Five things you need to know before buying an NFT

The market for NFTs has become very expressive over the past two years, following multi-million dollar sales of digital art that were tokenized on the blockchain — hence the term “non-fungible token”, and Acronym NFT.

Over the past year, the new virtual asset class has become popular not only with cryptocurrency investors , but also with celebrities, who don’t hesitate to spend thousands of dollars on Ethereum to own or produce their NFTs.

In 2021, the global NFT transaction volume will be 23 billion US dollars , most of which will come from the “fear of being excluded” (“FOMO”), which has driven many people to invest in the industry. But many new investors know little or nothing about how NFTs work, leaving them prone to mistakes that can cause them headaches.

Therefore, to enter the world of non-fungible tokens, one must be careful, especially for beginners, because the investment style can be affected by the volatility of the crypto market. There is risk of loss, and there are scams, as in any financial industry, but it is also a segment that offers good opportunities.

Asked for comment, Bruno Milanello, Head of New Business at MB , said there are some important questions before investing in an NFT collection or project.

Assess your investor profile

“It’s important to understand that NFTs are cryptoassets (yes, they are, but not cryptocurrencies), and as with any investment, questions about your profile, horizon, risk appetite, and personal goals must be considered,” says the expert .

Check item transparency

Milanello then highlighted more specific issues in the space. “Avoid projects or NFTs where the team is anonymous. The reason is simple: there is no reason to hide. Transparency is the name of the game.” He explained:

“It’s important to remember that when you create an NFT, you create a community around it, so the project must have an active social network, preferably with a few followers. NFT Development An active community is a great sign of support for the project, And will likely continue to receive support.”

Be wary of “sweepstakes” and celebrity endorsements

Another point to consider, experts say, is that even if several celebrities do get involved in the cryptocurrency world, it’s worth being wary when a celebrity who’s never been in the middle supports a project. “Avoid programs with lots of giveaways or random enrichment programs. There are no free snacks. There never will be,” he notes.

Do a lot of research on the collection

Milanello summed up the advice that is very important in any type of market, and that is to get in the habit of researching a specific product. “Look at the team’s project history. Search, investigate. In the end, it’s important to understand what the series is about, understand the roadmap, is delivery feasible, are they paying attention, and are communicating with followers, investors, and fans in a transparent way and in a clear manner”.

be wary of speculation

Attorney Nathaly Diniz, an expert in smart contracts and tokenization, warns to be cautious when entering the world of NFTs, as it is also a speculative market.

She cites the case of Iranian businessman Sina Estavi as an example. Last year, he bought an NFT of Jack Dorsey’s first tweet print for $2.9 million, but he couldn’t get the high price when he auctioned off the cryptocurrency earlier this year and set the price at $50 million. Bidding at $9900 .

“The specific case highlights one of the harshest criticisms of the NFT market: the enormous speculation that pervades it. If the motivation for buying a certain NFT is to make a profit, then one needs to be very careful about choosing, and even then, there is no guarantee that the futures market will assigning the same price or higher value to a certain project than the one at the moment of its acquisition,” Diniz also told the report on Friday afternoon.

According to Diniz, “lovers” would say that this is a high-risk investment in which eventual losses are inherent in the model, as eventual profits can follow the same proportions. “Critics will say it’s a highly speculative market, bordering on gambling, which can lead to exponential losses for participants,” he noted.

and concluded:

“While the practice of collection is typical of human beings, it can be observed that NFTs with ‘added value’ are more likely to prosper in the marketplace, i.e. granting their holders access to VIP clubs, advantages, or exclusive perks for buyers. NFT Genrator This may is one of the strongest indications that prevailing prices will be maintained.”