You may have seen the pictures of Bored Apes and CryptoPunks selling for millions of dollars. Or blockchain games like Axie Infinity allowing people to earn a living simply by playing a game. Or even digital art from artists like Beeple (Mike Winkelmann) and Pak trading hands for massive sums.
And now you want in. Welcome to the wacky and wild world of non-fungible tokens, where speculation can make you rich in a matter of months and, at the very least, allow you to take part in internet communities in ways that were never possible before.
In this article, we cover five ways you can “get into” NFTs. By the end of it, you’ll learn:
- How to buy an NFT, including how to store them correctly
- How to sell an NFT, including different selling strategies
- How to get involved in NFT projects
And much more. Let’s get started.
How to Buy an NFT
The first step for many people in “getting into” NFTs is learning how to buy one. The next few sections will take you through the entire process, from setting up a non-custodial wallet to transferring crypto to it, to making your first purchase.
Set Up Your Wallet
Like you would use a place to store your personal possessions, you need a place to keep your non-fungible tokens. That’s where digital wallets come in.
Digital or crypto wallets come in two types: custodial and non-custodial. The difference between the two is that with custodial wallets, an entity controls your wallet “keys.” With non-custodial wallets, you control the keys and are completely responsible for maintaining the wallet.
That responsibility is critical. But while you have the added benefit of controlling everything in a non-custodial crypto wallet, you might lose access to it if you don’t take proper security measures.
The three most popular crypto wallets for the Ethereum blockchain are MetaMask, Coinbase Wallet, and Trust Wallet. The most popular one on the Solana blockchain is Phantom. To set one up, follow the correct download link, install the wallet, and select “Create a New Wallet.”
The most important part of this process is storing your seed phrase (the 12-to-24-word key to accessing your wallet if you’re ever locked out). Write it down and store it in a safe place, preferably where no one else has access to it. Avoid storing it on a computer, as malware can read your keystrokes and find your seed phrase.
Transfer Crypto to Wallet
After you’ve set up your wallet, the next step to purchasing an NFT is transferring cryptocurrency to it. To do this, you can purchase crypto directly through the wallet (through a third-party service) or transfer from an exchange. We’ll cover both options here.
To purchase crypto directly through your digital wallet, you’ll want to look for a button that says “Buy Crypto.” Through it, you’ll find the option for different cryptocurrencies you can purchase. The “Buy Crypto” button hooks you up to a third-party site like MoonPay or Wyre. These sites charge a small fee, a cut if you will for using their services.
Select the amount of cryptocurrency you want to purchase and put in your credit or debit card information. Then follow the instructions to buy the crypto.
To purchase crypto through an exchange, you’ll want to find a crypto exchange that works in your geographical area. Coinbase, Kraken, and Binance are some of the most popular. To buy crypto with your fiat currency (fiat being USD, Euros, British Pounds, or another national currency), you’ll likely need to KYC, which stands for “know-your-customer.”
KYC procedures keep exchanges in line with national crypto regulations. Some would say they reduce the possibility of money laundering and other illegal activity as well. To complete the KYC procedure, you’ll have to submit identifying information like an address and a screenshot of your license or passport.
After the cryptocurrency exchange approves KYC for your account, purchase the amount of crypto you want and transfer it to your cryptocurrency wallet that you opened in the previous section. Getting the address correct is important. If even one letter or number is incorrect, your funds could be lost in the transfer.
Find an NFT Marketplace
Once you have purchased cryptocurrency and have it stored in your non-custodial wallet, you are ready to purchase your NFT. First though, you need to find the correct marketplace to purchase on.
Markets in the NFT world generally sort into three categories: open, curated, and proprietary. Open marketplaces are a bit like an eBay or Amazon: You can find any number of items there at wildly differing price points. Curated marketplaces control the supply of NFTs by selecting them (or the digital artists) individually. Proprietary marketplaces own the copyright to the digital items or digital assets they sell. They are often the result of partnerships, like the NBA Top Shot marketplace being a partnership between the NBA and Dapper Labs.
