If you haven’t heard about NFTs (Non-fungible tokens) yet. You will.
NFTs are changing the very way business is done, trade IP (intellectual property), and that’s only the beginning.
If you are following the news, then you may be seeing glimpses of NFTs show up in your headline news feeds… “NFT sells for millions“!
And the crazy thing is huge returns are happening every day. People are making substantial profits (25X+ in many cases) AND I’m seeing this first hand. There’s a shift of wealth happening with crypto and NFTs that we haven’t seen since the early days of the Internet.
This is why I’m super excited and why NOW is the time to learn about NFTs. Those who are best educated become investors. The rest become the unknowing gamblers.
Back in 2001, I made a pretty bold get. I spent $10 per share on a former Internet darling that had fallen more than 90% from its highs. That little company was called Amazon (AMZN).
This of course seems so obvious in the present day, but back then the dot com floor had imploded, and hundreds of Internet companies were going out of business. So, this wasn’t an obvious bet for most.
Why then did I invest back then when Amazon was barely making any money? Well, I saw the tech advantage on the horizon. Being in IT, I understood the “cloud” and where it was going.
No one had any clue that Amazon (in addition to its e-commerce goals) was building out a massive cloud infrastructure. Because of this, I felt their valuation was seriously discounted. And I was rewarded heavily. My biggest mistake, however, was not buying more and holding longer.
Fast forward to the present day and NFTs are looking a LOT like Amazon did to me back then. The long-term implications for this fast-evolving smart technology (Web 3.0) are going to be massive.
Did you know that BTC (Bitcoin) is the fastest adopted technology ever in human history?
Guess what’s catching up right behind BTC? Ethereum. The ability to write smart contracts with Ethereum and newer blockchain tokens is revolutionizing commerce.
NFTs as we know them are just the beginning. Let’s start there.
What is an NFT?
An NFT is a non-fungible token. It’s a way to digitize something (like a piece of art) and make it digitally unique.
In order to confirm it’s unique, it must live on a cyptocurrency blockchain (eg. Ethereum). That means the NFT is publically visible upon its creation and all of its subsequent transactions. Because of this, the NFT is verifiably unique, ownership is clear, and scarcity is defined.
This may not make a whole lot of sense the first time reading this, so let’s use an easier example to illustrate from the real world.
Let’s think about collectibles like baseball cards. There are a bunch of baseball cards printed up, but there is not an equal number of cards available for each type. This makes certain cards more limited than others thereby creating scarcity. Collectors see this and naturally want the limited cards more than the common ones.
Once people begin to trade money for the limited cards a market has been created and value has been established. This idea holds true for other assets like real estate, commodities, or stocks.
NFTs Can Accomplish Much More
The same scarcity model holds true for NFTs.
NFTs expressed as digital art is just the beginning because most of us can wrap our heads around it.
But, NFTs have the ability to go much deeper because they can add in other benefits and values called utility. This is possible due to smart contracts which a physical asset can never provide.
Imagine that you purchase an NFT for its cool-looking artwork, but in addition to the utility of getting to stare at it all day, you also get:
- exclusive access to quarterly parties
- special discounts to merchandise
- free NFTs from the artist’s next collection
- license to 3-d print an object
- gaming advantages & perks
This is where we are heading.
Furthermore, NFTs are not limited to images. NFTs can be in the form of tokens, videos, games, songs, virtual real estate, etc.
TikTok just released their first NFT last week!
We Are Still Early to NFTs
I started investing in NFTs several months ago. And while that may not seem like a lot of time, it’s a huge span of time in the NFT space. That’s because the markets are evolving daily on how their marketing is, bought/sold, transferred, etc.
It’s a truly remarkable time to be entering the NFT space… AND, it’s still early.
Just the other day, Coinbase made a huge announcement that they are entering into the NFT space.
It’s significant because there are nearly 7 million Coinbase users, but less than 1% of them are holding NFTs.
There is a massive flood of money still coming into the market and those who have invested wisely ahead of the wave stand to profit quite nicely.
If you’d like to get on their early NFT platform waitlist, you can do so HERE.
How to Buy an NFT
It’s actually quite easy to buy an NFT. And this is because there are a lot of different platforms to buy one from.
