You Bought an NFT Now What?

You Bought an NFT Now What?

If you’ve already purchased a non-fungible token (NFT), you may think NFTs are popular. Here’s proof:  

  • In 2021, non-fungible token sales hit $25 billion globally (reported by international media outlet Reuters).
  • That’s a 260x increase over 2020 when NFT sales were $94.9 million.

For anyone starting their NFT journey, we’ve got more valuable information for you.

What Does Fungible Mean?

Many people get confused by the term “fungible,” but it’s what makes every non-fungible token unique. 

Money is fungible because you use currency (let’s say a $10 bill) to buy something, and any $10 will do. NFTs are one-of-a-kind, not interchangeable like money.

What Does Token Mean?

NFTs appear to be digitized images. That’s why they call it crypto art. But, technically speaking, the NFT is not the picture or video game you see.

The “token” in NFTs is more like a certificate of authenticity that digital artwork exists in blockchain data. When you buy a non-fungible token, it gets stored in your cryptocurrency wallet.

You could also compare an NFT to the deed for a house. The deed isn’t physical property, but it proves your ownership.

Measuring the Financial Impact of NFTs

NFT art collections are getting sold for insane amounts of money!

Check this out: 

  • In March 2021, a collection of NFT images by world-famous artist Beeple was auctioned at Christie’s for $69 million. Everydays: The First 5,000 Days is a non-fungible token now owned by the buyer. 
  • CryptoPunks characters were the first crypto artworks created in 2017. Individual characters have gotten sold at auction, and many are worth multi-millions.

How NFTs Change Online Business 

NFTs make selling digital art easier online. When you buy an NFT, you can collect royalties when your art is copied or displayed online. NFTs may also become the best way to enforce trademark laws digitally.

An NFT is a consumer guarantee that the work they’ve bought is genuine. For artists and musicians, it means their work can’t be shared or sampled for free anymore.

It could also mean that gatekeepers like Spotify or Amazon may no longer get a significant chunk of artist earnings—in time, NFTs containing artwork or music may cut out the go-betweens.

Proving an NFT Is Yours

When you buy an NFT, your token is a few computer bytes (with a URL or serial number) stored in your cryptocurrency wallet under your blockchain address.

It may be just a tiny digital record, but the token proves that you own genuine digital artwork. No one can take or use your NFT unless you sell it, trade it, or gift it.

When to Sell an NFT

It’s not easy to know when to sell your NFT as a fixed-price listing!

The NFT marketplace is still evolving, and there’s always a risk that you’ll buy too soon or hold on too long. However, here is our best advice.

Have an Exit Strategy

We recommend an exit strategy to anyone acquiring NFTs:

  • Is this a short-term purchase or long-term?
  • Are you making a rational decision? Selling because you’re scared (or greedy) could result in a loss.

Let’s look at short-term and long-term purchases more closely.

Short-Term NFT purchases last for days to a few weeks. It’s a strategy that can pay off if hype grows around an NFT artist or project.

Do your homework to get an NFT early at the best price. Then, sell it based on the highest trading volume in an NFT marketplace (we’ll discuss that more below) and how many followers are interested in NFT community groups on Twitter.

Long-Term NFT purchases can be great investments, but it doesn’t always pay to buy into a project early. Long-term means studying artists with a solid track record of projects and community interest.

It’s crucial if an NFT is for a playable video game—prices can plummet if the game doesn’t gain followers and stay popular. 

It’s also essential to choose NFT categories that aren’t oversaturated and could diminish your NFT’s marketplace value. 

Trading Volume Is Important

NFT marketplaces track how often NFTs sell. It’s called the trading volume. Make sure to watch NFTs in your category because it’s harder to sell in with too many listings in competition. 

On the flip side, keeping a non-fungible token price high and the sale active when there’s liquidity in an NFT marketplace is often safer.

How to Price Your NFT

There’s currently no fixed way to price a non-fungible token. It all depends on this:

  • How long you’ve had it
  • Trading volume, market hype, and seller interest
  • How much profit do you want

Here’s an example of a pricing strategy. If you want to sell a non-fungible token tomorrow and see that five comparable listings have sold today, you need to price your NFT within the same range as the successful sellers.

Averaging Out Your Exit

Selling NFTs can be as speculative as dealing in stock markets! 

It’s unrealistic to think you’ll sell at the top every time. So instead, consider averaging your exit:

  • If you own multiple NFTs from one artist’s project, consider selling gradually instead of a group sale.
  • For the short-term, this means selling one NFT and waiting three days, and for the long-term, space out your listings between a few weeks to a couple of months.

Are NFT Auctions Better for Sellers?

Some NFT owners only sell through what’s called a Dutch auction. This type of auction means a set starting price and ending price for a set length of time.

This auction begins at the set starting price. Then, the price gradually drops until the non-fungible token sells or the auction ends.

A Dutch auction can work well when an NFT marketplace doesn’t provide precise data to set an acceptable price range.

It can work equally well when you just want to liquidate your NFTs. For example, setting a start-to-end price range at a lower level might spark buyer interest and get you a higher auction bid than if you’d sold at one fixed, lower price.

Protecting Your NFTs From Cyber Attacks

To ensure safe storage of NFTs, online security specialists recommend a non-custodial or “hot storage” crypto wallet with a seed phrase (like a master password).

You could also store your NFTs in “cold storage,” an offline drive that’s virtually impossible to hack.

In closing, never trust suspicious offers to buy your NFTs. A hacker may email you an infected link to gain access to your computer. Double-check all email addresses and only open correspondence from trusted sources!