How To Decide Which NFT Is A Good Investment

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As NFTs have been around for a few years, the market has its fair share of opportunities and pitfalls. It is important to know which projects are a good opportunity to invest in and what criteria should be considered before investing. 

This article will explore some factors that can help you decide which NFT is a good investment.

1. What you are buying

The first step to take is to think about what you are actually buying. You should generally look for NFTs that present an opportunity for a project to grow.

How To Decide Which NFT Is A Good Investment_

For example, a simple marketplace or a game can be great investments, as they have the potential of increasing their user base and generating more profits. The key point here is that there is something real behind the NFT - it should offer some utility beyond being collectible.

Also, think about the people behind the project. It's significant to see whether those involved have been involved with other projects in relevant fields before-chances are those projects were successful, which means they are probably good at what they do. You can look into jungle as a starting point and  explore the team, advisers, and investors associated with a project. 

Similarly, look to see if the team is actually doing something innovative - it sounds like a given, but there are many projects that don't offer anything new or interesting beyond the idea of NFTs. 

2. The timeline for development

The timeline of the project is an important one to consider. For example, if you can see where the executive developers track their milestones and show progress on them regularly (weekly updates) then you know that they are serious about keeping up with their promises and delivering what was outlined in their white paper. 

On the other hand, if a project does not have a clear set of deadlines, goals and milestones, you might want to conduct further research on the team behind the project before investing in their NFT. As for the actual development of the platform, it's critical that this is sustainable, with clear progress being made every week/month depending on how regularly updates are scheduled. 

Furthermore, if appropriate documentation is available, like an open source code for someone else to audit or information about the technology they are using (e.g., proof of stake), then it can be helpful in determining whether you want to invest in their project. 

3. The market value of NFTs

The next factor that can help you to determine whether a NFT is a good investment opportunity is the market value of that NFT. For example, it would be difficult to expect a large return on an NFT with only 20 users because its scarcity and quality are low - which means your investment would not be worth much more than what you initially paid for it. 

The market value of NFTs

On the other hand, if there was one particular NFT whose value increased due to its high number of active users and developers behind the project, then this would result in a higher return on initial investments when compared with other tokens in the market. It can be more beneficial to do some research on the exchanges that NFTs can be traded on, particularly if they use a non-ETH based protocol such as 0x. 

This is because this means you will not have to convert your NFT into ETH before being able to trade it - which means your transaction fees will be lowered. 

4. Liquidity and trade volume of the NFT

The liquidity and trade volume of an NFT is important in determining whether it is a good investment opportunity, as there is no point purchasing an asset that you cannot sell. 

Additionally, if an NFT has low liquidity and trade volume, then it may mean that its project does not have much support from the market despite strong fundamentals. Investing in such projects can be risky if their potential growth is stunted by lack of widespread support from traders and investors. 

On the other hand, if an NFT has high liquidity and trade volume, then it may be a good investment opportunity because there are strong network effects in play. Furthermore, with high market capitalization and volume, this means that more traders will likely support the project, which can result in profitable returns on investments in such tokens. 

With the help of a reputable NFT marketplace development platform, you can navigate the dynamic NFT market and identify promising investment opportunities with ease.

5. The composition of token ownership in the economy

The token ownership of an economy is also important to consider because there should be a balance between the number of NFTs owned by developers, users, and investors. If most or all of the tokens are owned by one group, then this can result in slower growth for the project because users may not be incentivized to engage with the platform if they cannot make money off it. 

On the other hand, if almost no tokens are held by any of these groups, then initial investments in such projects could lead to massive returns on investment due to high demand in a low supply environment. 

Therefore, it's significant that you do your research into what percentage of total tokens are held by developers/users/investors when considering whether an NFT is a good investment opportunity. 

6. The smart contract of the token

Another essential thing for you to consider when deciding whether an NFT is a good investment opportunity is the smart contract that backs it. For example, if an NFT has a bad system for disincentivizing hoarding, then this will be detrimental to both the scarcity and demand of that token in the market because investors would rather sell their tokens instead of having access to them through spend functions. 

One way to mitigate this problem is by setting up a system where holding certain levels of tokens unlocks features within your platform - which can help provide utility for valuable tokens while discouraging hoarding for speculative reasons. 

Likewise, a smart contract that has too many features can also be problematic because it can lead to bugs and other issues resulting from the complexity of these systems. 

7. The feasibility of the project

The feasibility of an NFT is important because it contributes to the success or failure of a project. For example, if the idea behind the token is not scalable, then this will put pressure on its price due to lower demand - which could lower your ROI in your initial investment. 

On the other hand, if companies are spending their resources building tangible products based on an NFT's platform, then this can have positive effects on the growth of that token in terms of volume/market capitalization - which can potentially increase your ROI after you've made your initial investment. 

Therefore, when deciding whether an NFT is a good investment opportunity, it's significant for you to consider what kinds of projects are being undertaken and how feasible they are. 

8. The number of companies participating in the project 

Another thing to consider when deciding whether an NFT is a good investment opportunity is how many companies are already using it and if its adoption rate is set to increase. For example, if hundreds of other companies adopt an NFT's services, then this can lead to increased demand for that token - which can potentially drive up the price of an individual unit. 

On the other hand, if only a few companies are participating in an NFT's project, then there likely won't be any significant increase in its value due to lack of interest from investors and developers alike. 

So, it's important for you to investigate how many companies have already begun using a particular NFT before deciding whether it is a good investment opportunity. 

9. The team behind the project

The last thing to consider when deciding whether an NFT is a good investment opportunity or not is who's actually running it, and if they have the necessary qualifications to lead such a project. If the team lacks any significant amount of experience in this field, then there's a chance that inexperience can lead to high failure rates and low ROI for investors. 

The team behind the project

However, if the team is composed of experienced individuals with proven track records in similar projects, then it will increase investor confidence and could result in better opportunities for them which could potentially increase your ROI when you make your initial investment. 

So, it's essential that you consider who exactly is running an NFT before deciding whether it's a good investment opportunity because their level of qualification contributes to its success or failure. 

If you need more perspectives, read this post to find more criteria to assess potential NFT projects.

Conclusion: how to decide which NFT is a good investment

NFTs have the potential to facilitate a fair digital economy by creating a platform where consumers can purchase virtual assets that they actually own. 

Also, because these assets are stored on the blockchain, it is impossible for anyone to take them away from you or seize your privilege of ownership - which can help secure your investments when making trades in meaningful currencies down the line. 

In addition to this factor, NFTs also have an incredibly low transaction fee compared to traditional payment methods, which gives investors more incentive to use them when trading with other digital currencies. 

Investors who choose to buy NFTs can do so without having to surrender their information to other entities during the authentication process because cryptography is used to establish their identity, which protects them from any potential threat of harm or theft. 

So, if you didn't know about NFTs and their value, hopefully this article clarified what they are and their potential benefits for you. Now that you know about the potential of NFTs, maybe you'll consider buying some in the future when you're looking to make trades in meaningful currencies. Good luck!

About the author 

Peter Keszegh

Most people write this part in the third person but I won't. You're at the right place if you want to start or grow your online business. When I'm not busy scaling up my own or other people' businesses, you'll find me trying out new things and discovering new places. Connect with me on Facebook, just let me know how I can help.

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