You can also find marketplaces that serve a niche. For instance, some NFT marketplaces are solely list digital works from artists or gaming digital collectibles. Your non-custodial wallet should connect to most of them except for proprietary marketplaces, which use custodial wallets. So, you will be good to go.
For more information about which marketplaces are the most popular, check out our article, “Top NFT Marketplaces.”
Once you’re on the secondary marketplace or your marketplace of choice, you can browse through the different sections to find an NFT you like. Then, after you’ve clicked on the NFT, you can purchase it by either clicking a “Buy Now” button or make a bid on it if the seller is auctioning the NFT.
The process is generally simple and straightforward. You will have to connect your non-custodial wallet to the marketplace and approve a small “gas” fee when you buy. Gas fees can range from cents to hundreds of dollars depending on the blockchain and the time you are buying.
Now, let’s look at how to sell an NFT.
How to Sell an NFT
There are two primary ways you can sell an NFT: through a general listing or through an auction. Both options have their pros and cons.
Creating a general listing for an NFT simply means setting a price (usually in the NFT’s blockchain’s native cryptocurrency) and setting a period for which people can buy. Often, there is a default period people can buy but because it is so long, it’s often better to adjust that for a shorter period.
“Floor price” is a term that is helpful to know. This is the lowest price someone has listed an NFT for in a collection at a current time. Most people price their NFTs around the floor unless their NFT is attractive (has traits that look good) or rare (has traits that give it a high rarity score).
Selling at the floor is generally a good option as it’s where most buyers will look first. It also is the place in the collection that has the most trading volume (a measure that combines the buying and making sales of NFTs).
Then, there is selling an NFT through an auction. There are many different auction types, including English, Dutch, and others. Which you use will depend on your needs. With auctions, you can set a reserve price or a minimum price without which the NFT cannot sell.
Auctions can be useful if you have an NFT that is a hot commodity. They can create FOMO (fear of missing out) and inspire a great deal of bidding action towards the end of the auction. A reserve price is critical, however. Without it, you run the risk of selling an NFT for pennies on the dollar and losing out on your investment.
On a final note, when you sell an NFT from a collection for the first time, the marketplace will often require you to pay a one-time gas fee. Like the gas fees previously mentioned, this can range from a small amount to a significant amount depending on the blockchain and the time you are paying the fee.
There are some common strategies for selling NFTs. Here are five:
- Sell into volume. When trading volume is high, many people are buying NFTs from the collection your NFT is a part of. That means it’s a good time to sell if you’re planning to sell in the short-term. This is because there are many buyers, which also often means the floor price stands a chance of rising. If you don’t sell your NFT at this moment, you could be stuck with an illiquid asset for an indeterminate period.
- Sell by rarity score. Many people buy and sell NFTs solely by rarity score, which simply denotes how rare an NFT is within a collection. The higher the rarity score, generally the rarer the NFT. Often, NFTs with a higher rarity score will sell for higher prices on the open market. You can check out rarity scores on several sites, including ours. Rarity Sniper has created rankings for over 1,500 collections, with more getting added daily. There’s a high chance you can find your NFT on our site, along with its rarity ranking.
- Sell by trait. Like selling by rarity score, you can sell by trait as well. For instance, in some collections, people will reference a particular trait and say the floor for this trait is “’X’ ETH or SOL.” In that way, you can gain a reference point for how much your NFT is worth. This technique can be particularly helpful if you’re in the possession of an NFT with a rare trait or one that is aesthetically appealing. Beware, however: Usually, people will cite rarity scores before “floor price for traits” when pricing NFTs.
- Sell the news. This is an abbreviated version of the quote, “Buy the rumor, sell the news.” In this situation, a project might have a big announcement coming up that could send prices for its NFT high. Instead of waiting for the announcement, people will start buying the NFTs prematurely, effectively “buying the rumor” and thereby already pricing the news in. When the news come, the buyers dump their NFTs and the floor price for the collection falls.
