NFT Trading Strategies (Updated 2022)
The market for NFT is the talk of the town in 2021. They have become quite popular lately, and many investors have made a lot of profit by trading in Non-fungible tokens. If you’re planning a short-term or long-term investment, you want to put some thought and creativity behind your NFT purchases.
Here are the most important things one needs to know before starting.
What is a Non-fungible Token?
An NFT is a tool that a digital artist can use to sign their work and ensure it’s never stolen or plagiarized. It is a digital indication of any item, including collectible cards, virtual lands, and digital art pieces. NFT art comprises digital art, music, videos, gifs, video games, memes, and much more. It registers the unique ownership of a distinct artwork on the decentralized ledger network known as blockchain technology.
Why should you invest in an NFT Collectible?
There are several reasons why you should invest in an NFT. Here’s why,
Blockchain technology paired with an NFT creates a validation not present in physical collectibles. It is impossible to create fake counterparts of crypto art in the blockchain and is highly authentic and original.
Before promoting your favorite artist’s work via your investment, ensure that the NFT marketplace you buy from has reviews and validation from reliable sources and high-security credentials.
Advancement of NFT market
If you get into the NFT space a bit earlier than others, it will give you the perfect spot to enjoy the lucrative benefits. The controversy around a non-fungible token is still new to the market. More people will be entering the space as soon as the adoption of cryptocurrencies continues to improve.
There have been numerous reports about wealthy people buying and selling NFTs. Often, these tokens are even given out free of cost and eventually become monetized and valuable as more people are attracted to the uniqueness of the asset. NFT investors with the proper technique stand a greater chance of making reasonable profits for both the short and long term.
Why should you Have an NFT Trading Strategy?
NFT collectibles have proven valuable lately and are now regarded as a profit-making venture. Before investing in them, though, it is advisable to develop a trading strategy that would help you make a massive profit.
The primary purpose of trading any asset or commodity is to help the trader make gains, and not assuming the proper trading techniques could limit the amount of profit.
Having an NFT trading strategy will give you a significant return on investment and guide you to work with trade.
This metric considers the number of unique addresses that hold Non-fungible tokens. When the number of addresses holding the NFT is high, it suggests a larger community, marketing the product to other potential investors and boosting the non-fungible token’s value.
This shows the number of tokens traded for a particular project within a specific time. The higher the volume, the more the project is in high demand from investors.
Factors for assessing NFT Collectibles
Few individuals still consider NFTs a new addition to the crypto market, and evaluating them can be problematic. Here are key factors to help you consider your NFT collections:
Age of the token
Even though NFTs have become increasingly prevalent, the market has existed way before that. Some projects have survived the storm thrown at crypto-related projects over the last couple of years.
On-Chain or Off-Chain collectibles
NFT collectibles are based across on-chain, and they imply that the token’s metadata is added to the network’s smart contract they are hosted on. This also confirms that they will exist as long as the blockchain exists in the market.
Off-chain NFT collectibles, on the other hand, are tokens that have their metadata stored separately due to repository restrictions. On-Chain NFT collectibles have proved to be more valuable than those launched off-chain.
Background Information of the Project
The historical details of the project’s developers need to be taken into interpretation.
Even though there may be different items in a collection, rare items are deemed more valuable than others. Hence, acquiring them is usually more costly than buying any accidental item in the collection.
Top NFT Trading Strategies
The goal of trading NFTs has always been to make enormous returns. You can check some of the best strategies below:
Buy the Floor
Non-fungible tokens are still quite popular and gaining the rage among individuals, so chances are they will continue to exist for as long as possible.
Floor prices in the NFT market designate the lowest price of a non-fungible token within a given type.
It is not advisable to purchase the NFT only because it has a low price, and you should choose an NFT based on a category of your interest.
This is a promising trading strategy for NFT that places you in the market for enormous growth, given that the token becomes popular in the future.
In straightforward terms, buying the floors helps you reserve an early seat in the NFT’s journey to higher growth in the future.
Search for Google Trends
It doesn’t matter whether you are new to NFTs. You can quickly determine if the market is still a hot niche by checking its Google trend.
Google trends can be used to measure public opinion toward a precise topic, or keyword and searches for the word are scaled in a range of 0 to 100. When the rating is high, it indicates that many people are getting involved with NFT collectibles, and it indirectly signifies a good buy time.
Nevertheless, when the search for NFT-related keywords is low, it means you will need to stride carefully as fewer people are showing interest in the market.
Buy NFT’s that deliver value:
It would be best to buy NFTs, which are regarded as highly valuable. To recognize an NFT of value, you will need an online tool like Rarity. The tool compares different NFT projects based on how rare they are compared to others.
Tips for NFT Traders
Have a Motive for Each Trade: You should understand why you’re buying the NFT to help you stay committed irrespective of the market movement.
Only Invest What You Can Afford to Lose:
When trading in an NFT, it is easy to get carried away. NFTs are positively risky, and nothing is promised to anyone. An asset may decline by more than 50% in a matter of hours based on several reasons, including regulatory sanctions on the crypto space.
Trade Tokens With Good Competitors
It would help if you decided which NFT has good potential for growth. By combining different techniques and methods, you can decide which NFT is the best for you.
Enter the market early
Please do not wait until a project is on every social media platform before you choose to buy it, as you may be buying at a relatively high price.
This blog has highlighted and shared NFT trading strategies to help you succeed. Nevertheless, no matter how easy the points listed in this article may seem, do not get carried away as NFT is similar to other crypto sectors, which deliver significant risks.