Fri, 20 May 2022

5 Things to Consider Before Buying a Non-Fungible Token

7Newswire
28 Apr 2022, 19:02 GMT+10

In the last few months, non-fungible tokens have suddenly become trendy in the world of cryptocurrency and investors have started looking for NFT advisory.

Non-fungible tokens (NFTs) are unique digital assets that are used to represent ownership of real or virtual objects and give users control over their use on decentralized networks.

The idea of NFTs has been around for some time, but they have drawn increased attention following the sale of a collage of images by an artist named Beeple for $69 million.

The sale attracted attention because it was one of the most expensive transactions involving NFTs. However, it is not the only high-profile transaction involving NFTs. In January 2021, a British auction house sold a work of art by Mike Winkelmann, who goes by the pseudonym Beeple and previously sold his works for as little as $100 through his website.

But other artists and even sports organizations have begun selling NFTs as well.

If you're considering buying an NFT, here are 5 things to keep in mind before you make a purchase:

1. Check for authenticity

If you're considering purchasing an NFT from a secondary market, be sure to check its authenticity first. Many artists have released lists of their minted NFTs, which can help you determine if an NFT is legitimate or not.

2. Check the price

Before buying any NFT, be sure to do your research on the average price of a similar item. Look at the current market value to ensure you're not paying over the odds for something simply because it happens to be the latest hot release.

3. NFTs can be very expensive

Unlike traditional cryptocurrencies, NFTs are typically not designed to be spent. Instead, they're meant to be collected and held for long periods of time. This means that any investment in an NFT could be illiquid for months or years. Furthermore, there is no guarantee that anyone will want to purchase your NFT in the future — meaning that your investment may never pay off. Be sure to consider this before purchasing an NFT.

4. What's your goal?

You might have an artist in your life who could benefit from selling an NFT (or maybe it's you). If your goal is simply to profit by reselling the NFT later on, then you need to think about the value of owning an NFT long-term.

How much are you willing to pay for an NFT? There are many stories of people paying thousands of dollars for an item from a famous artist that will have a small or non-existent resale market in the future.

5. The risk is real

We recently saw a few NFTs go for millions of dollars in public sales, which has understandably attracted interest from investors and speculators alike. But it's important not to lose sight of the fact that these tokens are still very much in their infancy, and there's still plenty of room for them to fail.

We think they will succeed. They've already attracted huge amounts of investment capital, and they offer a number of benefits over traditional digital assets (more on those below). However, it's also worth understanding that there is much more risk involved with NFT investing than traditional investing or even cryptocurrency trading — both because this is an unproven new asset class and because fraud is still common in these markets.

In fact, our research shows that fraudsters have already stolen more than $40 million worth of NFTs this year alone.

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