I’ll start with the easiest platforms first, followed by the more complicated and lucrative ones.
For sports fans, there are 3 big players offering NFTs. What makes it so easy is that they accept credit cards directly, so there’s no need to manage an external wallet (more on that later).
The downside is that your NFTs live within that platform (for now). Here are some just to name a few.
There are many others and I do believe we’ll see some consolidation at some point.
For licensed collectibles, one of the largest sites and where I got my start was VeVe.
VeVe is a mobile app that allows you to buy into their OMI token ecosystem. You trade dollars for “gems” and you use gems to purchase NFTs on their platform.
VeVe has partnered with some big brand names like Marvel to bring consumers 3D or animated NFTs with unique serial numbers. They’ve recently added in digital comics which are a huge hit and some of the super rare comics can easily go for 5 figures.
Anytime there is a new release or batch of NFTs for sale, it’s called a “drop”. Drops can release up to 30,000 items at once and it’s fascinating to see these sell out in seconds! In order to purchase one, you’ll have to navigate the app, find the drop you’re looking for, and be lucky enough to press “buy” when the time is right. You also stand a chance of receiving a more rare NFT which would be valued much higher than a common. In fact, there are 5 different types of NFTs defined in Veve’s ecosystem.
Common, uncommon, rare, ultra rare, and secret rare.
To give you an idea of how these might play out in a drop (release).
A VeVe Story
** Update ** (Just launched my YouTube channel for NFTs. Come check it out!)
Back when I was starting out in NFTs, VeVe was my initial training ground. A close friend was mentoring me, so he’d let me know when the latest drops were coming out. And because the demand was so high, every drop would sell out.
So, he shared with me the most efficient way to position myself to catch a drop. And, it worked.
I funded my VeVe wallet with $200 and converted them to their trading token (gems). Soon thereafter, I used these proceeds to snag a Tokidoki secret rare NFT for the equivalent of $100.
Just 3 hours later, I flipped that NFT for $1400 in tokens! Now that I was playing with profits, I was more willing to take additional risks.
I now have 30+ NFTs on VeVe including the first-ever secret rare Spider-man NFT that I bought for $400. As of writing this article, the Spider-man NFT is worth approximately
$10,000 (it’s now up to $62,000 3-months after I wrote this).
Yes, that’s a 50X return on investment of $200.
I share this with you not to impress you, but to impress upon you that the demand for NFTs is significant and in turn can translate into big profits.
VeVe has now started to release digital comic NFTs as well which is only furthering the demand.
Here’s one example:
VeVe released a Fantastic Four comic with 30,000 total units at $6.99/comic.
This was in a blind box format meaning that you wouldn’t have known which variation you would receive. If you were lucky enough to get one, the odds were as follows:
To get a common it was a 1/1.43 chance, uncommon a 1/6 chance, rare a 1/12.77 chance, ultra rare a 1/28.57 chance, and secret rare was 1/50.
At the moment, there is so much demand that a lot of these drops are selling out in seconds. That means if you can score one there’s an excellent chance you’ll see a much higher value for the NFT you just purchased.
The Cons of VeVe
With all of the great things happening in the NFT space with Veve, there are some cons to consider.
First, their tokens are currently more illiquid than NFTs on ETH.
That means to “cash out” you’d have to work through a few extra steps to bring your tokens back to cash.
You can do this by selling it on eBay, or doing a private sale, but it’s much harder to do this.
The good news is that VeVe is upgrading their token system to Immutable X which will allow them to trade on top of ETH.
(Update: VeVe has officially moved all of their collectibles onto the Ethereum blockchain. Next, they’ll be working on being able to move your money out and buy/sell on Immutable X. I would expect to see this sometime in 2022.)
This is very bullish because it will then become easier to buy and sell their NFTs AND to move your money out to separate crypto wallets as desired.
Another con is that demand is so high right now it’s tough to get an NFT during the drops.
So if you’re wanting to actively trade, you’re at the mercy of the drop frequency.
NFTs that live on the Ethereum Blockchain
While Veve is fun, there is a lot of competition and luck required to turn a decent profit these days. So, people are flocking to the open NFT markets on top of the Ethereum blockchain.
