Are NFTs a good investment opportunity?
When someone purchases an NFT they might not be sure what they’re getting themselves into. “Will it hold value?” “Is this an investment worth having?” There’s certainly a lot of questions that can be swirling around the average investors mind. To be clear, with NFTs and the crypto space at large, it’s not just about owning the asset – it’s also about the community. These communities exist in a myriad of ways, such as on a Discord server, Twitter, or on developer repositories on sites like Github or Gitlab. A strong community is key and it helps give assurance to the project as whole – in turn it’s usually the community members that hear the news first or get access to new features and project spinoffs. In this article we’ll dig into what a “good opportunity” looks like and key features to watch for.
This is the second article in our introductory series and part of our conversation with Blockchain Consultant Enzo Soyer (CEO of TENK, Co-founder of Fungible Strategy and Business Developer in CryptOracle).
Disclaimer: All content is for educational purposes. It is not financial advice.
A New Frontier…
First things first, there is no “rulebook” so to speak when a creator or developer launches a new project. Sure, there are certain processes that must be followed (for smart contracts to operate on chain for instance) but within new technologies like the crypto and NFT space there exists a lot of… gray area. In that, it’s important for investors to approach a project with a healthy dose of skepticism. That said, because the rules are not well-defined, it allows for a lot of freedom to essentially “redefine” what an NFT is or can be – and that’s exciting!
Most projects at the moment do not have real utility outside from simply owning a digital asset. There are exceptions to this of course, such as using NFTs to issue in-game content or rewarding investors that stake their assets, for example. Whether there is utility or not, it’s still hard to know if a collection will sell out or be able maintain and hold it’s floor price. This leads us to our next question…
What should you keep in mind before getting involved in a project?
Now you know to be a bit of a skeptic, but how can you actually tell if a collection or project is legitimate or not? We’ll go over some important things to look for when assessing a new project or collection.
1. The Community
The community, as we touched on earlier, is one of (if not the) most important aspects of an NFT project. A strong, active, community on Discord, Twitter, Telegram, Twitch and elsewhere that sees continuous growth, can often be a good indicator that the project has “legs.” Additionally, a constant and communicative relationship with the developers, creators and community managers with investors and members is important. Having a good link between the community and creators of the project keeps everyone informed of updates, new features, as well as simple, mundane details that can often get lost in the shuffle (e.g. “wen mint?” or “I can’t seem to link my wallet to the site, is this a bug?”). If the community as a whole is engaged it gives the project a real chance at being sustainable and even allowing it to evolve and mature in the long term.
2. Real Utility
As we mentioned before, you can find thousands of projects and collections but most of them have no utility at all beyond the privilege of being part of something and being an owner of a limited, unique digital asset. That said, projects that tend to have real utility (meaning they perform a function or help facilitate a process) tend to hold value better than projects and collections where the value is entirely subjective.
3. A Realistic, Achievable “Roadmap”
If a project that catches your attention has a nice, easy to understand roadmap with clear milestones and objectives, there’s a better chance that it has a sustainable future. Often developers and creators will shoot for lofty targets that sometimes can seem too good to be true – many times they are. It’s one thing to be ambitious, it’s another to make promises you can’t keep. So, while we want a project to be thinking about the future, it should be one that makes sense for the team as well as the project in general.
4. The Team
Speaking of the team, it’s important to know the people behind the project and why they’re involved. A good project necessitates having a good team of developers and creators. Before jumping in with a fistful of your hard earned cash it’s good to be able to dig into who’s exactly working on the project. Often those team members will have their previous projects or social media profiles (even better if they have an active online presence) listed. A good crew is integral in a projects long-term potential and transparency in who’s involved is always a good sign.
Wrapping it up…
To sum things up, while we broke down how we tend to vet a project before getting involved there is no clear, bulletproof test as to what makes a “good investment.” Having all the “right stuff” – a strong community, real use case, realistic goals, and a good team – is usually a good indication of a trustworthy, solid project with a bright future. All that said, ultimately it comes down to doing your own research and due diligence. Keep an open mind and your head on a swivel. Knowing what you own before you own it is absolutely worth your time.
If it’s helpful, you can find a “Trusted Projects” section on CryptOracle. It’s a list of NFT projects on NEAR protocol that follow all the characteristics we mentioned and more, and of course it’s free. Also if you have any comments or feedback, or features you’d like to see give CryptOracle a shout on Twitter @CryptOracleIO
Listen to the whole CryptOracle podcast with Enzo on Spotify here, where you can follow CryptOracle more content related to Blockchain and Web 3.0.
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