What to consider when investing in an NFT?

The explosion of the NFTs during the last year it’s far from casual, and everyday there’s more and more investors that are curious on how to buy it. It’s a new and strange market where confusion is the first reaction when one is just getting interested in the subject. How can someone explain that the first tweet of Twitter’s CEO Jack Dorsey, of the pixelated characters of the collection Criptopunks are now some of the most valuable NFT’s, reaching millions of dollars of market price?

As the cryptocurrencies continue to gain relevance on the internet, the quantity of artists, collectors, speculators and more of the digital fauna, turn up and increase the value of a sector who, because of his age, is now complicated to know if it is a temporal effect or if the industry is sustainable in the long run, and a safe place to invest. The indubitable fact is that the NFT’s are among us in many levels.

Now that we know of the context that surrounds this mysterious activity, it’s logical to ask, how can someone invest in an NFT collection? Some answers are easy to reach, while some others need to be understood since the beginning.

How to invest in NFT’s?

As you know, the value of the NFT’s lies in that they grant the guaranteed property of any kind of asset to his proprietor, it can be a fragment of artistic handiwork, music, even elements from a videogame. Now that we acquired an NFT piece, its value depends on the way that any given project starts monetizing. Even so that is one of the main prejudices to overcome, the value of an NFT is real, not virtual.

Although most of the NFTs are developed on the Ethereum blockchain, there are NFTs that use other Blockchains such as Solana or Polkadot.

The big difference between NFTs, stocks, and cryptocurrencies is practically the same as in the real world. While cryptocurrencies and currencies are fungible, that is, directly equivalent to each other; NFTs are completely genuine properties, and irreplaceable.

NFT’s main markets for purchase are OpenSea, , Rarible, SuperRare and Foundation. Acquiring an NFT requires a crypt wallet in an NTF Marketplace, which is the equivalent of an electronic wallet in which the currency is stored. For instance, An NFT developed on the ethereum blockchain requires its purchase in Ethers. Once purchased, an NFT can be used for marketing, displaying, keeping it as a collectible, and even integrating it into a larger digital project.

Why invest in NFT?

The most relevant reason that has made the NFTs an industry with enormous potential is that their value has exploded in the last year, creating a highly attractive project for investors.

Especially in an emerging market like that of the NFTs, the valuation of digital art is analogous to the way that traditional art has been appreciated over time, the acquisition of an NFT represents in that sense, a long-term investment.

Another reason that makes NFTs so valuable are “Smart contracts”, which in other words are a set of codes incorporated into the blockchain and that can guarantee the equitable distribution of profits resulting from trade with any piece.

The NFT market is itself an element that provides mobility to the trade of digital assets, the greater the volume of the community of sellers and buyers, the greater the strength of the sector, which provides greater value and security to its consumers.

By their nature, NFTs are valued according to their demand and although this represents a great advantage in terms of their eventual appreciation, it also implies constant risk, since there is no guarantee of a fixed minimum value, and there are many different reasons why an NFT can lose its value considerably.

As the NFT market grows, its diversification becomes wider, and although there are many theories that it is a speculative bubble, there is no real way to predict this. The NFT ecosystem is still in an early development phase, and it is undeniable that this is a promising trend, but that it also involves a high level of risk. Faced with any risk investment, the key is to analyze and tend towards diversification.