- Sell at the floor. This strategy is generally for those who buy at or around the floor price of a collection. The reason this strategy works is because most of the trading volume for a collection happens around as it is the entry level price of the collection. So, if you buy around the floor, you have a better chance of selling for a gain because you can easily price your NFT around the floor later.
Those are five strategies for selling NFTs. Using them can net you thousands of dollars or more in future sales. Now, let’s look at how to get involved in NFT projects.
How to Get Involved in NFT Projects
One of the most important aspects of NFT projects — and another way you can “get into” NFTs — is community. Community is often the make-or-break aspect of NFT projects. It can propel the right projects to entirely new heights and can tank projects quickly.
There are two primary ways you can get involved in the NFT community: Through Discord or Twitter. In this section, we’ll cover both. Let’s get started.
Discord is a Web3 site where NFT communities usually start. It resembles a chat site: You create a username and can join a certain number of servers where you can chat with other members in a community. NFT teams will often have their most direct communication channels on Discord. There, you can learn about the project, participate in giveaways, and form relationships with other NFT degens.
However, there are pitfalls. Discord is rife with scams, which is why most NFT teams insist that members turn off private messages from their servers. And back when NFTs were “popping,” it seemed every other week that hackers hijacked an NFT project Discord and stole money from NFT members.
Still, Discord is one of the primary ways to get involved in the NFT community. It is so much so that certain jobs have sprouted up surrounding Discord. The “Discord Mod” job, which can pay well, grew out of the need for a team to have a constant presence in the Discord server. There are also community managers who spend a lot of time in the project’s Discord.
Often, people will say that your “network is your net worth” and that is true of the NFT space as well. If you want to succeed in the NFT space, you will almost certainly need connections, and Discord provides an opportunity to make those connections. Just make sure to be careful and never answer unsolicited DMs, especially those promising money.
While Discord is a private place that NFT communities can get together and chat, Twitter is a public-facing channel. And it can have even greater implications than Discord in terms of the project’s perceived value. For instance, NFT project communities that have a large Twitter presence often capture more attention than those who do not. Therefore, NFT communities repping on Twitter matters quite a bit.
There are three primary ways you, as a newfound NFT community member, can support your project on Twitter: through changing your PFP to a picture of your new NFT, by interacting with your NFT team’s posts, and by creating your own posts in support of the project. Let’s tackle these one by one.
First, there is the PFP itself. One of the first utilities of NFTs was the ability to rep the picture on social media apps. When you do so, you signal to the world which project you are most affiliated with. Some people consider it personal branding as well if you’re aiming to become an influencer. Your picture becomes synonymous with your posts, like a logo for a company.
Changing your PFP to a picture of your new PFP is a great way to show loyalty to a project. Every time you post and a person sees your PFP, it is free advertising for the NFT project. It also signals to other people with the same NFTs that you are allies with the project. This can lead to follows and new relationships quickly.
Second, you can interact with a project’s posts to show support. Projects will often use Twitter (more so than other social media networks) as a form of official communication. There, they will make the public aware of giveaways, announce new project developments, and solicit feedback from the community.
Retweeting, commenting, and liking — all the Twitter post functions — can go a long way to supporting a project and giving it more visibility. Also, you can connect with other project community members in these posts, allowing you to form relationships and build your network.
Third and finally, you can support a project and “get into” NFTs by making your own posts. It can help initially to observe for a few days the type of posts on NFT Twitter and find a niche that you can fill. From there, you can start crafting your own posts to support a project or build your personal brand.
Those are three ways to get into NFTs using Twitter. Now, let’s talk about investing into NFTs.
How to Invest in NFTs
If you’re looking to get into NFTs, you’re probably not just looking for a guide on how to buy NFTs, sell them, and involve yourself with the communities. You’re probably looking to make money as well.
