Let’s go through some simple Do’s and Don’ts of Trading NFT’s.
Disclaimer: The following post will go through some rules I personally stick by. They should only be used as a guide, trade NFT’s at your own risk. Just like all parts of crypto, it’s a highly volatile and high risk investment so stay safe.
Things I’ve Learnt to DO
- Look for Volume: How often is an asset being purchased? Is it consistent or sporadic with only 1 or 2 sales a week/month? The reason why Genesis Chests were a good investment was because the volume was consistent and every day there were 5-20 being bought! We knew that as these get more scarce, they will continue to be bought and price subsequently go up.
- Look for an active Community: Usually NFT projects use Discord to manage their community. At the time of writing this, Decentraland has 12,000 Discord Members and Gods Unchained has around 15,000 Members. If you check the chats, people are regular in discussion with around 5-20 new people joining every day. This type of consistency proves that the project is consistently growing.
- Monitor Trading Channels: Most Popular Projects have a ‘trading channel’ in their discord. This is where people communicate and talk about different items, buys and sells, etc. Making sure you’re reading this every day will give you a lot of insight about where opportunities are.
- Projects must be Well Funded: An idea can be great but if there’s not enough money behind it, it could default before reaching it’s goals. Blockchain Gaming is a new industry and it will take times for these Pioneering projects to figure it out. You want to make sure there is millions if not 10’s of millions behind them so they have the spend power to learn and restrategize.
- Do Your Research!: This one is a big one. NFT projects are HIGH RISK investments. More than normal crypto projects. If liquidity dries up it is hard to sell your item. If you’re going to spending $100’s of dollars, ($1,000’s), you need to make sure worst case scenario, you can sell for the same price. Take time to learn the market. Monitor sales history, talk to people in Discord, read up on articles and videos. It’s extremely worth while committing a weekend to learn everything rather than just jumping in.
- Current ‘Market Price’ is more accurately determined by exploring Sold Assets NOT Listed Assets. What do I mean by this? Let’s use an example of the Light’s Bidding Promo card in Gods Unchained. The chart on the top right of the below picture shows the most recent sale was 17.1 ETH on Dec 30th. BUT, the next listed card is 37.72 Eth! Does that mean the market value of this card is 37.72 ETH? Hell nah. Previous sales for this card has ranged from 14-17 ETH so this is the price you want to try get this card. At 37.72 ETH you’re taking a big risk.
- Negotiate: This is the best part of NFT Trading. Unlike buying coins on an exchange where your only options is to buy at the listed sell prices, you can talk to sellers and negotiate buy prices. Sometimes you can get a great deal, (especially when buying bulk). A good negotiation strategy has made me most of my money.
What I’ve Learnt NOT TO DO
- Don’t panic sell/buy: Easy to say, hard to implement. Mostly this happens when sellers haven’t done enough research and drop their listing from 50,000 MANA to 5,000 when they could have sold it for 15,000. When you’ve been following sales history you know exactly at what price people will pull the buy trigger.
- Don’t spend more than you can afford: If you get stuck not being able to sell your NFT’s, you’ll be in deep trouble when you need money. I know this rule falls on deaf ears for the gamblers but really, NFT’s are not to be taken lightly. Make sure you are not spending more than what you can afford to lose.
- Don’t buy at Listed Prices: See a cool item listed that you like? Don’t just press the buy button. See if you can find an email or contact you can reach out to and negotiate with.
- Beware of Scams: You might get private messaged on a really good offer. Always make sure you ask the community if the person messaging you is legit. Many times, trusted sellers are known by community members so their opinion is valuable.
- Don’t fall for hype: Too many NFT presales have a hype stage followed by months of silence once the sale is over. Then you’re stuck waiting for the marketplace to open and even when it does, people don’t buy and sell as much as they did in the presale. It’s easy to jump in when everyone else seems to be buying. A good project presale has 100’s/1,000’s of investors, Millions of Dollars invested, good Funding and an active dev team who prioritize market activity.
- Don’t buy without knowing supply cap: MLB Crypto comes to mind. (Major League Baseball). This was a fantasy sports type game where you could buy figurines that earn you more figurines. Sounded cool…until there was literally 100s of thousands of figurines dropping the price to less than transaction fees. Introducing too much supply messes market economy if you don’t introduce it well.
There is plenty more I can add but that’s enough to get started. Stay safe and have fun trading!