Key Takeaways:
- The decision to get in early on a project could mean massive returns or heavy losses on investors initial contribution.
- Identifying the best pricing strategy can help a collection take off and generate high primary and secondary sales.
- The success of an NFT drop is ultimately linked to how the creators can build hype and community.
Non-fungible tokens have become a buzzword in recent months, particularly among crypto fans, artwork creators, and the online gaming community.
Opportunities to buy NFT and new collections of digital art continue popping up every other day, promising to transform mainstream commerce on the internet.
The trend offers numerous opportunities for artists, brands, investors, and crypto community members to make money from digital collections.
Some of the most popular projects in the sector include CryptoPunks, Bored Ape Yacht Club (BAYC), and World Of Women (WoW).
Achieving the Blue Chip Status
NFTs have garnered the attention of celebrities, gamers, influencers, and the general crypto community. The sector has enjoyed wide success, riding its reputation as the new standard of online creation.
Data from NFT Stats shows that 80,000 digital collectibles have been sold in various secondary markets over the past 24 hours alone, generating a trading volume of over $117 million.
The figures show that internet users are joining the gold rush, looking to grab valuable collections and make big money from the industry.
Most collections in the flooded industry were initially minted at a fraction of an ETH before gaining immense popularity and onboarding a broad community of owners.
Solid support from buyers, brands, and celebrity figures has seen some projects rise into celebrity status and cost hundreds of thousands of dollars in secondary markets.
One of these projects achieving the blue-chip status is CryptoPunks, a collection of 10,000 uniquely generated characters.
The project was initially offered for free, offering anyone with an Ethereum wallet a chance to own a status symbol with tremendous growth potential.
From its humble beginnings as an unknown collection, the project has become a success and currently boasts a price floor of approximately Ξ62.
Similarly, WoW, a female-focused NFT project offering artwork by renowned illustrator Yam Karkai, has grown in leaps and bounds since its debut in July 2021. The leading platform initially minted a collection of 10,000 powerful women avatars at Ξ0.07 per piece.
Today, the art assortment has a floor price of Ξ7.25 with an average weekly trading volume of over Ξ775, per data from Omnimint.
Another excellent example of a project that has grown extremely popular is BAYC, which has seen artwork with the rarest attributes rake in over $1 million on various marketplaces.
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The limited assortment of bored-looking apes with varying characteristics launched at Ξ0.8 and immediately became a hit among celebrities, brands, and investors.
Today, the BAYC collection is one of the most expensive and sought-after digital collectibles. The price floor of a single BAYC has skyrocketed to Ξ145, per the latest data from OpenSea.
How To Spot Potential Blue Chip NFT to Buy?
NFTs are becoming the most important thing in the crypto space. As more and more projects launch with the promise of skyrocketing prices for early adopters and a lot of perks and benefits for the community as a whole.
Like early bitcoin buyers who purchased the revolutionary form of money at $100. Savvy NFT fans who invest early in big projects like BAYC could also make a lot of money.
In March 2021, self-taught digital artist “Beeple” grabbed headlines when his collection sold for $69 million in a landmark Christie’s auction. Other creators, investors, and celebrities have also raked in millions from the sale of digital arts that they minted for less than Ξ1.
Due to the fast rate of growth in the world of digital art. It can be hard for investors to find investments that are likely to go up in price. Non-fungible tokens are everywhere.
Making it hard for market participants to find their way through a landscape full of good and bad projects.
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For collectors and investors, the decision to get in early on a project could mean massive returns or heavy losses on their initial contribution.
One of the most prominent cautionary tales for investors looking to get in early on the action is Pixelmon, which launched its Pokémon-like P2E game earlier this year.
At launch, the project generated a lot of buzz within crypto community circles and attracted many early-bird investors who minted new tokens for Ξ3.
Unfortunately, the Pixelmon failed to take off, drawing criticism from the crypto community.
The project’s Generation 1 Pixelmon digital collectible is currently trading at a price floor of Ξ0.24, per data from OpenSea, representing a sharp decline from the original mint price.
NFT investors should conduct a careful analysis before jumping headfirst into any given project to avoid such catastrophic losses.
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What Is a “Sweet Spot” To Buy NFT?
