Non-fungible tokens have become incredibly popular during 2021. This has led to a rush of investors that do not fully understand the market mechanics behind NFTs.
This can be a little problematic because many investors will purchase an NFT that loses value, which is something that no one wants from an investment.
With that in mind, this article will cover how you can ensure that your NFT investment does not lose value. Unsurprisingly, most of this strategy revolves around purchasing an NFT that does not lose value.
3 Tips For Purchasing NFT That Do Not Depreciate
An entire book can be written on proper NFT selection. But there are some basic principles that you can follow to ensure that your NFT does not depreciate in value.
Again, these tips revolve around choosing the right NFT project rather than anything you do after purchasing the NFT.
Avoid Celebrity NFTs
The first tip to avoid purchasing an NFT that depreciates is to avoid celebrity NFTs.
Are all celebrity NFTs bad?
No, there are some celebrity NFTs that could appreciate in value, especially NFTs that have an artistic element to them (ie. music NFTs). However, most celebrity NFTs are nothing more than money grabs by celebrities.
For instance, a collection of 10,000 NFTs released by a celebrity is a pure money grab. It’d be similar to a celebrity releasing 10,000 trading cards.
You should avoid those types of celebrity NFTs unless you expect the value of the NFT to rise in the short term. That said, you should immediately liquidate the NFT when it is profitable because the long term future of those NFTs are zero.
NFTs Are About Community
Many people inexperienced with NFTs have an erroneous belief that NFTs gain value because of their appearance.
That is not true at all.
Crypto Punks look like computer art from 1995 and have a value in the hundreds of thousands.
The difference between NFTs that appreciate in value and those that depreciate in value is in the community.
Bored Ape Yacht Club is a good example of that. The founders of the NFT club have donated to ape sanctuaries, released merchandise, and even released a secondary NFT for original owners of Bored Apes.
They also have given full commercial rights of the Bored Apes NFTs to owners, which has sprung a sort of secondary community of animated series and other media that utilizes the Bored Ape imagery.
This contrasts to most NFT projects that simply dump 10,000 art NFTs onto buyers and have owners that disappear.
To summarize, find an NFT project that has founders (or enough users) that appear serious about maintaining a community. You can typically find this by looking at the size of the Discord server and the amount of excitement that the project receives on Discord.
More excitement on Discord generally means that the project will have more community support.
Promote Your NFT
A final tip to help ensure that your NFT does not depreciate is to promote the NFT you purchased.
How do you promote your NFT?
The easiest way is to change your Twitter profile picture to the NFT. This helps get some exposure to the project, which is the best way to drive value to it.
For instance, Jay Z has changed his Twitter profile picture to the Crypto Punk that he purchased as a way to promote the Crypto Punk project.
Obviously, you need to be active on Crypto Twitter or have a large following for this strategy to work. But being active on Crypto Twitter is not particularly difficult if you understand much about cryptocurrency.
The other way, and less ideal in our opinion, to promote an NFT you own is to simply mention it on Twitter and Discord. The key to this is to do it in a way that does not get you banned from the platform and that gets people to read it.
Simply spamming the same message about your NFT across Discord servers and on Twitter will not get much attention. You must be smart about how you promote your NFT.
What To Do If Your NFT Depreciates In Value?
Did you buy an NFT that depreciated in value?
In that case, your best course of action is to hold it. There is a chance that it becomes valuable in the future as a sort of “1st generation” NFT.
Yes, it’s unlikely. But you are not going to sell it for anything substantial, so you may as well hold onto it.
The value of early NFTs could rise when more of the general population starts purchasing NFTs.
This is similar to how the value of bitcoin dropped quite substantially in 2013 and many people sold it for a loss. If they would have held it, then they could have made significantly more money.
Just hold your NFTs unless you really need the cash.
Nothing is Guaranteed
One parting piece of advice about purchasing NFTs is that nothing in the space is guaranteed. You could find the perfect project that looks poised for success and it could be a complete flop.
You may also see a project that looks doomed for failure (ie. Loot) that has NFTs that increase in value.
The NFT marketplace is truly the Wild West of cryptocurrency and that’s saying a lot because cryptocurrency is an extremely wild market.
Just remember, only invest money you are willing to lose into NFTs and you will not be too disappointed when the “guaranteed success” NFT you purchase goes to 0.
That covers it for some tips on making sure you don’t purchase an NFT that depreciates in value. We hate to say it, but a lot (not all) of picking the right NFT comes down to luck.
Do a few big whales or social media influencers purchase an NFT from the same project?
You are probably in luck in that case because those people will have the tools necessary to help propel the project to greater heights.
With that in mind, some NFT projects come out of nowhere to major success (ie. Loot) and the most promising NFTs simply fizzle out because everyone is interested in flipping rather than making a community around the NFT.