Non-fungible tokens, or NFTs, are one-of-a-kind digital assets produced and safeguarded using blockchain technology. 1 While avatars and collectibles are two of the most common use cases for NFTs, they may be used to represent ownership of virtually anything.
You might be asking how to acquire NFTs, what the dangers are, and whether they’re suited for you. Continue reading to learn more about NFT investment and other helpful hints.
1. Decide which NFT you want to purchase.
Shopping for the NFT you wish to buy is the first and most enjoyable step in owning an NFT. Every NFT is one-of-a-kind or part of a limited edition. Browse the marketplace until you locate the perfect NFT to begin your collection.
To see what’s available, go to one of the major NFT marketplaces, such as OpenSea, Rarible, or Axie Marketplace. Because you can only buy NFTs using cryptocurrency on most NFT marketplaces, you’ll need to keep track of the cryptocurrency you’ll need to buy your NFT.
2. Create a bitcoin wallet that is compatible.
The next step is to create a cryptocurrency wallet if you don’t already have one. These digital wallets are where you keep the cryptocurrency you’ll need to buy NFT. Because not every cryptocurrency is compatible with every other, you’ll need a digital wallet that’s compatible with the cryptocurrency you’ll be using to buy your preferred NFT.
A digital wallet can be created for free on your phone or computer. MetaMask, Coinbase Wallet, and Ledger are some of the wallets that enable NFTs.
3. Make a digital currency deposit in your wallet.
The next step is to fund your digital wallet by purchasing the cryptocurrency you’ll need for the NFT with fiat money, such as US dollars. Although Ether is widely used on major NFT markets, it’s possible that the NFT you’re looking for is only available in another digital currency. The accepted money for an NFT purchase is usually the cryptocurrency associated with the blockchain that supports the NFT, such as Ethereum. 3
4. Join an NFT marketplace with your wallet.
You can connect your crypto wallet to the digital marketplace that lists the NFT once you’ve created and financed your digital wallet. Once you’ve connected, you should be able to see the bitcoin balance in your wallet, which you can use to buy one or more NFTs.
5. Purchase an NFT
When you’re ready, you can purchase an NFT by clicking the Purchase button.
If you pay in ETH, you’ll also have to pay a “gas” cost to the Ethereum network to complete the transaction. The amount of this fee changes depending on Ethereum platform network congestion and can reach hundreds of dollars. NFT Gas Station and other similar websites can assist you in estimating future gas fees for NFT transactions.
6. Verify that the NFT transfer to your digital wallet was successful.
You are now the proud owner of an NFT after clicking the buy button. Congratulations! Because blockchain transactions are irreversible and cannot be reversed, the NFT remains yours until you decide to trade or sell it.
Before you may see the NFT in your digital wallet, the transaction may take some time to complete. The NFT transfer to your wallet is not complete until the blockchain network that supports the NFT confirms and verifies it. 4
The transaction is considered complete once you see the NFT in your wallet.
Before Investing in NFTs, Here’s What You Should Know
Investing in non-ferrous metals isn’t a proven strategy to make money. While some NFT investors have had incredible gains, there’s no guarantee that your digital asset will appreciate or maintain its worth. Any NFT might effectively lose its value.
Know the Consequences of Investing in NFTs
As a new asset class, NFTs should be regarded as extremely risky. The risk of investing in NFTs is exacerbated by the risk of investing in cryptocurrencies. Despite the fact that cryptocurrency has been around for over a decade, it is still a relatively new investment area with substantial price volatility. 5 Due to government intervention or bad market conditions, the value of bitcoin could plummet without warning.
If your NFT is priced in Ether, and Ether’s value drops by 50%, your NFT’s value could drop by 50% or more. It’s possible to lose your entire cryptocurrency or NFT investment.
The Benefits and Drawbacks of Investing in NFTs
Pros Exposure to blockchain and cryptocurrency technology
Investments that are safe and semi-anonymous
Cons
Investment that carries a high chance of huge losses.
You’ll need to keep track of your digital wallet.
Network expenses are prohibitively expensive.
Explained Advantages
Investing in NFTs provides direct exposure to and familiarity with a relatively new technology and asset class: blockchain technology and cryptocurrencies.
Investments that are safe and semi-anonymous: NFTs can be purchased safely online and stored in an independent digital wallet of your choice.
The Drawbacks are Expounded
Investment that carries a high chance of huge losses: NFTs and cryptocurrencies are high-risk investments due to their volatility. In an NFT, you could lose your entire investment.
Maintaining a digital wallet is required: You may struggle with the technical parts of managing a digital wallet to buy, sell, and store NFTs if you don’t have at least basic computer abilities.
Network fees are prohibitively expensive: To obtain an NFT, you may be required to spend hundreds of dollars in Ethereum gas fees in addition to the transaction amount.
How Do You Begin Investing in NFTs?
If you’re new to cryptocurrency and NFTs, start investing in NFTs by following these instructions.
Make a Wallet for Your Digital Assets
You’ll need a standalone digital wallet to store NFTs, most likely one that accepts Ethereum.
6 Your crypto wallet might be either software or a hardware device that you keep on your person. Hardware wallets are more secure, while software wallets are more convenient. 7
Choose which NFTs to purchase.
You can browse NFT marketplaces online to find the NFT you wish to buy. You’ll probably come across a wide range of photographs, short videos, and original artworks. Many NFTs are sold as sets or collections, with individual NFTs costing anywhere from free to millions of dollars. 8 Choose an NFT that you think will be entertaining and profitable.
Finish the First Transaction
You must first link your digital wallet to the marketplace where the NFT is posted before you may purchase it. Before you can make a purchase, you may need to create an account with the NFT exchange.
What to Expect After Investing in NFTs
You may opt to buy and sell NFTs often to make a quick profit, or you could buy, keep, and collect NFTs for the long term.
It’s up to you to determine how you want to invest, but don’t forget about your NFTs. Keep your digital wallet information in a secure location that is nevertheless easy to access.
You are completely responsible for keeping track of and recording your bitcoin and NFT capital gains, as well as declaring them on your tax return every year.
11 NFT taxes is complicated because they can be interpreted as collectibles, which are subject to a 28 percent capital gains tax rate.
Should You Invest in Non-Financial Telecommunications (NFTs)?
NFTs are a one-of-a-kind and potentially lucrative investment, but they aren’t for everyone. NFTs may not be ideal for you if you are not technically inclined or seek stable, low-volatility investments.
If you understand the risks, are comfortable managing a digital asset wallet, and can afford to lose your entire investment, you should consider investing in NFTs.
Most Commonly Asked Questions (FAQs)
What are the best ways for newcomers to get started investing in NFTs?
Beginners can buy NFTs with a software-based cryptocurrency wallet and any of the major NFT exchanges. Check the cryptocurrency the NFT is listed in and make sure you have that coin in your digital wallet after you’ve identified the NFT you wish to buy. To buy an NFT, you’ll usually need an Ethereum-compatible wallet with Ether. 13
Is it necessary for me to invest a large sum of money in NFTs?
NFTs that cost millions of dollars are available, but you don’t have to be a millionaire to buy one. Some NFTs are advertised for free on marketplaces like OpenSea, but transaction processing costs must still be paid. Some blockchain networks, such as Binance Smart Chain, have transaction fees as low as one dollar. 14
What is the best approach to invest in non-financial-transactions (NFTs)?
There is no one-size-fits-all approach to investing in NFTs. Consider the risks and costs of an NFT investment plan in addition to the potential upside. Using a balanced approach will allow you to select the optimal NFT and NFT marketplace for your budget and investing objectives.
