How to Think About Investing in Long-Term NFTs
NFTs are a pretty big deal these days. Trading in NFTs hit a value of around $22 billion in 2021, compared with just $100 million in 2020 – representing a significant leap. And the demand for non-fungible tokens is only accelerating.
If the desire for NFTs continues to grow like this in the years ahead, anyone investing in a long-term strategy for holding and selling tokens has a lot to gain if they jump in now. While the price of NFTs is increasing, the long-term value could be a lot higher.
For instance, the world’s most valuable NFT (Pak) sold for around $91.8 million, but experts predict the value is closer to around $356 million now. The question is, how exactly do you get involved with long-term NFT investment strategies?
In this post, we’ll look at how to think about investing in long-term NFTs.
Are NFTs Suitable for Long-Term Investments?
Before we go any further, I should note that this article isn’t investment advice. It’s an insight into my personal experiences and thoughts in the NFT market.
I’ve been experimenting with NFTs lately, and I’ve seen plenty of evidence of how valuable they can be. However, I also recognize a lot of misinformation and confusion in the marketplace. There are still people out there who don’t believe NFTs have any value at all.
They assume NFTs are just pictures they can click and save themselves online – mostly because the information about what NFTs are and how they work is somewhat limited. Of course, you could argue that many people responded to the concept of cryptocurrency in a similar way and look where we are with things like Bitcoin and Ethereum today: 1 Bitcoin is worth over $42,000:
$BTC is approaching a key level of support.
Using IntoTheBlock’s IOMAP indicator, we can identify that some support can be expected between $40.8k and $42k, where 272k BTC was acquired by 787k addresses. If this level fails to hold, Bitcoin could revisit the $38k lows. pic.twitter.com/zMFCNEcuWB
— IntoTheBlock (@intotheblock) February 17, 2022
What I think makes NFTs such a valuable investment right now is the fact that we’re on a tipping point in digital transformation. We’re on the edge of concepts like the decentralized web and Web 3.0, where NFTs will become an increasingly essential concept in the way we invest.
There are a lot of changes yet to come which could significantly increase the value and demand for non-fungible tokens. This means if you can get involved now, you’ve got a lot of scope for growth. Early stage NFT investors today could be similar to the first people who invested in Bitcoin.
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The Compounding Value of NFTs
For a long-term investment to be worth it, there needs to be scope for your purchase to grow in value over time. In other words, you need to see a future where someone might want to buy your NFT for a higher price than you paid for it.
I’ve already started building my own NFT collection, with a handful of VeeFriends from Gary Vee, an ape, and a cryptopunk, among other things:
I chose these NFTs for several reasons, including personal preference:
The NFTs I think are the most valuable as a long-term investment are the ones with the best communities and the highest level of scarcity.
In the real world, certain physical collectibles, like art, have a long history of appreciating in value, particularly if there aren’t many of those collectibles available. The more hype there is for the asset (thanks to a growing community), the more demand continues to grow.
Another factor I think gives NFTs compounding value is the commitment of companies to “roadmap” activations. Basically, this means a creator shares a map of how they’re going to release new NFTs, develop new value, and continue attracting attention for the community. This shows you that you’re investing in not just an art piece or a token, but a growing ecosystem.
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NFTs and Social Value
I think the community and social value of NFTs is an often overlooked part of what makes the tokens so attractive as a potential investment opportunity.
For a lot of people, NFTs represent an interesting intersection between gaming and business.
When you buy an NFT, you get involved with a community of people, similar to buying certain digital assets within the gaming landscape.
I have an NFT which gives me access to a Miami-based group, where numerous members regularly get together for dinners to discuss ideas, work together, network, and collaborate. You don’t necessarily need to “do business” with the people who are in the same NFT group as you, but you gain access to a community with a shared interest – making that community thrive.
Some of the popular social channels to create communities are:
Only a couple of thousand people have access to some of the most valuable NFTs in the world, like the Bored Ape Yacht Club NFTs, for instance:
This means actually getting into the community is pretty expensive. The price of entry is around 52 ETH, or $210,000 right now.
However, when you buy into the club, you don’t just get the NFT, you get access to the wider community. One of the reasons I chose to buy one of the Bored Ape NFTs was because of the community, which includes members like Jimmy Fallon and Post Malone. With people like that involved, you get a strong sense that the community isn’t going to let the NFT fail.
