The non-fungible token market is exploding. The entire value locked in NFTs has climbed from $250 million to $2.6 billion in the last year, according to DappRadar. Not only are NFT expenses rising, but so are the number of NFT initiatives. Lawsuits are flocking to the NFT boom, as are brands like Nike and Gucci.

That could have been the pinnacle of the early NFT craze, a sign that the market’s true desire had overtaken the enthusiasm. Sales of Top Shot continued to decline, and an increasing number of high-profile celebrity drops failed to generate significant profits. Many individuals worried if the NFT craze was really a fad.

How NFTs Create Value

The NFT boom, which some belief generated billions of dollars in sales last year, has sparked fears of an NFT crash if the value of Bitcoin and other cryptocurrencies declines.

So, what’s the deal with this NFT craze?

The rise of blockchain games and digital products is the first. NFTs are ideal for displaying in-game objects, digital art, and other digital treasures. As blockchain games and digital collectibles have increased in popularity, so have NFTs. NFTs had some success during the early 2021 NFT boom.

Second, large NFT platforms, such as OpenSea, Ethereum’s NFT marketplace, were launched. These websites make it easier for makers and collectors to buy, sell, and trade NFTs.

Third, there has been a spike in interest and investment from the general public. NFTs have been purchased by celebrities such as Jack Dorsey, Mark Cuban, and Paris Hilton. Furthermore, large venture capital firms are investing millions of dollars in NFT companies.

The NFT market is being propelled to unprecedented heights as a result of all of this. However, as with every NFT, there is the possibility of failure. So, what should investors be aware of before investing in the NFT craze?

The Metaverse, which many anticipated (read: prayed) would be the digital playground to employ these NFTs, whether through avatar skins, products, or socializing in exclusive online communities, accompanied the NFT boom.

1. The NFT’s Unique Characteristics

Collections are a common form of NFT. MekaVerse, Bored Ape Yacht Club, and PEACEFUL GROUPIES are just a few examples. These NFT collections contain one-of-a-kind avatar NFT artworks, each with its own personality. More qualities may occasionally result in a higher value, although this is not usually the case. Simple avatars, such as the basic Bored Ape NFT, are sometimes the most useful.

Examining an NFT’s characteristics is also a good way to check its legitimacy. Many fake accounts post duplicates of well-known NFTs, but they are unable to duplicate the characteristics. Keep an eye on this part as well as the others as a precaution.

2. Authentication of the Seller

Official merchants on OpenSea, Twitter, and Instagram will have a blue verification check next to their account name to guarantee that they are not fake accounts. As a result, if you want to buy something from a well-known seller and make sure the account is verified.

This verification tick, on the other hand, cannot always be utilized to verify the seller’s genuineness. Many renowned NFT vendors, like many social media celebrities, do not yet have their verification tick on specific platforms.

Also, read – Is Your NFT Really Secured by Global Intellectual Property Law

3. The Market Platform’s Transaction Fees

When you trade bitcoin, buy an NFT, or do anything else on a market platform, you pay a transaction charge. Traditional e-commerce platforms like eBay and Depop have comparable fees, albeit the amount varies per platform.

OpenSea, for example, charges sellers a 2.5 percent transaction fee, or 2.5 percent of the selling price. Any transaction charges, however, are not the responsibility of the buyer. Most NFT exchanges, including Known Origin and Axie, follow this pattern.

Some platforms, like Rarible, charge fees on both ends of the transaction, for example, charging the buyer a 2.5 percent fee on top of the NFT pricing for every transaction. Make sure you’re informed of any current costs on your preferred platform before making any purchases.

4. NFT Liquidity and Market Volume

It’s vital to keep in mind that NFTs lack the same liquidity as cryptocurrencies. Because you can’t change an NFT into conventional money as easily as you can with cryptocurrencies, this could be a stone in the path for people who want to utilize one. To increase the liquidity of your NFTs, some experts advocate fractionalizing them, which effectively divides your NFT into smaller portions.

Aside from liquidity, NFT companies must also consider market volume. The NFT market volume is around $10 billion at the time of writing, and the type of NFTs heavily determines the daily growth or decrease of this figure.

The NFT market, as you are aware, is still in its infancy. Nobody heard about NFTs a few years ago, and these digital artworks didn’t sell for millions of dollars. The peak may be ephemeral, as it is with many other organizations or sectors that appear to expand swiftly. Keep this in mind if you’re looking to buy an NFT as a long-term investment rather than a piece of art to display or sell in a few months.

5. NFT price performance from a variety of buyers.

If you are seeking to confirm whether or not your chosen NFT is a smart investment, it’s usually a good idea to look at the seller’s account. You may look at their previous sales to discover how much their items have sold for. Then scroll down the table to discover how many similar NFTs were sold recently. At the bottom of the value range, the floor price is the lowest price at which NFTs are traded.

This will give you a good idea of how NFT pricing is changing and if they correspond to what you want to see in your chosen NFT in the future.

Other sites offer similar data and analytics that you might not be able to find elsewhere. NFT Stats and CoinMarketCap both have some interesting statistics on NFT sales, value, growth, and more, so have a look if you want to learn more.

NFT boom: VCs pump millions into digital collectibles start-ups

NFTs are a great investment, but it’s always a good idea to be cautious.

While purchasing and selling NFTs can result in considerable profits, there are a number of mistakes that can be made when making purchase decisions. Cybercriminals are currently taking advantage of the NFT market in a big way, and certain NFTs are just not worth buying. So, before you complete your transaction, make sure you take into account all of the requirements given above.