There are some risks with NFT investing that need to be talked about. It’s not all rainbows and butterflies but it is fun.
With the reward of potentially being decades early, there’s high risk. let’s explore,
(This is taken by a Twitter thread I did earlier),
Future of the NFT Industry is extremely promising, that doesn’t mean every NFT you own will 🚀.Some projects will sustain and turn into giants, most will wither and die.Just like in 2017, I increase my holdings as projects become more established.
Do a TON of research.
Take your sweet time learning and absorbing ALL the info you come across.
Watch every tutorial in this NFT beginner Youtube series and read every article on my dclblogger.com home page and blog posts.
Liquidity is quite low.
Easy to buy, hard to sell NFTs.
There is no agreed ‘market price’ like cryptocurrencies on exchanges you can exit at.EACH NFT has a different price and you have to usually wait for a buyer to sell to if you need to cash out.
So important.If you buy 50 ETH worth of NFT’s but the project has only transacts 10 ETH worth of volume every 7 days. You’ll have to wait months to sell your position.
My strategy has always been to enter at a GREAT price so I can exit if I need to.
People RUSH to new NFT presales.
A month later, it’s quiet and everyone’s moved to another NFT presale.
I wait till after FOMO and see if growth, enthusiasm, progress sustains.This requires a GREAT product and community.Key for longevity.
Many NFT projects have folded.Finding a sustainable funding model is hard.Can’t keep selling NFTs as you’ll keep diluting investors UNLESS there’s community growth.
VC backing = better chances of lasting first 2-3 years.
Still respect boot-strapped projects tho.
Cryptocurrency Price Swings.
Historically we’ve seen the NFT market freak out when BTC/ETH/Crypto Moons or Dumps.People FOMO in or out and they sell their NFT’s much cheaper than ‘market price’ to secure a sale.
Sometimes this sets off a ripple effect.9/ Not a risk – but Art is somewhat immune to the above.
Maybe because people have more attachment to their pieces and are in it long term.Hence why I’m bullish on the Art Industry as a whole.
They have major influence.
Most NFT projects have relatively small market caps, (1-3,000 ETH).One crypto whale can dominate this.What if they decide to sell?I like to see a variety of whales. Ideally 100’s, 1,000’s of investors making up the total market share.
I’ve seen this. Beware. Look deeply into top buyer/seller wallets of some NFT projects.Just because there’s a lot of trade volume doesn’t mean it’s healthy. Easy to wash trade.
Am sure I’ve missed some. But the above are good to keep in mind when investing.