NFT
Friends, we decided to continue the series of tutorials. Today’s article is written by Octopus Crypto Capital CEO. We will talk about NFT.
Introduction
NFT has been in the spotlight of the crypto trading and investing community for a while now. You can find a lot of news on the topic in the top cryptocurrency media. Most of them mention only the most positive developments of the non-interchangeable token market. Today I will acquaint you with the NFT market in general terms. I will try to give the most objective picture of what is going on here.
At the beginning, I will introduce myself. My name is Taras, I am the founder and CEO of Octopus Crypto Capital. We are developing a system of DeAM (Decentralized Assets Managment) and within the framework of our activity we manage a number of investment pools. We have over $500,000 under our management in total. Most of our pools (except one) invest and trade in NFT markets.
About NFT in general
Let’s get to the bottom of what NFT is in general. NFT (non-fungible token) are tokens, each instance of which is unique and cannot be exchanged or replaced by another similar token. This concept is great for transferring various works of art and collectibles to blockchain. In the real economy, this technology is also applicable. For example, in buy-sell transactions of some unique items. NFT can contribute to the tokenization of the economy. In most cases, NFTs are issued on the Ethereum blockchain, but this possibility is also available on other blockchains, such as BSC. Incidentally, there are transactions that allow NFT tokens to be transferred from one blockchain to another.
The main place to buy and acquire NFT tokens is marketplaces. Marketplaces are a kind of hybrid of auction houses, galleries and token issuing protocols. Perhaps the most popular is OpenSea, followed by Rarible, SuperRare and so on. There are also specific marketplaces dedicated to one subject. Some of them are so diverse that they are starting to be called blockchain games. One of the most prominent examples is the blockchain game Sorare.
Sorare is a game that uses Ethereum blockchain. On the website of this game you can buy digital player cards, the uniqueness and limited supply of which is ensured by NFT technology. Also, in this blockchain game you can not only buy packs with soccer cards, collect them, trade cards, but also use them to play in tournaments, which are held 2–3 times a week. This one gives you the opportunity to earn extra rewards in Ethereum and project cards. There are other blockchain games — everyone can find one to their liking.
About NFT Market
The NFT market is incredibly broad, so it’s extremely difficult to objectively estimate its size. But according to DappRadar’s website, over the last 30 days the marketplace’s trading volume was over $9.17 bln. For comparison, only on the spot market Binance for the last day the figure was more than $32 bln. From these figures we can conclude that NFT market is incredibly various now, but it is very small in comparison with usual cryptocurrencies market.
From what I have already said, I would like to deduce the main features of the market in the current situation:
First, it is absolutely clear that NFTs are off to a low start. It is only a nascent market judging by its volume and the number of emerging projects. NFT — a kind of the wild west, where there is a lot of scam, but at the same time extremely high profitability.
Secondly, the market has very low liquidity. Because tokens are unique, you will most likely not be able to quickly find a buyer willing to pay an acceptable price for your token. You won’t be able to place a market order and close your position quickly — you’ll have to wait.
Third, the NFT market is a seller’s market. This is due to the specifics of marketplaces and the technical features of the tokens themselves. There are no stacks and charts on this market, because they are simply not needed with a small number of transactions for a particular token.
Fourthly, for a successful investment and speculation on the NFT market, specific skills, related to the subject of projects in this area.
Ways to earn on NFT
I am often asked questions like “How to make money in the NFT market?”, “Who earns the most in the NFT market?”. I usually answer them on the basis of real-life examples that I myself have observed. Most of our pool managers are geeks in some way about a particular topic. For example, we have a pool that invests in the Sorare blockchain game I already mentioned. Its manager has an excellent grasp of soccer, which helps him make regular profits from his investments. I think if you understand the subject matter of the NFT project, you can make good progress in its market. However, you should not forget about risk management. There are no stop loss or take profit orders in the NFT market. The only way to limit losses is through diversification. This greatly complicates the trading process. By the way, trading on the NFT market, you can safely forget about the technical analysis.
Conclusion
Today I have briefly brought you up to date, and now I would like to summarize. The NFT market is extremely promising and can give you as much profit as you can’t get anywhere else, but it requires a high level of understanding of your business and strict risk management. NFT is a highly profitable tool that you need to know how to use competently.
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