{"id":925,"date":"2022-09-01T17:48:00","date_gmt":"2022-09-01T21:48:00","guid":{"rendered":"https:\/\/www.1stdibs.com\/the-mint\/?p=925"},"modified":"2022-09-02T12:00:00","modified_gmt":"2022-09-02T16:00:00","slug":"how-to-invest-in-nft-art","status":"publish","type":"post","link":"https:\/\/www.1stdibs.com\/the-mint\/how-to-invest-in-nft-art\/","title":{"rendered":"How to Invest in NFT Art"},"content":{"rendered":"
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\"Easy<\/a>
Easy to win<\/em> by Alexei Makhov<\/a><\/figcaption><\/figure>\n<\/div>\n\n\n

Nobody knows how the future of NFT art<\/a> \u2014 or of NFTs in general \u2014 will play out. Non-fungible tokens<\/a>, or NFTs, became immensely valuable in 2021<\/a>, but the subsequent steep drop in cryptocurrency values also did a number on the NFT market.<\/p>\n\n\n\n

So far in 2022, the NFT art market is still down \u2014 but it\u2019s not out. NFT values have experienced a \u201ccrypto winter<\/a>\u201d before, remaining low for months at a time only to come roaring back. If you\u2019ve got NFT art collecting on the brain<\/a> and nothing to lose, now may be the time to buy. <\/p>\n\n\n\n

Are NFTs a Good Investment?<\/h2>\n\n\n\n

First of all, let\u2019s be clear: Non-fungible tokens are not strictly speaking an investment<\/em>. <\/p>\n\n\n\n

The Securities and Exchange Commission<\/a> (SEC), which oversees stocks and other investments, doesn\u2019t consider NFTs to be securities. While that means you don\u2019t have to pay capital gains taxes on any profits you realize from a sale, it also means that if you get scammed, there\u2019s little you can do about it. <\/p>\n\n\n\n

The SEC has been making noise about regulating NFTs<\/a>, so it\u2019s likely to happen eventually. The mere threat of regulation can drive down the price of speculative assets like NFTs and cryptocurrencies. Look what happened to Bitcoin \u2014 just the discussion of regulation in China was enough for the price to tank by 22 percent overnight<\/a>.<\/p>\n\n\n\n

In the meantime, NFTs are considered alternative investments because they\u2019re collectibles that have no intrinsic value. Their price<\/a> is largely determined by the tastes, perceptions and proclivities of buyers and sellers, which means investing in them is quite a gamble. Down the road, your NFT collection may end up a worthless relic of a passing fad (think Beanie Babies).<\/p>\n\n\n\n

The other side of the coin is that people can earn millions of dollars unloading NFTs they bought for a fraction of the sale price. It happens, but it doesn\u2019t happen often. Will it happen for you? There\u2019s absolutely no telling, which is why if you\u2019re going to invest in NFTs, you need to do it for the right reasons.<\/p>\n\n\n\n

Why Do People Invest in NFT Art?<\/h2>\n\n\n
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\"Time<\/a>
Time is a Construct 2765<\/em> by Bruno van Hooijdonk<\/a><\/figcaption><\/figure>\n<\/div>\n\n\n

The prospect of making a killing is the wrong reason to invest in NFTs. As with any speculative purchase \u2014 including physical art<\/a>, first-edition books and signed sports memorabilia \u2014 it\u2019s entirely possible you\u2019ll never get your money back.<\/p>\n\n\n\n

So why should <\/em>you invest in NFT art? <\/p>\n\n\n\n

Because You Want to Support Artists<\/h3>\n\n\n\n

Some NFT collectors are driven, at least in part, by an affinity for the digital form and the desire to support artists who work in it. <\/p>\n\n\n\n

One of the great things about NFT art is that creators can make a commission every time their NFT artwork sells, both initially and on the secondary market, if that\u2019s written into the smart contract. And there\u2019s no middle man to take a cut.<\/p>\n\n\n\n

Once an NFT is minted to the blockchain<\/a>, provenance is established and cannot be altered. The smart contract associated with the NFT contains the terms of a sale, and these execute automatically when the NFT changes ownership. <\/p>\n\n\n\n

Because You Enjoy Collecting Art <\/h3>\n\n\n\n

If you love art in general and find great joy in the weird and wonderful world of NFTs<\/a>, you may eventually find that looking isn\u2019t enough. You want to own a piece of it \u2014 and partake in the novelty of it and the culture around it.<\/p>\n\n\n\n

Because You\u2019re a Hopeless Technophile<\/h3>\n\n\n\n

If you\u2019re someone who finds great satisfaction in living on the cutting edge of technology, you probably like the thrill of being on the ground floor and the status that confers in some circles. NFT art is one way you can experience Web3 technology, in addition to purchasing virtual land in the Metaverse, digital trading cards, designer outfits for your avatar and event tickets.<\/p>\n\n\n\n

How Much Can You Make Selling NFT Art?<\/h2>\n\n\n\n

Average sale prices don\u2019t mean much when discussing selling NFT art<\/a>, because a few eye-watering numbers jack up the average \u2014 like the cool $69 million Beeple netted in 2021<\/a> for his NFT The First 5000 Days.<\/em> A graph plotting the numbers of works sold against prices realized shows a steep downward slope, with the overwhelming majority of NFT artworks going for between $200 and $700<\/a>.<\/p>\n\n\n\n

It\u2019s impossible to predict how much you\u2019ll make selling NFT art. Or how much you\u2019ll lose. Life moves fast in cyberspace and in the back rooms of tech startups. You never know what you\u2019re going to wake up to, and that, for many NFT art investors, is a huge part of the thrill.<\/p>\n\n\n\n

If you\u2019re so inclined, take a crack at increasing the value of your investment by raising its visibility. Promote your NFT art<\/a> collection far and wide to drum up interest and keep it alive in the collective cyber-consciousness. (The artist will be eternally grateful, too.)<\/p>\n\n\n\n

How to Invest in NFT Art<\/h2>\n\n\n\n
The cowboy \u2014 New Normality #016<\/em> by J’erre<\/a><\/figcaption><\/figure>\n\n\n\n

Nobody\u2019s written the rule book on investing in non-fungible tokens. In the Wild West of NFT investment strategy, the watchword is an acronym: DYOR, or Do Your Own Research. It\u2019s imperative if you want to make strategic buying choices, stay on top of trends and avoid scams and bum deals. <\/p>\n\n\n\n

Here\u2019s how to proceed if you decide investing in NFT art is for you.<\/p>\n\n\n\n

Understand How NFTs Work<\/h3>\n\n\n\n

The better you understand how NFTs work<\/a>, from minting to dropping to selling and reselling, the more likely you are to make wise investment choices. <\/p>\n\n\n\n

Look for Red Flags<\/h3>\n\n\n\n

Despite the security of the blockchain, deceitful practices exist in NFT marketplaces. Pump-and-dump schemes, also known as \u201crug pulls,\u201d are legal in the NFT world. Scammers build interest around the NFT to drive up the price, and then they sell it, making off with the cash and leaving nothing of value behind.<\/p>\n\n\n\n

This and other scams are perpetrated by clever people, and spotting them requires you to DYOR and pay attention to the details. Here are a few ways to protect yourself from such schemers:<\/p>\n\n\n\n