Open NFT marketplaces like Opensea and Rarible.com are pushing billions of dollars of volume each quarter. This is where the “whales” like to play and where you can snag some nice profits.
With that said, buy and selling NFTs on Ethereum are much more complex. In exchange, however, you have more upside potential and liquidity.
Here’s how it works.
Many NFTs are developed as “projects“. These projects do their best to build hype around their artwork, community, or utility. If they market it well, they can find a strong market of early adopters willing to purchase the project’s initial “drop” (release of an NFT).
There are literally multiple drops every day. So, the question becomes, how can you find the projects worth investing in?
Most projects will set up a server in Discord. This is where they will do their best to build a community of followers, provide relevant information, and even hype up demand.
*Side note: Discord is also a place where you need to be careful because people will try to scam you and steal your cryptocurrency. If someone is sending you a DM in Discord, it’s 99% likely it’s a fishing scam unless you know the person directly.
Twitter is another space where projects are announced and where they can gain some traction. Influential tweets from well know NFT personalities can literally blow up or hype a project’s demand quickly.
Like any market, NFTs are a function of supply and demand. If you can build the demand, and limit the supply, prices will rise.
On the opposite end of the spectrum, if the existing supply exceeds demand, then prices will fall.
There are now tools you can use like Icy Tools or Nansen to watch trading volumes. For example, you could set an alert on activity within the Ethereum network if volume spikes to a certain level. This could be an indicator that a lot of people are buying a particular NFT project and give you the opportunity to buy in while it’s still “hot”.
Buying and Selling NFTs
To buy and sell an NFT that lives on the Ethereum blockchain you’re going to first need a digital wallet.
A wallet is a digital storage place where you can store your cryptocurrencies and NFTs. Think of it as a safety deposit box at a bank, except this box is digital and stored on the blockchain.
If you already hold Bitcoin (BTC), Ethereum (ETH), or another cryptocurrency, then you are familiar with this concept. Perhaps you started a Coinbase account, Block Fi, or Binance account to get started (there are a lot of options these days), but the concept remains the same.
Let’s walk through the basic process if you’re just getting started and would like to trade NFTs on ETH.
Where to buy and hold ETH
To begin, you will start by opening a new account at an online exchange like Coinbase. This account effectively becomes your first digital wallet (although it’s technically controlled by them) and you’ll need to transfer money from your traditional bank into it. Once Coinbase acknowledges the transfer of money into your account, you’re ready to begin buying ETH.
Similar to a stock trading account, you can place a buy order for ETH. The easiest way is to buy it at market rates in exchange for your dollars. As of writing, the current exchange rate is $3800/ETH. So, if you want to purchase 1 ETH you’ll need to hand over $3800 plus some transaction fees.
Awesome, you now have some ETH in a Coinbase account that you control. But, we’re not done. Although you now have ETH in your Coinbase account, it isn’t necessarily compatible with buying and selling NFTs.
Yet Another Wallet – MetaMask
You’ll need another wallet that is able to interact better in the Web 3.0 environment. The most popular one is called MetaMask. It’s a crypto wallet and gateway to blockchain apps and trusted by millions of users worldwide.
It’s free to set up a wallet at MetaMask and it’s imperative that you write down your secret recovery phrase (a unique 12-word phrase) and store it OFFLINE. Don’t email this to yourself, leave it stored in a text document, or save it anywhere else online. If someone gets a hold of it, it is the master key to your MetaMask wallet!
(*If you’re storing a large amount of cryptocurrencies, you may even consider purchasing a hardware wallet that allows you to store your wallet offline.)
Once you’re set up with your MetaMask wallet it’s time to fund it with the ETH you purchased from Coinbase.
From Coinbase, you’ll want to initiate a withdrawal of ETH to your MetaMask public ID. This unique wallet ID could look something like: 0x85cbf58c9d20895647a0b1f586a5caf643a29286
You need to make sure this is accurate when you do the transfer because there are no second chances once you hit the transfer button!
You may even consider sending a test amount over first if you’re transferring a larger amount.
Over time though you’ll get familiar with your public MetaMask id and you’ll become more confident sending transactions to and from it.
Once you’re received your ETH into your MetaMask wallet, you’re ready to mint (purchase) NFTs from projects directly or buy and sell on Opensea.