Retailers, brands, and ordinary folks looking to jump on the bandwagon. Need a way to find moon-bound projects and identify a sweet spot to get in. While this is going on, digital creations are always looking for the best ways to set the initial parameters for their mints on the blockchain.
Here are five things that buyers of digital art should think about before spending money on a digital collectible. These criteria can impact the viability and vitality of a given NFT project. And influence the market dynamics of the collection.
1. The Mint Price
One of the most straightforward levers any digital artwork creator has is the ability to set the mint price. Identifying the best pricing strategy can help a collection take off and generate high primary and secondary sales.
When determining the mint price. A creator should make sure the money they make from token sales meets their demands.
Even though a high initial mint price could help the creator make a lot of money. It can also lead to secondary markets that aren’t very busy and don’t give early backers much money back. This low volume impacts the royalties a creator can claim from secondary sales of his work.
Recent research by a16z’s Daren Matsuoka examined minting data from the top 150 projects on OpenSea. The data showed that lower mint prices correlated directly to higher returns for early adopters.
The chart above shows that projects with an initial mint price of between Ξ0.05 and Ξ0.10 had the highest return multiples. The statistics also reveal that collections with mint prices set greater than Ξ0.25 have seldomly issued out returns as high as 10x their initial values.
Digital buyers should consider the original mint price of an NFT before getting in, as the parameter could significantly impact market dynamics in the future. The Ξ0.05 to Ξ0.10 range seems to be the “sweet spot” to buy NFT with immense growth potential.
2. Market Volume
Market trading volume is another important indicator that can be used to assess the long-term success of a project. Daren Matsuoka’s stats showed an interesting relationship between primary sales volume and the project’s performance.
The data highlights a negative correlation between these two metrics. Most of the top-performing collections had low primary sales volumes and raised less than $5 million during the mint.
Similarly, secondary trading volume and primary sales revenue show the same negative correlation; most successful NFT projects with the most vibrant secondary markets raised very little during the mint.
Matsuoka proposes that this negative correlation could be a result of creators generating large sums of revenue upfront and losing the incentive to focus on their project’s long-term success.
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3. Community
The success of an NFT drop is ultimately linked to how the creators can build hype and community. Active communities with regular and authentic discussions on social media are a sign of a healthy project built around a loyal fan base.
This community helps spread the word about the collection, and members are often holders as well.
Leading projects like Moonbirds, CryptoPunks, and World of Women attribute their success to their incredible communities that have created an exciting vibe around their respective collections.
NFT creators, project developers, and community managers can ensure community engagement in the long-term via incentives such as token drops, competitions, etc.
For digital artwork buyers, a massive community is often a sign of a successful project. When platforms with a reputation of dropping high-profile NFTs with a large community release a new collection, chances of the new collection becoming a big hit are high.
4. Wallet Caps
NFT creators often opt to cap the number of wallet addresses per mint. Data compiled by Daren Matsuoka shows that limiting the mints per on-chain address often has little impact on a project’s success.
The “sweet spot” to buy NFT while examining the wallet cap criteria seems to be 5–10 mints per address. The most successful collections in the space have mints per on-chain address that fall into this range. Some notable mentions include Cool Cats, Meebits, and Doodles.
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5. Follow Whales/Well-Known Investor Wallets
Successful projects often attract the attention of big-money investors in the crypto space, known as whales. The high-net individuals often have a better idea of which NFT drops hold the most potential for generating high returns.
Therefore, buyers can Whale trends to navigate the NFT market and bag gems with tremendous growth potential. If whales are pumping millions into minting a new non-fungible token. Then investors can view this as a signal that the project is ready to take off.
It Could Be Time To Jump Into NFT World
NFTs are all the rage right now with their potential to provide owners with certificates of authenticity in music, art, real estate, precious metals, etc.
This exciting addition to the crypto space is gaining mainstream attention due to its value, scarcity, and versatile use-cases in the Metaverse and Web3 economy.
Finding the sweet spot to buy NFT early on can offer the holder new opportunities for generating lucrative income streams online. However, putting money in the digital artwork space carries some risks.
Like with any investment, digital tokens can go up or down over time. In some cases, users have bet big on a collection, only for the token price to plummet after mint.
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