NFTs are among the hottest topics in the crypto markets. Both seasoned investors and traders are dipping their toes in one of the fastest growing markets. Largely based on the Ethereum (ETH) blockchain, NFT stands for Non-Fungible Token.
If you still don’t know what is NFT, a Non-Fungible Token (NFT) is a unique digital data that cannot be exchanged. For example, 1 ETH can be exchanged for another ETH. A NFT cannot be replaced with another NFT as each NFT is unique. A NFT can be an image, video or even sound (audio) for example.
NFTs are stored on the blockchain, which assures the data is unique and cannot be exchanged. Ethereum’s blockchain is currently the most popular digital ledger for NFTs.
NFTs are purchased and sold using cryptocurrencies. Marketplaces provide the platform for both buying and selling NFTs.
Who Uses NFT?
NFTs are being used largely in the entertainment industry but more and more brands are head-diving into NFT’s. The NBA began selling moments from the games in early 2021. Creators that struggle to be recognized or earn little from royalties are displaying their art in NFTs (known as NFT art for short).
The gaming industry has also penetrated the NFTs market. With the announcement of the Metaverse, real estate NFTs are booming.
Collectors, investors and traders are buying NFT’s in hope the price for their NFTs will rise over time. NFTs’ value is determined by rarity of the NFT, how difficult is to to acquire. The other factor is the story behind the NFT. Like all artwork, the value of the NFT is determined by the market.
Derrick Rose NFT video clip from February 2020 is currently listed for a whopping $1,000,000 in the NBA marketplace. The Golden State Warriors recently announced their partnership with FTX and will make their NFTs available in early 2022.
The Bored Ape Yacht Club
The Bored Ape Yacht Club (BAYC), managed by Yuga Labs is the most popular NFTs among celebrities. Jimmy Fallon, KSI, Mark Cuban, Post Malone, Lil Baby, Marshmallow are just some of the names that have already purchased one of the Bored Apes NFTs.
The average price for the BAYC bored apes NFTs is around $220,000. Bored Ape holders benefit from special privileges and events. BAYC is likely to continue making headlines throughout 2022.
Opensea is among the most popular marketplaces for buying NFTs. When buying NFTs, it is worth understanding that you may not necessarily find a buyer. You may end up holding onto the NFT for some time and perhaps even lose some of its value.
NFT Trading Bots
The use of bots for buying NFTs is beginning to increase. The most recent incident with one of the bored apes NFT is a classic example. A user by the name of ‘maxnaut’ in opensea held a highly valuable bored apes NFT.
By error, maxnaut listed the NFT for sale at ETH 0.75 instead of ETH 75. An automated account (bot) immediately purchased the NFT for 0.75 and sold it shortly after for 59.99. In today’s EHTUSD price, the bot made a profit of $227,000.
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Automated NFT buying software is likely to rise overtime, especially after the above incident. Such mistakes are bound to occur in the future and will be well-capitalized on by NFT bots.
Real Estate NFT
Big names such as Gucci and Burberry have poured funds into NFT’s. When purchasing real estate, it can be fractionalized as well. This means that the cost of the NFT is shared among several investors.
Real estate in NFT can be rented for a fee. If large events are held for example the owner of the real estate can lease the land, thus earning revenue from the initial investment that was used to buy the real estate. In June 2021 virtual land was purchased for over $800,000 in Decenterland.
Investing in Real Estate NFT
In Decenterland, land can be bought as parcels in opensea. While it is not required to buy land in order to enter Decenterland investors are buying real estate in hopes for a profit in the future.
Investing in virtual real estate is highly speculative. The metaverse technology is still new. Determining whether the early boom will continue is difficult to estimate.
Fractionalizing the costs of the real estate and sharing the potential profits is a more conservative approach but again, time will tell how this market will evolve within the next 20 years.
As opposed to forex trading, to start trading NFTs you must familiarize yourself with the project behind the NFT. There are numerous projects available.
RTFKT was recently acquired by Nike (for an undisclosed price). Wearable virtual products gained the attention of Nike. These types of projects is what must be looked into prior to purchasing NFTs.
As opposed to forex signals, providing NFT signals is more challenging as only 1 NFT can be purchased unless we recommend the NFT project or real estate. We are still exploring the metaverse.
When trading NFTs one must be aware of gas fees. Gas fees in other words is the transaction’s fee in the Ethereum blockchain. When there is high demand in the blockchain more miners compete to validate transactions.
This can result in higher gas fees per transaction. However, during low volume hours gas fees may be cheaper.
Nonfungible.com is a website that tracks popular NFT projects including the trading volumes. It may assist you in discovering potential projects that worth investing in.
Forex Trading Vs. NFT
Forex trading has been available to retail traders for quite some time. There are regulations for trading such as FCA, CySEC and ASIC. There is a substantial amount of historical data that is available for technical trading strategies.
There may be great opportunities in trading forex. It has been established that during risk events (negative events on the economy such as the current pandemic) the Japanese yen (JPY) tends to benefit the most.
When a large trade is opened by error it can be quickly closed or hedged if needed. NFT trading is unregulated. If there are errors no regulators will protect you.
You may end up buying NFT for a large sum of money and have difficulties selling it without a substantial loss if the project behind it shuts down. Determining the true value of the NFT is also a challenge. If there is a sudden loss of interest in NFTs the potential loss may be great.
Another factor to consider is NFT value manipulation. Lets say I purchased a NFT from a new project at $800. As the NFT holder I may hold multiple accounts.
I then purchase that NFT from a different account I own for $50,000. This can be continuously done from multiple accounts until I ‘accidently’ list it at a much lower price, $25,000. The profit I made is fairly high (bearing in mind the gas fees).
Although the forex and futures market are subject to manipulation, as NFT is still new many potential investors may be unaware of it. It is similar to a technique used in real estate.
A firm buys a whole street, substantially increases the price for all assets aside one. When there is interest in buying an asset in the street it will appear to be the best price.
If you have made a decision to trade NFTs do so with some caution.
Last Updated on January 12, 2022