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The metrics to consider for buying and selling NFTs

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TL: DR

When choosing to buy or sell NFT you should have some basic metrics in mind to gauge its potential value.

I count eight, eight key metrics to consider when evaluating the intrinsic value of an NFT:

  1. the minimum price
  2. the maximum price
  3. the volume
  4. the offer
  5. sales
  6. the rarity
  7. the origin
  8. smart contracts.

Should you join an NFT early in the project or should you wait and buy later?

Index

NFTs have taken the internet by storm, and are showing no signs of slowing down. With its surge in popularity, there is no shortage of NFT projects being launched every day.

Deciding the precise value of an NFT can be difficult. However, to better assess the longevity and value of an NFT project for your portfolio, I am interested in pointing out that there are key metrics that can help guide an investment strategy. purchase and sale of NFTs in a better direction.

NFT evaluation metrics

Price of the plan

What is that?

In the NFT space, the floor price is the lowest priced NFT within an NFT project.

“Buying the flooor”, therefore buying on the floor, is considered a good starting strategy, as it is an accessible entry point for newcomers joining an NFT project .. the price will be the lowest.

Because it's important?

The floor price is a good metric to evaluate how well an NFT project has been received by the community. As demand increases, the minimum price will rise.

So, if you buy the cheapest NFT in a collection with the expectation that it will become more popular, you can then resell the NFT when the minimum price is higher.

A good goal is to find a project that balances high value and accessibility. While projects with higher base prices are worth more, they are more difficult for small traders to afford.

The "artistic" value of NFTs
The “artistic” value of NFTs

Maximum price

What is that?

The cost of the NFT with the highest price in the collection or the highest price an NFT was sold for.

Buying the maximum price can be considered a high risk, high reward NFT trading strategy.

Because it's important?

If you are willing to spend a lot of money on NFTs, try to buy ceiling NFTs, which is their highest price. These are usually the rarest and most popular digital goods that are sold at the highest prices.

If demand for the project increases, the price of ceiling NFTs can skyrocket. But if the project loses its appeal, investors looking to sell can suffer huge losses as liquidity runs dry.

Volume

What is that?

This metric refers to the total volume traded and shows the overall demand for the project.

Generally, consolidated collections have high traded volume values.

Because it's important?

The volume traded is a good indicator of how popular an NFT collection is. For a collection to reach a high volume, people must be willing to buy and sell.

By looking at the total volume traded, one can easily determine if an NFT project is currently in demand. The higher the volume, the more liquid the market tends to be. You want a liquid market so that you can easily enter and exit NFT positions.

Discount

What is that?

The offer refers to number of NFTs in the collection.

Because it's important?

Essentially, every NFT creator controls their job supply and inflation rate.

The offer of NFT affects how the value of a collection is perceived. Collections with a high supply tend to have a lower market value for each NFT. Low-supply collections often have higher base prices due to the rarity and scarcity of each piece.

Sales

What is that?

Il number of NFT sales helps investors identify past and present interest in an NFT collection.

Because it's important?

If an NFT collection shows a lot of recent sales, it could be a sign that there is growing interest. However, it is necessary to consider the direction of the movement in relation to the minimum price. If many NFT holders are selling and the minimum price is falling, it could indicate decreasing interest or even a panic sell.

I should have some change aside.

Rarity rank

What is that?

La rarity of an NFT is determined from the traits and characteristics that the NFT possesses within a given collection. This metric can also translate into how difficult it is to obtain a specific NFT.

Because it's important?

Rarity rank is a metric that helps investors gauge how valuable NFTs can be in each collection.

Following the law of scarcity, rare and in demand NFTs often attract more buyers and are sold at higher prices. Additionally, NFTs with a higher rarity rank may be equipped with additional unique NFT utilities, such as greater perks in play-to-earn games that players can benefit from.

Origin

What is that?

In the NFT space, provenance can be defined as the history of ownership behind an NFT starting from its origin.

Because it's important?

Provenance is an important metric used to evaluate NFTs because it allows you to verify changes in ownership information across the blockchain. Your investment is protected because only an original can be traced back to the original creator.

Smart Contracts

What is that?

Smart Contracts are an application or program that runs on a blockchain. They are an important part of NFTs because they make it possible to sell or transfer a digital asset, set royalties for artists, allow users to interact in the metaverse, and more.

Because it's important?

Smart contracts can outline the rights of the owner and the buyer. As well as preserving the supply chain or the history of the transaction.

In terms of supply chain preservation, the preconditions required by smart contracts are tied to the original creator and the buyer. While the buyers take ownership, they don't necessarily own the copyright of the NFT. Unless it is part of the terms of the contract, the copyright remains with the author.

What role could NFTs play in your portfolio?

Like any other investment, NFTs can potentially be a great portfolio diversifier.

NFTs are a class of digital assets with infinite possibilities. NFTs can open doors to other opportunities within the metaverse, as well as give exposure to the world of blockchain.

However, keep in mind that not all that sparkles is a diamond. With so many NFT projects springing up every day, successfully conducting your own research and making an informed decision is especially important.

3 tips for building a successful NFT portfolio

Diversify your portfolio
Don't put all your eggs in one basket. Not all NFTs will be a success. Diversifying your portfolio can improve your chances of making successful investments.

Don't spend more than you can lose
It is recommended not to spend more than 10-20% of the total cost of your portfolio on a single investment. NFTs are no exception.

Be active in the NFT community
Whatever NFT project you are interested in, it is worth being active in the community. Doing your own research helps distinguish a good investment from a potential scam.

Conclusion

The value of NFTs is largely determined by market forces, and it is impossible to accurately predict the future of the NFT world.

However, it is possible to increase the chances of success by doing proper market research and using the metrics seen above. Use them to better evaluate and navigate the NFT space.