Investing in Long-Term NFTs: What to Know and How to Get Started

Long-term investing is one of the finest strategies to ensure your financial future. Over the past few years, as we have seen with some crypto assets, it would have been tempting to stray from a long-term strategy and go after rapid gains. However, given the market’s high valuations, it’s more crucial than ever to concentrate on long-term investing while adhering to your strategy.

In today’s cryptocurrency market, there are various gems and blue chip projects where you can put your money and decide how much risk you’re ready to accept to suit your needs. Alternatively, you can also try a little bit of everything while diversifying your portfolio to create a holding that typically performs well in virtually every market.

The digital assets market is growing and is expected to grow even more in the future. This article will teach about NFTs, why investing in them might be a good idea, and how to get started with them.

What is a Non-Fungible Token (NFT)?

Non-Fungible Tokens (NFTs) are unique digital assets you cannot substitute for other tokens. They differ from traditional cryptocurrencies like Bitcoin, Ethereum, or ADA because they represent something unique and cannot be replaced with another token.

NFTs are digital assets that are not controlled by any centralized authority and have unique features such as limited supply, scarcity, and programmable ownership. They represent anything from stocks to commodities, digital art to real estate. They can be traded on the blockchain and offer several benefits that make them worth considering for investment purposes. Let’s take CryptoKitties as an example. A unique token represents each cat, and each one is different from the others. No two cats are alike, which is why they are called non-fungible tokens.

How to Acquire Non-Fungible Tokens?

Every investment is different, but the fundamentals of investing are the same. To a reasonable extent, the NFT space is a trend-driven ecosystem, and what is in vogue today might not work shortly.

There are several ways to acquire an NFT. The first thing is to be sure what type of NFT you want and why you’re buying it. Because everyone is talking about an NFT does not mean it will do 20X in returns, you’ll need to dig deeper. Also, purchasing an NFT should be personal interest-driven. For example, a gamer would naturally gravitate toward buying an NFT avatar of their favorite character or an in-game asset, which is different from a sports fan who might like to own an NFT of a sporting moment or an art collector who wants digital arts.

Amid the speculations, hype, and actual scam, many NFT projects are suitable for investing in the long term. For a beginner, starting with NFTs with a high market cap and liquidity is recommended. It is also essential to know that these tokens will not be tradable on exchanges for some time because of their nature.

How to Evaluate Whether an NFT is Worth Investing In

When it comes to NFT, there are no rules to evaluate or assess if you should invest or not. Unlike traditional finance, where people can use shares as a metric to value a company is not applicable with NFTs. The closest you can get to determine the value of an NFT is through the last buyer, which does not guarantee what the next buyer might pay.

  • NFT Rarity – this is a method to evaluate how rare an NFT is. The level of rarity of an NFT will determine its value. For example, Everyday’s The First 5000 Days by Beeple and Jack Dorsey’s first NFT sold for $69.3million and $2.9 million, respectively.
  • Utility – this explains how an NFT is usable in the real or digital world. For example, NFTs can be used for tokenizing real estate, in games, or given the owners’ rights and exclusive perks they otherwise wouldn’t have.
  • Interoperability – achieving interoperability within the NFT ecosystem is complex, but an NFT that can use the tokens in different applications rather than within its ecosystem is worth investing in. 
  • Liquidity – investors like to invest in highly liquid NFTs because it carries higher value. The ease with which an NFT can be bought or sold and profits taken quickly will propel the NFT value upwards.

The Best NFT Platforms to Consider Investing in

An NFT marketplace is just like the Amazon of the cryptocurrency world. Numerous NFT marketplaces exist, many of which specialize in a particular market or niche. The marketplace typically determines, most times, the cryptocurrency you need, but most NFTs use the Ethereum blockchain, so you’ll need Ether.

To complete the transaction, you’ll also require your own NFT wallet, such as Metamask. Connect the necessary cryptocurrency to your wallet, then select the NFT you want to purchase. You might also be able to use a credit card to pay for NFTs if you buy them straight from the company that makes the collectibles, like NBA Top Shot or DraftKings Marketplace. They’ll keep your NFT in a custody wallet for you. You can sell them through their marketplace if you wish to.

However, the more prominent digital collection market demands that you pay with cryptocurrencies. For example, an NFT marketplace like OpenSea supports over 150 payment tokens, supports artists and creators, and has an easy-to-use process of minting new NFTs. Axie marketplace is also another great place to start. It is an online shop for the Axie Infinity video game, and the marketplace is where you can shop for items to use within the game ecosystem. Other options include Larva Labs – owners of viral CryptoPunks NFT, NBA Top Shot Marketplace SuperRare, Rarible, and many others. 

How to Store Your Newly Acquired Tokens?

Knowing how to store your newly acquired tokens is essential for maximum security and peace of mind. There are two common ways to store NFTs – a software wallet (Metamask, Trust Wallet) or cold storage hardware wallet (Trezor, Ledger). 

  • Software wallets are online wallets with mobile and web applications where you can store your digital assets. They have a relatively easy-to-use interface and are suitable for newbies or non-tech users. However, since this software is online, it is usually vulnerable to hackers’ attacks and can be compromised in the future.  
  • Cold storage is an offline wallet available for users who want to increase the security of their digital assets. Because it is not connected to the web, hackers can’t steal or compromise its content. Though hardware wallets might be more expensive, the extra security layer is an advantage for those investing a large amount of money in NFTs and for the long term.

The crypto market is volatile, and many risks are associated with investing. However, the market can still reward long-term investors who choose NFTs since it offers another way to diversify your portfolio. 

Investing in long-term NFTs can be a good option for those who want to invest but don’t want to take on the risk of cryptocurrencies. Also, validating an NFT is transparent since all NFTs are recorded on the blockchain, making it more secure. These assets are not only more stable but also have the potential to grow exponentially over time.