Buying an NFT? Ask these five questions before investing

Synopsis

NFTs are popular online commodities. Once they are bought and traded over time, there is the possibility for recurring income. NFT valuations are critical and skyrocket due to fanaticism, royalty economics, and scarcity rules.

Considering cryptos are being used for trading NFTs, the NFT sales are plummeting due to the current market scenario. NFT traders are either shying away from investing or unaware of analyzing the

NFT price values before dipping their toes in. An NFT trade born out of this inexperience, results in a loss.

Why should you know about NFT price value before investing?
NFTs are popular online commodities. Once they are bought and traded over time, there is the possibility for recurring income. NFT valuations are critical and skyrocket due to fanaticism, royalty economics, and scarcity rules.

So, what can an NFT price value tell you?
Estimating the price value of the NFTs will help us to uncover the following.

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View Details » How scarce is the NFT?
With a scarce NFT, the project tends to attract more people. This increases the demand for the collection and the price. The best example of this is BAYC collection and ApeCoin, which has created more demand in the community.

What is the rarity of the NFT in that particular collection?
Forget the collection as a whole. The rarity of each NFT in a collection also plays a key role in the increased pricing of the collection itself.

What utility does an NFT collection hold?
Blockchain technology leveraged this use case of NFTs efficiently with NFT ticketing. Most utility NFTs are being used to unlock the entry to events or get the privilege of getting a hot seat in an activity. VeeFriends, GainForest, and World of Women are some examples of utility NFTs with increasing prices; some are even sold off as they were created in tandem with an event as an NFT Ticket.

Whether the price of the particular NFT appreciated over time or not?
Monitor the NFT’s historical value to understand its appreciation over time. An NFT price value estimator can assist you with these details. It can also help with price intervals (upper bound & lower bound values), indicating what will be the maximum and minimum value an NFT can reach.

Whether the NFT is involved in wash trading or not?
Estimating the NFT’s price value can also disclose whether the collection is wash traded or not. Wash trading tampers credibility, which in turn affects the liquidity of NFTs. This impacts your credit opportunities with decentralized financing through NFTs.

Keeping all of the above in mind, you can analyze the returns by investing in NFTs, understand the resale value of the collection, leverage credit opportunities with Defi, and plan for future investment with NFTs.

So, as NFT enthusiasts, stay intuitive and be aware of NFT price value before capitalizing on them.

Vijay Pravin Maharajan is the Founder & CEO of bitsCrunch
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

Source

Updated: 10/14/2022 — 10:00