How Do NFTs Gain Value? Will Yours Be Worth Something?
It’s no secret that some NFTs have soared in value since their mint, while others have dwindled. In the bear market that we’re in now, you might be questioning how NFTs gain value to decide on your next move. Becoming more knowledgeable in the NFT space can definitely help you make the right moves.
NFT Value Breakdown
• Crypto Value
Something that can impact and determine NFT value is crypto value. Crypto is the currency collectors use to purchase digital assets. Like the financial market, that of cryptocurrency can fluctuate, influencing the value of NFT projects.
The cryptocurrency that can be used to buy an NFT collection is usually the same one the project is minted on. For example, if an NFT project is created on the Ethereum blockchain can be purchased with ETH.
• Mint Price
What is minting? NFT minting is the creation of NFT collections. It is the “publishing” of the digital collectibles onto the blockchain of choice. The mint price is the cost NFT buyers need to pay to “create” the NFT token, which can very often include the gas fees of the digital art.
The floor price of a digital asset on the secondary market will usually be higher than the mint price. This means that the higher price the initial mint price was, the higher the NFTs value. However, numbers don’t mean a thing if the demand isn’t there.
• Secondary Market Price
The above point follows into our next one. NFT creators and sellers can choose to post whatever price they want when they’re selling NFTs on the secondary market. In order to not lose money, Sellers would need to price a non-fungible token at a higher price than what they paid.
What Affects an NFT’s Value?
The above factors all have an effect on the NFT’s value, but other factors that can impact it and influence NFT sellers when they make pricing decisions are below.
• Artist Reputation
The reputation of the NFT artist can have a profound effect on how digital artwork is priced. If there is a notable artist, like Banksy, who created their own collection, you can bet that the NFT values of any token will be sky-high.
If an NFT artist already has fame, then the NFTs he or she creates will already have significant value even before the mint. Lesser known artists can still use NFTs to sell their art and make money, it all depends on the hype they generate, which brings us to the next point.
• The Hype
Hype can be a key differentiator between a sold-out project and one that no one’s heard of. Before the mint, NFT creators will likely be attending Twitter spaces and promoting their NFT collection. Digital assets with utility will also be more likely to sell out.
Remember, it’s all about supply and demand even within the NFT market. Take Logan Paul for example, who created so much hype and excitement around his project that his NFT collection sold out within half an hour to the sum of 1 million!
• Utility and Capability
Speaking of utility, NFT collections that have tokens with a purpose also have a higher value. Yes, there are plenty of digital collectibles that are just that – collector’s pieces. However, there are NFT collections out there that are used for good.
Maybe the creators have assigned special discounts to each one of their NFTs can get you exclusive access to events that you would not otherwise have access to (like Bored Ape Yacht Club). There are also collections that give an NFT holder the privilege of helping out environmental causes and charities with each purchase.
Creators are getting very creative with the capabilities NFTs can have, so now most NFTs will have some type of real-world use.
• Scarcity and Rarity
If the supply is limited, then you can bet different buyers will be wanting to get their hands on your NFT if they see it as valuable. NFTs can be viewed as a rare asset. How can you determine the rarity of non-fungible tokens?
One thing that can assign value to NFTs is the traits. Physical traits on a token can have a significant hand in the value of an NFT. How often the trait appears and how many NFTs have it determine the rarity, which then impacts the price.
• Brand and Product Development
A secondary factor that has a direct impact on the value of NFTs and crypto assets is the brand. Your NFT collection is more than just an asset you are selling, it is a reflection of you and your brand. Spend time cultivating it, being engaged and helpful within your blockchain community, and creating a supportive and helpful presence in the digital world because it can help your NFT collection gain value.
• Wash Trading - This is Bad
We covered a lot of the good things that can catapult your collection price on the NFT market, but what about aspects that can cause the value to take a tumble? One such example is wash trading.
What is wash trading? Wash trading is creating the illusion that an NFT is worth more than it is in order to drive up the price and pump value. An NFT wash trader would buy the NFT for sale on secondary NFT marketplaces for the lowest price they can find, then they would resell it to themselves (usually a secondary account) at a much higher price.
What does this do? This tricks the market and people into thinking the NFT is worth much more than it is. You can sometimes spot wash trading if a singular token on the NFT market from a collection is priced at a much higher price than any others.
Unfortunately, wash trading is easy to do, it happens a lot, and can mess with the trends people look at when trading NFTs. Insider trading, rug pulls and money laundering are also risks of NFT ownership. There are multiple ways to combat these issues and a lot of them require doing your own research beforehand.
