n\n What many modern-day NFT creators and investors fail to realize is the fact that NFTs are a technological platform that can be used to either build a brand from the ground up or add further value, trust, and transparency to existing brands.\u00a0<\/p>\n\n\n\n Instead, many NFT creators have simply created nothing more than a picture with little to no actual value or utility at all. They aren\u2019t building a brand, creating a strong intellectual property, or providing anything at all to their consumers besides the NFT itself.<\/p>\n\n\n\n Furthermore, many of the media headlines you see regarding NFTs, are stories about people making huge profits buying and selling NFTs. This tends to leave the impression that NFTs are either a get-rich-quick scam, or that any NFT can make you a million dollars, and both are simply untrue to a certain degree.<\/p>\n\n\n\n Here are some arguments against the longevity of NFTs respectably:<\/strong><\/p>\n\n\n\n While many of these arguments are true to some degree, it’s not the case for every NFT. However, I do agree that a majority of NFTs are nothing more than a JPEG, many of them are scams, the technology is expensive and non-efficient, and the barrier of entry can be high depending on the blockchain used to transact.<\/p>\n\n\n\n BUT. That\u2019s not the case for every NFT.<\/p>\n\n\n\n Spotting a bad NFT project isn’t always simple, but there are signs to watch out for, such as:<\/p>\n\n\n\n If you study enough bad NFT projects, you can develop a sense of whether a project has the potential to sustain a community<\/a> and build a real brand, or if it will plummet. Ultimately you\u2019re investing in the creator of the NFT brand, not the NFT itself.<\/p>\n\n\n\n Likewise, once you began understanding what makes a good NFT project<\/a>, you will quickly be able to spot a bad investment, versus a potentially good NFT.<\/p>\n\n\n\n Beware that in a fast-growing and loosely regulated space, imitators and scammers pop up quickly. Platforms often have verified accounts for notable creators, which can help you choose a trustworthy NFT brand.<\/p>\n\n\n\n For lesser-known creators (whose NFTs are likely to be far more affordable), a good thing to do is research information such as what they\u2019ve sold previously and how many of a given type of NFT they intend to make. If they haven\u2019t set up an external website to provide information about their work and brand, for instance, that could be a red flag.<\/p>\n\n\n\n The value of an NFT is based on four primary factors; utility, history, brand recognition, and liquidity premium. Does the NFT offer something desirable, does it or will it have historical significance, are the creators building a brand, and can it be sold easily? Ultimately, the market always determines the value of the NFT.<\/p>\n\n\n\n NFT utility is how it is used such as a token used in gaming. High ownership values also play a role if the token is created by a famous person or brand name. The future value involves the speculation of where the NFT will move over time. Liquidity premium refers to how much demand there is for the NFT with NFTs with higher traffic yielding higher premiums.<\/p>\n\n\n\n The only way to safely invest your money <\/a>in an NFT is to never spend more money than you can afford to lose. Also, always do your own research on the creator, and their reputation as a person and business builder, and don\u2019t take anyone\u2019s advice over your own intuitive skills.<\/p>\n\n\n\n Here are some steps to take if you are attempting to safely invest in NFTs:<\/strong><\/p>\n\n\n\n You’ll want to choose an NFT that you feel has an upside value potential. The NFT may be art, music, video, or even an item within a video game. Use resources such as Google, Twitter, Discord, and any other platforms where you can find any information pertaining to the NFT and its creator(s). Make sure to do in-depth research, at least 40-60 plus hours of research is recommended by serial entrepreneur, angel investor, and Web3 innovator Gary Vaynerchuk.<\/p>\n\n\n\n As well, when looking at the upcoming NFTs, note when the sale is, what the cryptocurrency requirements are, and how many of the NFTs are being sold. This helps you better understand the scarcity behind the NFT you are choosing.<\/p>\n\n\n\n Only invest money that you are willing and able to lose. Nearly all investments are considered risky, so it\u2019s important that the money you use to invest is money you don\u2019t need. This includes money in your retirement plan and your emergency savings, you never know when you are going to need to tap into these accounts.<\/p>\n\n\n\n It\u2019s safe to assume that any NFT you invest in has the potential to fall to zero dollars.<\/p>\n\n\n\n Although the market always determines the final value of an NFT, really an NFT is only worth as much as you are willing to pay for it. That\u2019s why it\u2019s important to only buy NFTs that you truly like. Regardless of whether it\u2019s a piece of art, a ticket to an event, or a collectible item, you need to ask yourself what you like about the NFT, and what you plan to get from buying the NFT.<\/p>\n\n\n\n\n
How to spot a bad NFT<\/h2>\n\n\n\n
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How Do NFTs Gain Value?\u00a0<\/h2>\n\n\n\n
How to Safely Invest in NFTs<\/h2>\n\n\n\n
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<\/a><\/figure>\n\n\n\n1. Research any potential NFT investment<\/h3>\n\n\n\n
2. Don\u2019t spend money you can\u2019t afford to lose<\/h3>\n\n\n\n
3. Only buy NFTs that you value<\/h3>\n\n\n\n