The Top NFT Trading Strategies for Investors in June
Aaryamann Shrivastava
5 min read
Key Insights:
The NFT industry today is a $21 Billion market with over $61.83 Billion traded to date.
The popularity of NFTs has also impacted the token market as collections have launched their one token.
The recent crash has set NFTs up as an investment hedge for the crypto market’s volatility.
When Non-Fungible Tokens (NFT) first came into existence in 2014, they were just another innovation in the still-developing web3 space.
It took another six years for the same NFTs to find value, and by the end of 2021, these NFTs became mainstream and turned themselves into an investment vehicle.
Thus as we approach the end of the second quarter, here are some ways in which you can too become a part of this community.
The NFTs Trading Strategy
Investing in NFTs isn’t the same as investing in cryptocurrencies as, unlike the latter, NFTs cannot be bought and sold per the market movement as each individual NFT have different values.
For example, one can buy a Bitcoin and sell it the next day and repurchase it the day after, and that Bitcoin would be the same as the first purchase.
However, if you buy a CryptoPunk and sell it, you may never be able to buy it back, and any other CryptoPunk won’t be the same as the first one.
Every NFT is different from others even if it has minor differences | Source: CryptoPunks
Thus should you decide to invest your money into these Non-Fungible Tokens, you must be prepared.
Value the Project, Not the NFT
In many cases, investors tend to jump for NFTs that are either suddenly trending or are insanely expensive and ignore the lesser expensive NFTs, thinking they may hold no potential value. That is where one may lose out on a good opportunity.
Projects that are backed by big names and have been developed by notable artists will hold a much higher value in the long term, and one should aim for them.
Reputation and Community
Since NFTs are a relatively newer breed of crypto, they also remain vulnerable to scams and rug pulls.
In the past, too, projects such as Frosties and Evolved Apes have managed to get away with rug pulling investors up to $3 million in NFT value, even though they were some of the most trending projects.
This is why it’s necessary to ensure that any NFT project has a credible developer team that is transparent with the community.
Buy High, Gain More
Another intelligent trading strategy when it comes to NFTs is to make sure that you are not only the first ones but also the topmost in the community.
Getting in on collections can be done by buying at the lowest price point or by buying at the highest.
If you pick the latter option, you should be prepared to shell out big bucks, as in some cases, rarest and highly valued NFTs can cost as much as $33 million.
However, this also makes you the owner of the rarest and the most in-demand NFT, which can then be held on to or sold for profit in the future.
But Buy Low As Well
This strategy depends on the NFT collection. In the case where you find a project that has growth potential, get in on the floor price. As the value appreciates, the floor price would rise as well, making even the most common NFTs profitable for you.
Do Not Shy Away From Trends
While trending NFT projects may not necessarily be the most valuable investment options, they do serve as a solid opportunity for scalping in the long run. This strategy is an effective trading method in the derivate space but can also be applied to trending NFTs.
One can buy a most basic NFT as soon as the collection begins rising in popularity and demand and sell for profit once it’s at its peak.
However, a trader needs to be on top of the changing trends as the NFT market is also prone to volatility.
Just recently, one of the top NFT collections, CryptoPunk’s floor price dropped from 61 ETH ($107k) to 47.32 ETH ($83.6k) in the span of a month. Situations as such must be avoided in such a strategy.
NFT collections’ price | Source: The Block
The More, the Merrier!
It doesn’t take a genius to deploy this strategy. Simply combining the factors from the abovementioned strategies, one can expand their portfolios by investing in more than just one NFT project.
With the Metaverse growing as well, many NFT collections are integrating themselves with the virtual world to create deployable avatars of the NFTs. This gives utility to an NFT even if it isn’t valued on the basis of scarcity, resulting in an increase in price.
Making investments this way also prevents excessive losses as a decline in the value of one NFT can be balanced by the increase in the value of some other NFT in the portfolio.
Invest in NFTs by NOT Investing in NFTs
Lastly, there are ways for an NFT enthusiast to still find exposure to these tokens without risking themselves directly. This can be done by investing in tokens of the NFT projects, marketplaces, or blockchains that they are associated with.
Examples of the same can be found in ApeCoin (APE), the token of the Bored Ape Yacht Collection, which was launched last year and currently has a market cap of $1.75 billion.
ApeCoin is an option for investing in NFTs without being directly exposed to BAYC
Another such token is FLOW of the Flow Blockchain, which has exploded in demand over the last couple of days.
FLOW crypto exploded socially | Source: Google Trends
Backed by the likes of Coinbase, Dreamworks, Samsung, and Google Ventures, the Flow blockchain was created by Dapper Labs, who are also responsible for creating the NFT collection, Cryptokitties.
In conclusion, there are many ways for one to invest in NFTs, provided they utilize the most optimal strategies to gain profits.