• The Blockchain
The blockchain technology itself where the NFT is selling can also have a hand in driving up the price. If you drop your NFT on Ethereum, which was up until recently a proof-of-work (POW) blockchain, which took a lot of energy and cost, then your NFT collection will need to be priced higher.
• Crypto Prices
ETH is also one of the most expensive cryptocurrencies out there, which makes sense why an asset sold on the blockchain sells at a higher price. So, if new users choose a different blockchain, they could potentially not pay hundreds more than necessary.
We can’t predict the future, but can give an estimate of what NFTs can be worth. In order to assign value, a lot of it is collectors’ speculation. There are things a creator can do to boost the initial floor price and sale prices on secondary NFT marketplaces.
How to Make Your NFTs Gain Value
• Who is Your Audience?
Know who you’re marketing to. Understanding your audience, what matters to them, and what they’re looking for. You can then tailor your marketing campaign and create hype with a targeted effect to make more money.
• Build a Brand
We mentioned that the brand and product you create have a significant impact on how much your NFTs are sold for. It goes without saying that your brand should be positive. A good way to build a solid brand and improve the value of an NFT collection is to have a presence on social media. Attend and hold Twitter spaces and support other creators.
• Provide Value
NFT technology is a useful advancement, but people are also looking for value when buying NFTs as well. You can ask for a higher floor price if your tokens provide value, utility or capability. What this looks like depends on you, but you have to market the ownership of your NFT as something appealing.
Take Bored Ape Yacht Club (BAYC) for example, which offers access to exclusive events that could allow you to rub shoulders with big-time celebrities. You can even assign value to the NFT that applies in the physical world. An example is charitable causes. NFTs work as a buy-in and the cost can be donated to said charities.
• Create a Community and Market
If you have a strong and loyal community, then you will have a market to sell your assets. You can do this by advertising your project in a passionate way. Make sure you have a story to tell. What gave you the motivation to create this project? Why does the cause speak to you?
Your audience can usually tell if you created a project just to make money. If you sell it for exorbitant prices, or your supply is very poorly designed without a roadmap, milestones, buyer perks, etc., then there is no reason for the NFT community to commit to your project.
• Community Engagement
The Internet is essentially a place to socialize, engage in e-commerce and gain and share info. Use these pillars to engage with those in the community. You cannot expect to market your supply and get a sold-out project if no one knows who you are.
This is especially true since NFT ownership can be risky in a largely unregulated market. With rug pulls, wash trades and money laundering much more common than you think, you need to establish a trusted profile and also engage with those in the community to build trust
• Create a Beginner-Friendly Platform
Many creators just list their NFTs on platforms such as Nifty Gateway, but others actually create a website for their projects. If you’re the latter, then you have to make sure the platform you build is intuitive and easy to use. Remember that many of your buyers could be beginners, new to the NFT arena.
You can take inspiration from several marketplaces such as OpenSea and look at their layout and user interface. If you need help, there are plenty of companies that can help you build your platform and market your NFTs from the ground up. Of course, this takes a lot of capital (or a large share of your profits), and you can definitely save some money by learning how to do this on your own.
Future Value of NFTs
With all that said, what’s the future value of NFTs? No one knows but we can speculate that there are real-world use cases right now, and plenty of room for it to grow. Blockchain and NFT technology, namely smart contracts, can be used to process contracts and agreements. NFTs have also a big footprint in the gaming space with in-game token utility and so on.
People are usually resistant to change, and if we recall, web 2.0 also garnered similar criticism during its conception decades ago. If history has taught us anything, it’s that we shouldn’t write off something in the beginning, especially if there is some value and integration into big businesses now.
• Do all NFTs appreciate in value?
No, not all NFTs appreciate in value. There are several aspects that can impact the price of an NFT, some of which include the rarity, the hype, the artists’ reputation, real-world use, and connection to real assets such as physical artwork, and more.
• How do you make money with NFTs?
You can make money with NFTs by reselling them on the secondary market for more money, using them for commercial purposes if the creator includes commercial rights, or creating your own project with appealing utility.
There are millions of NFTs minted on blockchains, but not all of them will appreciate in value and fill your crypto wallet. There are many factors you should pay attention to in order to determine if the NFT will gain value. No one can tell the future (at least we’re not that we’re aware of!), so even if you “do everything right”, there is still a chance your NFT will not make money. But following our advice above can definitely improve your chances!