Non fungible tokens (NFTs) gained popularity between 2020 and 2021, and their value continues to grow. Nevertheless, NFTs range highly in price and might sell for millions of dollars. Like in any other industry, there is an increasing number of scammers in the NFT industry looking to defraud unsuspecting traders. That is why it is vital to be vigilant and consider these five things when buying NFTs.
1. The Unique Properties Of The NFTs
In most cases, NFTs come in collection forms. For instance, consider Bored Ape, MetaVerse or Yacht Club. These NFT collections comprise individual avatar artworks, and all have different properties. More properties could mean a high value. However, simple avatars such as the basic Bored Ape NFT are more valuable. To determine if an NFT is a worthy investment, check the rarity of its properties. You will want an NFT with a low percentage of commonness, and you can see the percentage in the properties section.
2. Seller Verification
Like popular social media platforms, official sellers on online marketplaces like OpenSea have a blue verification badge to prove that they are trustworthy and not fake accounts. So, if you want to purchase from well-known sellers such as Cool Cats or World of Women, ensure the accounts have that blue badge.
3. Market Platform’s Transaction Fees
You must pay transaction fees whenever you exchange cryptocurrency, purchase NFTs, or conduct a similar activity on a trading platform. For instance, OpenSea requires a 2.5% transaction fee for a seller, which will go to OpenSea. Nevertheless, buyers do not need to pay transactional charges.
Some market platforms charge both parties, like Rarible, which charges buyers 2.5% in addition to the price per transaction. Know all the existing fees on your preferred platform and check out their USDT to USD rates.
4. NFT Liquidity
Bear in mind that NFTs do not offer the same liquidity as cryptocurrencies. You can’t liquidate NFTs into fiat currency as quickly as you can with crypto. This might be an issue for those buying NFTs for profit. Some professionals recommend fractionalizing NFTs to increase their liquidity rates. The liquidity depends on various factors like the size of the NFT network, the number of transactions, and the liquidity inherent to the network. This plays a huge role in determining NFT’s price stability.
5. Utility
Knowing what an NFT serves is important, and a project’s worth defines the utility of NFTs. The practical application of NFT in the digital and physical world offers them their worth. A property class is needed to transform the value of assets from the real world to the online world since these are two intertwined worlds.
Apart from being unique, NFTs have various applications. For example, they can mimic objects or characters in video games. A digital property has no use case and low demand if it doesn’t have utility.so NFTs with huge utility offer instant value that can increase with time depending on the adoption level.
Final Thoughts
Even though you can make high profits from trading NFTs, there are some mistakes you might make in the process. Cybercriminals are taking advantage of this new technology, and some digital assets are not worth investing in. Ensure you consider these factors before making a move.