While it might sound odd at first to buy a digital image of an ape to gain access to a specific community, it’s not an entirely new concept. There are tons of member’s only clubs out there you’d pay to gain access to. The only difference here is you’re also getting something for your investment portfolio which actually gains value over time.
NFTs and Long-Term, Short-Term Value Blending
A lot of the NFTs available today combine immediate and short-term value, so you’re buying something that benefits you right now and in the future. Take a look at the Gary Vee NFTs, or “VeeFriends,” for instance:
The “digital drawings” he sells might not be particularly attractive, but they’re all personalized, hand-drawn assets.
In terms of long-term value, Gary is constantly drawing attention to his NFTs in subtle, effective ways. For instance, he’s always talking about “hustling” on his YouTube videos, so NFTs like the “hustling hamster” are likely to gain more attention as characters over time.
If Gary chooses to develop these characters, they become a part of his brand, and as Gary’s personal brand becomes more valuable, the NFTs associated with him will increase in value, too. Since he has already said this is going to be his “life’s work,” there’s a good chance we’re going to see compounding value.
By investing in Gary Vee’s NFTs, I’m not just paying for his art or betting on his characters, I’m betting on Gary himself.
This is something that’s likely to play into a lot of long-term NFT investment decisions as the tokens become more popular among influencers and creators. If Gary continues to gain popularity (like he has been for several years), the NFT will naturally gain value.
There’s also the short-term value to consider, too. Each NFT from VeeFriends has a specific value attached to it. For instance, Hustling Hamster (one of my NFTs) offers access to VeeCon 2022, 2023, 2024, and so on:
You literally can’t access the conference without a token. This means you’re getting immediate, genuine value from each NFT straight away. This value also expands over time, as you can continue accessing the conference for as long as you hold the NFT.
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Discovering the Value in NFTs
The community side of NFTs and the long-term/short-term value blending offered by things like VeeFriends are crucial parts of what make these tokens so compelling. I’m actually taking a lot of inspiration from Gary Vee for my own NFT collection.
However, there are also NFTs out there specifically designed for building financial value and generating growth. For instance, I have a cryptopunk in my collection, which was one of the first NFTs ever created. There are only around 10,000 of these, and a couple of years ago you could have claimed one for free. Now, they’re selling in the millions:
Because each token is entirely unique and bound to you, the natural scarcity of NFTs means they’re perfectly positioned to increase in value. Like other products with “scarcity,” you can trade your NFTs for fiat cash, cryptocurrency or something else of value.
The key is figuring out which NFTs have the right blend of scarcity, potential and community to drive growth over time.
Like any investment, there’s no guarantee every NFT will gain infinite value over the years. During these early stages, most people (like me) will be investing based on what they know about the creator, or the people attached to the NFTs, and what they like.
We buy art in the real world because we like it, so there’s nothing different about buying digital art because it appeals to you. If you buy investments with money you can afford to lose, you’re in a good position to start experimenting.
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Looking at NFTs the Right Way
I think a lot of people are still looking at NFTs as a trendy new way to make short-term cash – but that’s not really going to work out. If you look at things from a long-term perspective and give the market room to grow, you’re going to have a lot more scope to make some real money.
The great thing about NFTs is you also get to invest in a project or art piece you’re genuinely passionate about. This means if the value of your NFT goes to zero, you’re less likely to be as upset.
I remember when I held a significant chunk of ETH and at one point its value significantly dropped suddenly. I didn’t panic, I just held onto the cryptocurrency and continued to support the concept of ETH and its blockchain innovation. Looking at the investment with a long-term lens made it easier to deal with the unexpected dip in pricing.
NFTs might rise and fall in price a lot in the next couple of years, but if you have a long-term view and you know how to make the right choices for your collection, I think most people will be ok.
Hopefully you learned how to invest in long-term NFTs! But if you just want an expert NFT agency to do it for you, click here for your free consultation.
This topic originally appeared on our Leveling Up YouTube channel, where you can find tons more videos on all things digital marketing, like SEO, content marketing, NFTs, web3, paid media, email marketing, growing your business, and much more!