NFTs can be a great tool for speculation. It is a new field with a lot of promise, and it generally pays to be early to new investment tools that millions, if not billions more will adopt in the future.
That said, there are tips and tricks for investing in NFTs. This section will cover some general strategies along with some tactics so that you can walk away from this article with a broad education to get you started.
Here are five strategies for investing in NFTs.
- Diamond hands. Taken from the crypto space, “diamond hands” means holding through thick and thin as (you’d hope) the floor price would rise. It is a popular strategy and is based on the “numbers go up” philosophy, which is generally true for projects with strong fundamentals. It can also buffer you from volatility, which is natural in a new space like NFTs.
- Red clipping. Red clipping is a strategy that involves buying low and selling high. You generally start with one low investment, then flip it for a profit, before buying a handful of NFTs at a lower price level. After the prices of those NFTs rise, you sell (or flip) those and repeat the process. Red clipping involves watching the charts closely and is a more involved manner of investing than diamond handing. But it can pay dividends for investors, especially those starting out with less funds.
- Buy and sell on rarity. Rarity is one of the tried-and-true metrics for judging an NFT. If the NFT is rare, then it is likely to sell for more. There are many ways you can apply this philosophy. You can snipe rares, which involves buying NFTs that have rare traits when they are listed lower than they are worth. You can also buy rares in good collections, with the hope that as the collection stature rises, your rare NFT will explode in value.
- Make concentrated bets. While some might think diversifying a portfolio minimizes risks, some of the best traders get rich by making concentrated bets on collections they believe in. When they identify such collections, they purchase NFTs from them in bulk before waiting for the opportune time to sell. It is the same pattern many VCs use when investing in companies: Quality matters more than quantity, and when you find a winner, stick with them.
- Bet on the jockey, not the horse. This common investing phrase refers to the team versus the actual NFT you will be purchasing. Many people base their bets on the leaders of an NFT project, believing that a good team can make up for many wrongs while a bad team can easily sink a project, even if they have a good product. You can evaluate teams based on experience in the NFT space, the stature they have, whether they have RL connections, and whether they are doxed.
Now, let’s look at some investment guidelines.
While investment strategies are broad ways to invest in the NFT space, investment guidelines are more like nuggets of wisdom passed down from generation to generation. Here are three.
- Invest no more than you can afford to lose. This one is self-explanatory. Don’t invest any more money than you can afford to take losses on. The benefits to following this guideline are invaluable. First, you’re more likely to get a good night’s sleep knowing if your investments go to zero, you won’t have to sell your house. Second, you will be able to ride out highs and lows because you aren’t over-leveraged and prone to overreaction. Third and finally, you’ll be able to make clearer decisions about your investments, unclouded by emotion.
- Buy during bear, sell during bull. There’s another saying that states, “Bear markets are when millionaires are made.” Bear markets are when prices are depressed due to fear in the minds of investors. Not many people are buying because they are afraid prices will fall further. That’s when it’s a good time to buy. NFT bear markets have lasted for as little as a few weeks to the current one (months). On the flip side, bull markets are time for harvesting profits. That’s when people are greedy, buying more and more, pumping prices, and things are headed for a future crash. Buy during the bear, sell during the bull.
- Stick to what you know. There are many types of NFTs out there: Ones that specialize in utility, profile picture NFTs, NFT art, and so on. Many top traders specialize in a particular type of NFT and double down when they see a profitable investment opportunity. It is like Warren Buffet’s advice, which he has used to amass his person fortune. Stick to what you know.
That’s it for investment guidelines. Now, for the conclusion of this article.
There are many ways to get into NFTs, including more than we covered here today. Buying, selling, and investing in NFTs are top ways, while getting involved in NFT projects through Discord or Twitter provides valuable experience as well.
Many people take baby steps into the field, growing accustomed to the culture and processes, while others dive in right away. All that matters really is that you gain experience over time and enjoy yourself. It’s Web3 after all. It’s an exciting field full of promise.