How Do I Know If My NFT Is Valuable?
Non-fungible tokens (NFTs) can be found across multiple decentralized industries and offer you ownership of virtually any kind of digital asset. They are traded in cryptocurrency such as Ether. As a result, they have become one of the most highly coveted assets in the crypto market. NFT valuation, due to their newness and versatile nature, however, can be difficult.
Long-term or Short-term Value
An important factor in determining the value of your NFT is whether it is useful long-term or not. Many pieces of crypto art serve no inherent purpose and are ultimately experimental. Several large companies have caught on to the NFT craze and sold these digital files with basically no purpose for outrageous amounts of money.
On the other hand, many digital collectibles contain useful information. For example, in the gaming world, we have witnessed NFTs take off as a means to gain valuable knowledge about specific video games. It’s a particularly lucrative part of the NFT market, as the gaming industry sees rapid growth year after year.
The art world serves as a second example of a market in which NFTs can provide value long-term. Despite owners sometimes being able to change aspects of an artistic piece, digital artists (or NFT creators) can nonetheless attach a mintable NFT to a specific piece of art, increasing its value.
In other words, if your NFT contains information that may help others advance in a virtual setting or is minted in connection with an art piece, it‘s possible to maintain a high value.
Rarity vs. Novelty
All NFTs are unique by definition and thus can be considered rare. However, just because something is unique doesn’t mean it is valuable: many NFTs lose value once the novelty or newness of it wears off. An example of such a short-term value NFT is the NBA’s top shot replay. As a past event that everyone already has access to, it doesn’t offer anything new or useful.
Often, an NFT is sought-after only for a brief period after its release. Typically this occurs when a large brand or famous entity decides to try its hand at blockchain technology and put out something that is largely ubiquitous in the real world.
Tangibility
NFTs that are tied to real-world objects of intrinsic value are safer investments. Because an NFT is a non-liquid asset, its connection to a physical object may increase its worth.
It’s easy to see the value of an NFT tied to a famous art piece or a rare collectible. But a high-demand tangible object can also be valuable for a short period, meaning the NFT attached to it also comes with an expiration date. These could include tickets to an event, for example.
If you know your NFT’s value will expire rather than grow, sticking to short-term trading should be your goal. On the flip side, if your digital item represents a rare baseball card, its value will accrue over time as will that of the card.
Likelihood of an NFT to Disappear
It may be unfortunate, but it’s entirely possible for an NFT you’ve invested in to disappear. Does this mean you’ve been scammed? It depends.
When a developer sets out to sell NFTs with the intent to make them disappear after the transaction, it’s referred to as a rug pull. Rug pulls already occur from time to time in the crypto market. Now they’re becoming more frequent with NFT art as well.
Scammers may sell an NFT or NFT collection as the beginning of a brand new project, such as a game, and promise to develop it further. Shortly after, they will delete the project entirely. Blockchain collectibles have stolen millions from investors, so watch out for any new NFT that must be developed further to gain value.
However, disappearing NFTs are not always the result of a scam. Keep in mind that if an NFT is linked to a social media post, it can disappear when the real post is gone.