NFTs have an exciting use beyond just having digital artwork that looks nice. They are a valuable investment opportunity. Many investors make money by flipping NFTs or buying them when the price is low and selling them later on when the price rises and are more profitable.
The great thing about NFT trading is that the barrier to entry is much lower than the barrier for traditional investing, which often has many gatekeepers and institutions keeping average investors away from the profits. All you need to make money flipping NFTs is a digital wallet and some know-how about how the cryptocurrency and NFT world works.
Here is your guide to getting started with this investment opportunity.
What Are NFTs?
Before you start making money flipping NFTs, you should know what they are. NFT stands for “non-fungible token,” meaning that every NFT is unique and cannot be exchanged for an identical NFT. That unique aspect of every NFT separates it from regular cryptocurrency, as the proof of ownership makes these digital collectibles unique. An NFT’s metadata functions similar to an artist’s signature
NFTs mainly started on the Ethereum cryptocurrency, but now most other currencies support NFT collections. After an NFT is minted on the blockchain, the technology stores important validating information, such as proof of ownership and transaction histories.
Why Do People Flip NFTs?
Some people buy NFTs because they want to support their favorite artists or collect digital art. However, many people get into the NFT space because they see the potential for financial growth via strategic investments.
To “flip” anything is slang in the finance world for buying something at a low price and selling it for a much higher price. Most of the general public is familiar with this term thanks to the concept of house-flipping when people buy cheap, run-down houses and renovate them before selling them for a profit. However, you can flip almost any investment, including NFTs.
It might seem as if it makes no sense to flip NFTs. Unlike a house, you cannot physically do anything to an NFT to increase its value and price. However, NFT prices naturally fluctuate due to the market. Unlike other digital art forms, NFTs are deliberately scarce, meaning that only a few are up for sale. The scarcity implies that after an initial drop sells out, the price of most NFTs rises as people scramble for ways to get their hands on the valuable work.
Choosing Which NFTs to Flip
While many buyers choose NFTs that they think to look nice, you have to consider a few other factors if you are buying with an eye toward flipping the NFT later. Of course, the most crucial factor is the potential future value of the NFT. While you will never know the future value of the NFT you buy (especially in this volatile investment market), a few factors can help you figure out which ones are potentially valuable.
It is tempting to get lost in the vast world of NFTs because there are so many products available, but choosing a niche and sticking to it will ensure that you don’t get any nasty surprises due to turns in the market. Popular niches include digital animal art, collectibles, and even NFT-based collectible games such as Crypto Kitties.
Once you find a niche that interests you, research the market to see how lucrative the market is. Ideally, you want a project with a limited number of items, creating scarcity and demand, a low floor price to make your initial investment easy, but a high volume of potential investors that will drive the floor price up when you resell your NFT.
Luckily, you can use several different tools to see which NFT projects are trending upwards. Check buzz on social media, trending sections on NFT marketplaces, or check out sites that track NFT statistics. The more research you do, the better your feel for the market.
Buying Your NFT
Once you do your research on projects that have bright futures ahead of them, the next step is actually to buy NFTs. To do this, you have to set up a digital wallet. Most marketplaces are compatible with MetaMask and any other web3-based digital wallet. Next, convert traditional currency into cryptocurrency and use whatever cryptocurrency you have to buy your NFTs.
Before making a digital wallet, research which marketplaces accept which ones because not all are the same. For example, Open Sea, the largest peer-to-peer NFT marketplace, is Ethereum-based and requires users to have MetaMask for compatibility. On the other hand, trust Wallet is more compatible with BakerySwap, another popular NFT marketplace.
Once you choose the marketplace and the wallet you want, and you’ve researched which NFT projects you want to invest in, the next step is to purchase that project, put it in your wallet, and wait.
When to Sell NFTs
The most crucial factor when flipping NFTs is getting the timing right. Watch the market and see when the price of the NFT starts trending upward and there is more and more demand. However, be careful not to wait too long—if prices climb too high, buyers lose interest, and the trend crashes.
You can sell your NFTs using the same digital wallet to buy and store them. All you have to do is create a listing with your floor price. The floor price is the lowest price you will agree to when selling your NFTs. If multiple users want the same NFT, their bidding will drive the price of your NFT upward, making your flipping project even more successful.
Flip Your Way to Success
NFTs are a market with plenty of potential. The barrier to entry is low, but the prices when reselling tokens from in-demand projects are very high. Every investment project comes with risk, and NFTs are no different. Keep these risks in mind, and do your research when investing.
If you keep your ear to the ground and track market trends, investing in NFTs can be a lucrative opportunity!