One of the main current trends in the cryptocurrency market is non-fungible tokens. With their help, you can earn money on digital paintings, music, movies, and even memes. Some NFTs whose price may reach tens of millions of dollars bring good income to their creators. While some learn how to create NFTs, others wonder how to invest in NFT tokens. The market supports the trend and offers new opportunities for capital growth. So, how to invest in NFT? What are the main ways to make money on NFTs? Today, we’ll try to find out!
How to Invest in NFT Crypto: Key Ways to Know
The NFT market is experiencing tremendous growth. In December 2021, NFT sales reached $17 billion — 179 times more than in 2020. Analysts state that the sector will continue to grow.
Still, investing in digital arts is necessary only with a clear understanding of their meaning. Experts suggest focusing on future allocation, cultural significance, and the token’s usefulness.
How to invest in NFT crypto? Well, there are many ways to invest in NFT tokens. Let’s consider all of them in detail!
#1 Direct Investment
Buying a promising NFT to resell is the easiest way to make money on new technology. Non-fungible tokens are traded on industry-specific marketplaces (OpenSea, Rarible), and payment operations take place in ETH. Some platforms offer tools for minting tokenized items. Users can buy and sell different types of NFTs on marketplaces:
- In-game cards
- Music tracks
- Jewelry and more
How to invest in NFT crypto? To get started, you need to connect a browser wallet with ERC-20 support (Metamask). When choosing an investment object, you should understand that NFT is an illiquid asset, and its value is subjective. But the market efficiency helps to benefit from such investments.
Some objects allow receiving dividends. They are paid in cryptocurrency or other NFT tokens. For example, owners of Punks comics receive $PUNKS coins, and owners of BAKC (Bored Ape Kennel Club) tokenized dogs receive serum to create new breeds.
#2 Listing NFT as Collateral
According to the analytical service Nonfungible, 1.9 million lots were sold on the largest NFT marketplace OpenSea in Q3 of 2021. Only 27% of them remained liquid. Another 73% were not transferred from wallets of new owners. The lack of liquidity is the main problem of the market. In part, it is solved by lending platforms secured by NFT tokens.
How to invest in NFT stocks? Decentralized systems offer to directly lend cryptocurrency to owners of digital objects and receive interest for it. A collateral asset is transferred to a lender if a borrower fails to fulfill its obligations. Since this is a new direction, the interest rate is quite high – 15-20%. But this is a real opportunity to unlock an asset and transfer it to a liquid form.
The popularity of such loans is growing, and transactions reach millions of dollars. In October 2021, a $1.42 loan was approved on an NFTfi platform. A user provided a digital object from Larva Labs (Autogliph 488) as a credit.
In 2021, several large platforms were present in the NFT lending market:
- Strip Finance
In December, the Kraken cryptocurrency exchange announced the launch of its own NFT marketplace. One of the oldest platforms will offer customers custodial and lending services. The developers closed a $15 million funding round with support from Pantera Capital, Castle Island Ventures, BlockFi, and Quantstamp.
#3 How to Invest in NFT Stocks & Index Projects?
To increase liquidity of non-fungible assets, they are transferred to the ERC-20 format. Platforms that provide this opportunity are now very popular and have significant potential for development in the future.
Some of them (NFTX, NFT20) allow investors to independently transfer their NFTs into ERC-20 tokens and create indices from relevant assets. For example, you can track the minimum prices of Zombie CryptoPunks and buy only liquid collection items. Others (Whale, Metaverse) offer ready-made products as tokenized shares of a set of assets.
If you are still wondering how to invest in NFT stocks, just consider that investing in NFTs via the purchase of an index fund is an easy way to diversify risk by tracking multiple tokens of the same type.
How to Invest in NFT Tokens?
The ERC-20 standard allows you to convert any kind of asset into cryptocurrency. In the field of NFT, they perform several functions:
- Governance tokens. Such tokens allow the community to participate in the project’s development and jointly own it. So, how to invest in NFT tokens? Investing in NFTs in anticipation of growing popularity is a good way to profit from the market development. For example, a $RARI coin from the Rarible platform has risen in price by more than 8 times in 2021 (from $1.65 in January to $14.35 in December). At its peak, the cryptocurrency exchange rate reached $41.33. $AXS from Axie Infinity increased 191 times over the same period (from $0.57 to $109.27).
- Utility tokens. They open additional opportunities for holders of services that are not available to other users. For example, $SAND is used to purchase in-game objects in The Sandbox metaverse.
- Fractional tokens. They allow selling and buying small parts of NFT items, increasing their liquidity. This direction is being developed by NIFTEX and Metapurce. The former allows dividing NFTs into more liquid ERC-20s. The latter work on the same principle and sell small shares of paintings from the Beeple 20 Collection.
In 2021, the non-fungible token economy grew at a record pace. Experts expect that the market will continue to develop and capture new areas. In the future, digital art collections will become a common practice among celebrities, sports teams, and businesses. Advanced crypto investors should consider how to use this wave of popularity. At the same time, it is necessary to invest in NFT tokens taking into account possible risks.
How to invest in NFT? What other ways do you know? Feel free to share your knowledge in the comments below!