Our strategy to invest in NFTs
NFTs, or Non-Fungible Tokens, have exploded in popularity in recent years, particularly in the art world. They are unique, blockchain-based tokens that represent ownership of a digital asset, such as artwork, music, or even virtual real estate. With sales of NFTs totaling more than $2 billion in the first quarter of 2022, more and more projects are emerging. The growth has been driven by a number of factors, including increased interest from collectors, celebrities, and institutional investors.
So how to make decisions on what NFT to buy?
Choosing successful NFTs involves a combination of research, analysis and personal preferences. Here are some steps I follow to choose successful NFTs:
First lets dive into success factors of NFT projects which are:
- Strong community engagement: This means building a community of fans and followers who are passionate about the project and want to see it succeed. This can be achieved through social media marketing, engaging with fans on forums and message boards, and creating exclusive content and experiences for community members.
- Popularity of the Creator: NFTs created by well-known artists or personalities can generate a lot of buzz and demand.
- Rarity and Scarcity: NFTs that are rare or scarce tend to be more valuable. This can be due to the limited availability of the NFT or the unique qualities that make it stand out.
- Quality and Aesthetics: NFTs with high-quality graphics, animations, and other visual elements tend to be more attractive to buyers.
- Utility and Functionality: Some NFTs have utility beyond their visual appeal. For example, NFTs that provide access to exclusive content or events can be highly sought after.
- Brand and Culture: NFTs that align with popular trends or cultural moments can generate a lot of interest.
- Innovative use of blockchain technology: Blockchain technology is at the heart of NFTs, and the most successful projects leverage it in innovative ways. This can include using smart contracts to create new revenue streams, implementing unique voting mechanisms to engage with fans and followers, or creating entirely new platforms that use blockchain technology to facilitate transactions and ownership of digital assets.
- Timing and Market Conditions: NFTs launched during times of high demand or market growth can be more successful than those launched during slower periods.
- A clear monetization strategy: This means understanding how to generate revenue from the sale of NFTs, as well as other potential revenue streams such as royalties, licensing agreements, and sponsorships. The most successful projects have a clear understanding of their revenue streams and how to maximize them over the long term.
Overall, the success of an NFT will depend on a combination of these factors.
Beside the success factors of a single NFT project there are more factors that I think are necessary to take into consideration to build the NFT gallery:
- Overall market conditions: Like every other asset class NFTs are experiencing market cycles. After the hype in 2021 and early 2022 the market realized a drop in prices while the whole economy and many asset classes suffered. It is important to consider the actual circumstances when buying in certain NFTs projects.
- Keeping up with the latest trends and developments: The NFT market is constantly evolving, so it is important to stay up-to-date with the latest trends and developments. This means keeping a close eye on emerging artists and new platforms, as well as staying informed about changes in the regulatory landscape.
- Diversification: The goal is to have an exposure to a range of NFT assets, including artwork, historical NFTs, and other digital content. This diversification can help to mitigate the risks associated with investing in a single NFT.
- Professional Management: A deep understanding of the NFT market is crucial. This can help to identify opportunities, manage risks and provide a level of due diligence that individual investors may not be able to achieve.
It is important to us to participate in the NFT community and engage in multi-platform social media. That way we strive to learn about exclusive drops before their release. We take an analytical approach including analysis based on the rarity of traits, focusing on unique content and scarcity in properties as value drivers.
In summary, in the actual phase, I am interested in investing in the following areas:
1. Historically significant digital assets:
As the understanding and acceptance of digital assets becomes more widespread, we anticipate that these assets will accrue value disproportionately, eg. Rare Pepes
2. Major IP:
I believe that the web3 ecosystem provides the perfect conditions for innovation and intellectual property development. We anticipate that many of the leading IP brands in the next decade will have originated within this realm, e.g. Nike, Gucci, Dolce&Gabbana.
3. Major OGs | BlueChips
Blue chip NFT projects refer to NFT projects that have established themselves as highly valuable and reliable within the NFT market. These projects have a proven track record of success and are highly sought after by collectors and investors e.g. BoredApes, Crypto Punks, Moonbirds.
4. Digital Art
Digital art is the category of any artwork produced or created using digital technology as part of the process. Digital art examples include photographs, animations, digital paintings, drawings and illustrations, and videos. As it is exhibited in many fine art galleries the interest will be increasing e.g. Tyler Hobbs, Pak, XCOPY, Fvckrender.
5. Mintings
Mintings, in the realm of NFT projects, is the process of creating new unique digital assets or tokens on a blockchain. It is attractive due to the potential for early access to valuable, one-of-a-kind assets.
In general I would like to diversify the gallery as much as possible but to keep it manageable, I don’t want to invest in more than 50 projects.
Conclusion:
The overall market downturn also affected the NFT world. We view this as a prime opportunity to enter the space for long-term investments.
