NFTs are all the rage in the Web3 space—and for good reason.
You’ve probably heard the stories, people buying and selling memes, the fifteen-year-old who made a cool million by selling NFTs. You’re ready to get in on the action and start building wealth… but to do that, you need to learn how to invest in NFTs.
Here’s our step-by-step guide for how to invest in NFTs. Once you’ve finished reading this post you’ll be ready to enter the exciting world of alternative investments and NFTs.
How To Invest In NFTs: What Are NFTs?
Before we get into the nitty-gritty of how to invest in NFTs, let’s first answer a vital question: What are NFTs? NFT stands for “non-fungible token”. Essentially, non-fungible just means it’s not tradable, one-to-one (like Bitcoin or cash, for example). Buying an NFT guarantees that you own a digital asset. This asset can be a piece of music, an item in a video game, or even a meme.
NFTs are verified and managed using a system called blockchain. We won’t get too far into the weeds with the tech jargon here, but essentially blockchain duplicates and spreads information or transactions across a network of computers. This system is used to verify ownership of a given NFT.
The easiest way to think of this is by comparing it to a physical certificate of ownership, like a deed for a real estate asset or a certificate of authenticity on a piece of fine art.
Now that we have a better understanding of what NFT’s are, let’s go through our five vital steps you need to consider when diving into the world of NFT trading and ownership.
1. Find The Perfect NFT
The first step to investing in NFTs is finding the perfect asset. What’s the perfect asset when it comes to NFT investing? That depends—what do you like?
Compare investing in NFTs to art collecting. You should find a piece you value and care about. Even though NFTs are pretty new on the scene, there are still a wide variety of assets you can choose from. You can position yourself to have an advantage in your NFT investing journey by pursuing NFTs related to your specialized interests.
For example, if you’re an avid gamer, you may want to pursue a game-related NFT, such as an in-game item. Consider yourself a meme aficionado? Try your hand at investing in the next big meme that’s sure to be a viral hit.
Why should you pursue an NFT in a category you know a lot about? Think about it this way: How many non-drinkers successfully invest in fine wine? Knowing about the NFT before purchasing gives you a better chance of making a good investment.
If you need more ideas for where to look for the right NFT investment opportunity for you, look to your online communities! Many online communities are regularly minting new NFTs—maybe the perfect investment opportunity is waiting in one of your newsfeeds.
2. Determine The Necessary Crypto
Once you’ve selected the NFT you want to invest in, you’ll need to determine which cryptocurrency you need to purchase that specific NFT. Each NFT has different crypto wallet requirements associated with its purchase.
There are three blockchains that are used most commonly for NFTs:
- Ethereum (CRYPTO:ETH)
- Solana (CRYPTO:SOL)
- Polkadot (CRYPTO:DOT)
3. Fund a Crypto Wallet
Once you’ve determined the blockchain required for the NFT you want to invest in, you’ll need to fund an appropriate crypto wallet. To fund a crypto wallet, you’ll need to use an app to transfer US Dollars (or any other traditional currency) via credit card or wire transfer. Then, you’ll be able to convert this cash into the property cryptocurrency you need to purchase the NFT of your choosing.
Depending on the price of your selected NFT, you may find it challenging to fund the appropriate wallet adequately on your own. In this case, you can consider pooling money with friends or family using a tool like Tribevest that has the features you need to raise the necessary capital to purchase your dream NFT.
There are a number of marketplaces you can use to purchase your NFT. A few of the most common are:
4. Pull The Trigger!
Step four is… you guessed it, buy, buy, buy!
Depending on the seller and the NFT you’ve selected, you might purchase your NFT at a fixed price, or you may need to engage in a virtual auction for the chance to purchase your asset. Keep in mind, your NFT’s value is volatile both during and after purchase, depending on demand.
You’ll want to ensure you’re buying something you plan to hold onto for at least a few months. The NFT market is infamous for its volatility, and trying to day-trade NFTs is a surefire recipe for disaster.
Another tip for purchasing NFTs is to pool capital with friends and family and explore the world of NFTs together as a Tribe! Not only does pooling money allow you to purchase more expensive NFTs, but you can also leverage the knowledge and experience of the whole group. NFTs are a new investment for everyone: Why not spread the risk and level up together as a group?
5. Plan Next Steps
Your last step for NFT investing is to decide what you’re going to do once you’ve successfully purchased your new asset.
NFTs have a number of functions, depending on the type of NFT you’ve chosen to pursue. The first thing you can do with your NFT is to simply hold onto it as a collectible, like a piece of fine art. You can also use an NFT as an asset on a website or any other digital project.
The last thing you can choose to do with your new NFT is to list it on the marketplace to sell. As we mentioned above, we recommend hanging onto your NFT for a few months before you decide to list it, but when the time comes, selling is an option.
One thing to keep in mind when deciding to list an NFT on a marketplace is that you’ll be charged a “gas fee” by the marketplace to process your sale. This fee is associated with the energy needed to conduct the blockchain computing necessary for NFT verification.
To sell your NFT, you’ll need to:
- Upload the NFT to the marketplace of your choosing.
- Have the NFT verified by the marketplace.
- Set a price or list the NFT for auction.
- Lastly, the marketplace will handle the transfer of the NFT and the funds when the sale is made.
How To Invest In NFTs With Friends
Following these five steps will get you on the right track to start your NFT investing adventure, but as you get further along in the process, you may realize it’s not an adventure you want to take alone. NFTs can be pricey, and you may have more success and find yourself in a position to make more lucrative investments if you invest with a group.
Learn the ropes of NFT investing together with your social circle, taking advantage of the confidence and security of group investing to wade into the unfamiliar waters of a new investment class!
Pooling money and investing safely with friends can seem like a hassle, but with the right processes and systems, it doesn’t have to be! That’s where Tribevest comes in. We provide an easy-to-use platform, alignment tools, LLC-filing assistance, and more to make your group investing goals a reality as quickly—and painlessly—as possible. Start your tribe today!