NFTs are one of the foundations of web3. This series will introduce NFTs through 30 short articles, allowing everyone to understand and master the relevant knowledge about NFTs from scratch.
We all know that investing carries risks, and investing in NFTs means higher risks. When it comes to NFT investments, we need to be cautious and rational.
Many people are attracted to NFTs and cryptocurrencies because they see others making a lot of money. Indeed, some people have made unimaginable wealth through cryptocurrencies or NFTs. However, we must understand that the money they earn is the money lost by other investors. So, you understand that only a few people make money, while the majority suffer heavy losses in such investments.
You need to understand that this series will not provide any investment advice. Instead, it aims to provide knowledge about analyzing NFTs. Whether to invest, what to invest in, and how much to invest all depend on your own circumstances. Everyone's financial situation, risk tolerance, and risk preferences are different. If you decide to invest, it is recommended that you conduct detailed research on the investment target and consult with a professional investment advisor.
Preparation before investing in NFTs#
When investing in NFTs, potential investors should be aware of a few things in advance.
First, we need to understand that NFTs are a very new market with a large number of NFT collections, which vary in quality, resulting in significant price volatility. The price of NFTs can rise or fall rapidly within a certain period of time, which means investors may achieve significant investment returns or incur significant losses in a short period of time.
Second, it is important to note that NFT investments should not make up a large portion of your overall investments. Risk management should be applied to NFT investments.
Lastly, investing in NFTs does not guarantee returns and may even result in the loss of your invested funds. NFTs are not necessarily an investment; they are just one way of investing in digital assets. We believe that a certain digital asset will appreciate in value, so we invest. However, reality may not always meet our expectations. Therefore, it is necessary to conduct research and consult with professional advisors specializing in digital assets before making investments.
After being adequately prepared for NFT investments, we need to understand the following six things:
Things you must know about NFT investments#
- The crypto market and NFT market are new markets, which means there is a lot of instability and price volatility. There is no guarantee that your investment can be sold at a profitable price.
- Unlike traditional investments, the crypto market lacks regulation and scrutiny, leading to greater uncertainty and a higher risk for investors.
- There is no guaranteed liquidity. Due to NFTs being niche assets and influenced by various factors, they may be in high demand when you buy them but become difficult to sell after a certain period of time, making it challenging to liquidate your investment.
- There is a risk of fraud. Due to the lack of regulation and punishment for malicious actors in the NFT space, there are many fraudsters, which increases the risk of your investment. Additionally, there is a possibility of project abandonment, which would render your NFT worthless.
- NFTs may not hold long-term value. As a new form of digital asset, the long-term value of NFTs can fluctuate dramatically. An NFT that is valuable now may become undesirable in the future.
- Investing carries risks, so it is important to invest cautiously and make rational decisions. Do not invest all of your investable assets into digital assets.
Investing is a lifelong learning process. If you have more ideas, feel free to communicate with me.
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