People who've followed NFTs for some time are aware of these essential considerations when buying NFTs. Many new members of the NFT community overlook this critical aspect.
Many newbies buy NFTs without much consideration. The usual pattern is for people to hear about NFTs, find the NFT community on Social Media platforms such as Twitter, and become part of the Discord servers of various projects.
A busy server and quality artwork ensure the newbie becomes involved in the community. It leads to the person minting the NFT on launch.
Following the mint, it's common to see the price of the NFT fall in value. After a few months, the founders neglect the project, and the holders find themselves with an NFT with little value.
Since this neglect has been the standard pattern seen throughout 2021, most NFTs on the secondary market are worth less than the price paid on launch.
There have been numerous cash grabs. The founders make six figures from the NFT project, but the investors have a losing asset.
The success stories in the NFT space have received praise. For example, the Bored Ape Yacht Club (BAYC) is admired throughout the NFT community, and any NFT stories in the mainstream media feature the BAYC regularly.
For every successful project, there are far more failures.
Mistakes Made By More Experienced NFT Buyers.
After spending time in the NFT community, people become aware of the requirements of a good project. They commonly look for the following characteristics:
Doxxed Team. The team mustn't be anonymous. Anonymous groups are more prone to carry out rug pulls (where the founders close the project after launch). Investors have no idea of the identity of the founders. As a result, the groups can quickly abandon the project and scam the investors.
Great Community. There must be a sizable community behind the NFT project. People look at Social Media and Discord profiles to gauge the size of the community. Without a community, there is no one to buy the NFTs.
Good Artwork. Essential to ensure the artwork is high quality and in line with the current trends. For example, there is a great deal of admiration for the artwork by Doodles and Invisible Friends NFT projects.
Utilities. Projects need more than artwork to become a success. The only exception is if the NFTs are from an established artist such as Beeple, Banksy, or another artist with a big following in the traditional art world.
Projects without a well-established artist need to provide utilities in the form of Play To Earn games, events, staking possibilities, and more.
People seeking these factors in projects are better positioned than newbies. But many projects satisfying these conditions still fail to succeed, especially in this current climate where the NFT space is experiencing a bear market.
The Importance Of The Founder
The most critical factor in a project is the founder. Many investors entertain projects because the founder is well known. They could be a celebrity or an industry leader.
Unfortunately, many of these projects flounder in the long term. Shortly after mint, there is a pump in price. But a few months after the launch, the value has become less than the mint price.
The founders are not highly active in the project; they make no effort to immerse themselves in the community.
It leads people to conclude (probably correctly) the founders are not interested in the project. The community loses faith, sells their NFTs, and projects end up in the backwaters of the secondary market.
A successful project is one where the founder engages with the community. They should be active before and after the launch. Making themselves involved in the conversations on Discord and Ask Me Anything (AMA) or Twitter Space shows a genuine interest in the project.
An example of a successful project is VeeFriends by Gary Vee. The founder is always available. He is constantly talking about his projects on Social Media and does not go missing in action.
The most important consideration for any NFT collection is the founder, motives, and project vision.
Unfortunately, the NFT world has seen many cash grabs. The devs and the founders fail to take much interest following the launch.
The reality is that unless the NFT collection is by a genuine, highly established artist, the project starts after the launch.
The easy part is the stage up to the launch; it's the segment where the founders are raising capital to realize a vision. Making their promises become a reality involves hard work.
To date, in the NFT space, many founders are fond of the idea of raising capital. But dislike the effort to complete the project and make the utilities and the roadmap a reality.
Many experienced investors in the NFT community understand the situation and no longer mint NFTs easily. This is a contrasting situation to 2021, where people readily bought NFTs.
Perhaps this explains the current bear trend in the NFT world; sales volumes are significantly lower than the record-breaking numbers a few months ago.
For the investor, the best approach is to take a great deal of interest in the founder. Presenting evidence of interest by the founder ensures confidence in the community.
The involvement of a famous name does not guarantee long-term success.