Published on December 7, 2022
How To Know Which NFT To Buy: A Beginner's Guide
Key indicators of promising NFT projects and how to choose NFTs that will likely retain their value over time.
7 min read
The world of NFTs can be a bit overwhelming for beginners. You'll encounter hundreds, if not thousands, of unique NFT collections that widely range in type.
For example, PFPs, metaverse land plots, and one-of-one art are vastly different assets that all use NFT technology. So as a beginner, where's the best place to start? Well, no matter what type of NFT you purchase, you likely want to see it appreciate in value over time. In this guide, we are going to break down the key indicators of promising NFT projects, and other significant reasons consumers like to purchase NFTs.
Key Drivers Of NFT Value
How Do You Know Which NFTs Will Be Valuable?
NFTs, or non-fungible tokens, are unique digital assets that cannot be replaced. Often, they represent digital art, music, and collectibles. Because NFTs are so new, it can be difficult to know which ones will be valuable in the future. However, a few factors can help to indicate whether an NFT will have lasting value.
First, NFTs that a major brand, personality, or organization back are more likely to maintain their value over time. For example, NFTs created by well-known artists or attached to popular brands are more likely to appreciate. Just look at RTFKT (backed by Nike).
Secondly, NFTs with a limited supply are more likely to retain their value. This is because as demand for the NFT increases, there will be fewer and fewer available, allowing scarcity to drive the value.
Finally, NFTs that offer utility or function beyond simply being a digital asset are more likely to hold their value over time. For example, NFTs that can be used to purchase goods or services, or that offer unique benefits like access to exclusive content are more likely to appreciate in value. By considering these factors, you can choose NFTs that contain these characteristics and have a better chance of retaining their value over time.
Where To Begin with Collecting NFTs
Which NFTs Are Best For Beginners?
First, it's important to understand the different types of NFTs. The most common type of NFT is an ERC-721 token built on the Ethereum blockchain. These NFTs are often used for collectibles and gaming items, as they can represent unique items that can be traded on the open market. However, other types of NFTs, such as ERC-20 tokens, are more commonly used for digital assets like utility tokens or currencies. Therefore, when choosing an NFT, it's important to consider what you'll be using it for and which type of NFT best suits your needs.
Another thing to remember is that not all NFTs are created equal. Like with any other asset, there are good NFTs and bad NFTs. It's important to do your research and only invest in NFTs that you believe have value. There are a number of factors to consider when assessing an NFT, such as the team behind it, the community support, and the overall project roadmap. By carefully researching each NFT you're considering investing in, you can help ensure that you're making a wise decision.
Solana NFTs are a highly popular starting point for beginners. Because Solana has incredibly low gas fees, it has a much lower barrier of entry for beginners — especially when compared to Ethereum NFTs. As a result, we've seen a rise in Solana NFTs over the past few years, with Solana-based marketplaces like Magic Eden becoming a staple of the SOL ecosystem.
Finally, it's also worth noting that the NFT market is still very young and volatile. As a result, prices can fluctuate quite wildly, and there is still a lot of speculation going on. This means that it's important to approach NFT investments with caution and not invest more than you can afford to lose. If you're careful and do your homework, though, investing in NFTs can be a fun and profitable way to get involved in the digital world.
Can I Buy An NFT To Support An Artist?
NFTs have become a magnificent way to support your favorite artists. Traditionally, creators struggled to monetize their passion and become financially independent on their own. We've all heard the expression "starving artist" before. With NFTs, creators can capture more value from their audience than ever before by eliminating the need for middlemen.
For example, creators can issue a collection of NFTs where holders receive perks, benefits, exclusive access, community, merch, and more. Because the NFTs exist on an immutable blockchain, authenticity and verification cannot be fudged. But that's not even the best part. If an NFT holder wants to sell their NFT, they can potentially sell for a profit! In other words, if an NFT holder feels they no longer want to enjoy the benefits of an NFT, they can sell it to a new person (potentially at a profit). And for every NFT transaction, the creator could receive a small royalty in perpetuity. This allows creators to become financially independent while cultivating a more intimate relationship with their most loyal fans. It's a win-win for everyone involved.
Use NFT Discovery Tools
What Cheap NFTs Should I Buy Right Now?
NFTs are fun, creative, and evoke a ton of emotion among collectors. One way to sift through the noise and identify purchasing opportunities is by understanding NFT analytics. By leveraging tools, like Icy Tools, you can receive organized, on-chain information before other buyers. For example, NFT tools can help you determine if an NFT is priced correctly, alert you of trending projects, track NFT mints, and assist you in minimizing risk by making data-backed decisions. If you want to make sure you're not wasting your money, NFT tools help the best traders make informed investments every day, so it's something to consider if you're starting out.
NFT scams are becoming more and more prevalent as the popularity of NFTs grows. As you venture into making an NFT purchase, here are some tips to help you avoid being scammed:
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How to Buy An NFT
Now that you have a foundation for the basics of NFTs, it's time to make your first purchase. First, you'll need to set up a Metamask wallet. Metamask is the most popular crypto wallet for purchasing NFTs, so take the time to set that up and add some funds to your wallet.
Second, you'll need to find an NFT marketplace. There are a number of different NFT marketplaces, so do some research to find one that suits your needs. Once you've found a marketplace, you can browse through the available NFTs. Most NFT marketplaces allow you to search by categories, such as gaming NFTs, collectibles, domain names, virtual worlds, and more. Once you find an NFT that you're interested in and evaluate it by following everything in this guide, you can go ahead and make the purchase. You'll need to pay for the NFT using cryptocurrency in your crypto wallet. Once the transaction is complete, the NFT will be stored in your digital wallet, from which you can then use the NFT or sell it at any time.