Investing Beyond Art
A lot of NFT projects are doing their best to bring more than just cool art. They are creating community roadmaps filled with games, bonuses, and exclusivity along with the NFT.
Long-term NFT investors will want to look for utility that extends far into the future as it can help hold the value of the NFT.
Short-term NFT investors who are looking to flip, are trying to identify high-demand markets. When they do, they do their best to mint during the whitelist or presale period as this will get them the lowest mint price. And if they do, they can flip for some nice profits to those who weren’t able to secure the NFT initially.
I personally like to do a bit of each. That means if I’m able to mint multiple NFTs, I can flip one or two for-profits, and keep an extra 1 or 2 for my own personal collection.
Read here about my upcoming 2022 investing strategy for NFTs and crypto.
As I’ve shared my excitement with others around trading NFTs for fun and for profit, several people have asked me to show them how to do this themselves.
As you can see from this article, getting set up can be a bit complex and overwhelming, so I decided to launch a new training and investment group called NFTs UNLOCKED.
This includes an extensive course to walk you through step-by-step to get set up for trading AND I’m going to show them the exact steps I’ve taken to get myself and my friends 30X+ returns.
If you’re interested I’d love for you to join us – we already have an incredible group of investors who have joined and some have already scored BIG (we’re talking 4-5 figures!).
Check the NFTSU website for more information. Or, if you’d like to listen more about NFTs, I was recently a guest on the Side Hustle Show with Nick Loper.
With that said, investing in NFTs is NOT for everyone. And like everything else on my site, this is NOT financial advice.
NFTs can be wildly profitable, but they can also be volatile and costly. Only invest money that you can afford to lose.
(For myself, I like to have 1-5% of my assets in more speculative investments and the remainder in solid assets like real estate, stock index funds, etc.)
Readers, have you heard about NFTs before? Would you consider investing in them if you understood them better?
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Yes, I heard about NFTs quite a bit earlier this year and would definitely invest in them if I understood them better.
Do you think that the NFTs you own are a set-it-and-forget-it-type investment? Or is there an aspect of investing in NFTs where you kind of have to stay on top of the market?
I’d guess (of course having no direct experience…) that for some NFTs, their prices pump really fast and there’s definitely a time where you have to “get out” or the price will never recover. Is that true?
Or do you stick to more (for lack of a better term) “blue-chip” NFTs that you don’t really have to worry about (like your Spider-Man one)?
Great questions, Logan. I think there are a lot of different investing strategies when it comes to NFTs. When I jumped into it, it was more speculation and for fun. However, as I started to dive deeper, there are definitely LT investing opportunities for long-term utility… like Vee Friends.
For those looking to flip for profits, there’s definitely opportunity here also. But, you have to do your homework, build a chip stack slowly. And then once you’re playing with “house money” you can take bigger risks. And you’re correct, you have to choose projects wisely. There are A LOT of projects nowadays that will pump and then dump to levels that won’t ever recover.
Oh, and one interesting development is that there are now NFTs that have the goal to own other NFTs! Hmmm, I wonder where they got that idea from… haha.
Thanks ~ sounds like a crazy but super fun space to be in. Excited to jump in!
Life comes at you fast! Not to brag, but I just received an offer to acquire futures in NFTs based on Hunter Biden’s paintings.* Odd piece of trivia, NFT kingpin Cozomo de’ Medici recently revealed himself to be Snoop Dogg. Another unlikely person to early-adopt BTC was Paris Hilton, and all the snickering has stopped at family holidays. Elon Musk is now goofing on Warren Buffett, telling him to ‘get on (his) level’ and buy Tesla stock so he can catch his NW up to Musk’s. I did read that a bulk-buy of BTC was executed October 5 when the spot price was $47K and today less than two weeks later it is $62K for a half-a-billion increase (+32%).
Gotta admit, I am lost in the investing world. Appreciate this post, Michael, I’m not giving up and still trying to learn this stuff before it completely passes me by. Thank you!
*that was a joke
NFTs and crypto are certainly fascinating beasts. Their value only exists because people demand them. And, well, it looks like demand has spoken. More importantly, the demand is driving tech innovation that wouldn’t have happened otherwise.
And get this! In the semi-near future, people will get PAID to play video games… no joke.