How to Invest in NFTs

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Non-fungible tokens (NFTs) made a big impact in 2021, with some selling for millions of dollars. Although many have heard about NFTs and their connection to cryptocurrency, a clear understanding may be lacking. To invest in NFTs, here's a simple explanation of what they are and how to do it.

What are NFTs?

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NFTs are unique digital assets that certify ownership of things like art, music, videos, or in-game items. The most well-known use of NFTs is the buying and selling of digital art, although they can also represent other physical assets. NFTs serve as proof that the digital asset they represent is authentic and original.

Digital items, such as artwork or music, can have unlimited copies. While anyone can access digital copies, only one version can be considered the original, just like physical assets.

The Verge described NFTs in simple terms by comparing them to prints of famous artwork like Monet. For example, images of Van Gogh's Starry Night can be found on many products, but there is only one original painting.

NFTs certify the authenticity of digital items. They can be in-game objects such as land or a one-of-a-kind helmet, or used as proof of ownership for real-world items. Digital marketing expert and crypto enthusiast Dennis Consorte also highlights their potential in e-commerce.

The future of e-commerce lies in the metaverse. Brands like Louis Vuitton are already incorporating RFID chips into their products to make each one unique. With NFTs, they'll be able to sell one-of-a-kind products with digital counterparts in the metaverse, possessing unique features.

"E-commerce's next frontier is the metaverse. Luxury brands like Louis Vuitton are already adding RFID chips to their products, making each unique. When they move into the NFT space, they'll be able to sell non-interchangeable products with digital counterparts in the metaverse with unique features."

Why invest in them?

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NFTs are considered non-interchangeable because they cannot be substituted by another item of identical value. They are either unique or come in limited numbers, similar to rare baseball cards. NFTs are linked to cryptocurrencies as they are tokens on a blockchain network. Most NFTs operate on the Ethereum blockchain.

Individuals purchase NFTs with the expectation of their value increasing or as a way to support their favorite artist. However, there are concerns that the NFT trend may have gone too far.

Some notable NFT purchases include: a $390,000 payment for a 50-second video by Grimes, $6.6 million for a Beeple video, $3 million for Jack Dorsey's first Twitter tweet, and $69 million for a Beeple image auctioned at Christie's. This last purchase is worth mentioning as it sold for $15 million more than Monet's Nympheas, which sold for less, just a decade ago.

Artists have the option to receive a percentage of the purchase price each time their NFT is sold to another buyer.

Read More: How to Invest in Cryptocurrency


How to buy NFTs

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Purchasing NFTs may seem challenging based on the information you have learned. It's not as straightforward as buying ether, the Ethereum blockchain's cryptocurrency. NFTs cannot be bought through crypto exchanges, but Coinbase is developing its own NFT marketplace. To buy these digital tokens, you need to follow these steps.

To buy an NFT, follow these steps:

1. Set up a crypto wallet and purchase cryptocurrency, make sure it is compatible with the Ethereum blockchain as NFTs are mostly found on Ethereum.

2. Explore NFT marketplaces such as OpenSea.io, Rarible, Axie, SuperRare, Nifty Gateway, Mintable, or Foundation.

3. Search for the desired NFT. Most marketplaces categorize NFTs for easier browsing.

4. Place a bid on the desired NFT, as most marketplaces operate like an auction house.

When buying NFTs, be aware of gas fees. Gas fees are the cost to execute the transaction if you have not used ether before. Some NFT buyers have paid more in gas fees than for the NFT itself, so consider delaying your purchase if gas fees are high, in case they decrease later.

If you prefer not to buy NFTs directly, consider alternative investment methods like a venture capital fund investing in NFTs and crypto infrastructure, but this option requires being an accredited investor. If not accredited, consider purchasing an NFT-focused ETF, such as the Defiance Digital Revolution ETF, which invests in blockchain, cryptocurrency, and NFT stock.

Should you buy NFTs?

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One should approach the decision of buying NFTs with caution. This type of investment is not suitable for everyone and carries a high level of risk. If you are considering purchasing NFTs with the hope of a price increase, it may be wise to reconsider your investment strategy.

Alternatively, if you have encountered a digital artwork that holds personal significance to you, it may be worth the investment for sentimental reasons. Furthermore, investing in the artwork may serve as a form of financial support for the artist, enabling them to continue creating.

Furthermore, Kris Barton, the Chief Product Officer of Gannett, believes that NFTs offer a tremendous opportunity to foster community and disseminate captivating content. Although he considers that this possibility could materialize in various forms.

As the space develops, we will keep a close eye on it, but NFTs represent a part of the larger potential to connect with new audiences through imaginative and groundbreaking methods. Gannett recognizes the potential of NFTs to capture unique moments in time, which may attract both broad and specialized audiences, and to serve as an incentive for subscriptions through creative packages.

In conclusion, the value of NFTs is determined by the amount someone is willing to pay for them. Therefore, if you are unable to resell an NFT that you have invested a significant amount of money in, it will become virtually worthless. Cryptocurrencies are already considered speculative investments, but NFTs are even more so, making them highly unstable and prone to risk. It is never wise to invest funds that you cannot afford to lose.





Source: https://www.nasdaq.com

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