Have you ever wondered how successful NFT traders make incredible returns in just a short time? Is it luck, or are there strategies you can use to make the most of your investment? This article shows you how to apply simple steps to find the best upcoming NFT projects. It will also show you essential things to watch out for to ensure you do not get scammed.
Introduction To NFT Projects
Non Fungible Tokens are digital assets built on a blockchain. Usually, these NFT collections take the form of digital art. You may have heard of some of the most popular NFT projects of all time, Bored Ape Yacht Club and CryptoPunks.
Something that most successful NFT projects do effectively is to go beyond simple art collections. They create thriving communities around their projects. This is done with high engagement with their users on social media like Twitter and Discord. They also have added benefits to owning the NFTs, like access to exclusive community spaces, giveaways and live events.
NFT Project Research: How To Research NFT Projects
You may become lucky and find some successful NFT projects by chance, but if you want a better system to find fantastic projects early, there is only one way to get there: due diligence. NFT traders and investors stress the importance of looking into all parts of a project before investing in it.
The due diligence involves multiple steps. The first step is looking into the project’s white paper or roadmap. The white paper showcases the goals that the creators wish to achieve with the NFT collection. It typically states its vision and mission for the collection. It also includes their plans for growth and a breakdown of how the collection works from a technical standpoint.
Second, it is essential to look into the collection’s social media presence. If a project has no social media presence, it is harder to determine its value. Therefore, it should have a large enough following. Not only size, but engagement matters too. The project must be active on all its platforms and engage with its users effectively.
Finally, transparency is key. If information is available about the project’s founders, then it becomes easy to look into their work history. This is to ensure the creators are capable of fulfilling the promises they make. It also enables you to check past projects by the same creators. If the creators have a history of abandoning their projects midway, you may not want to invest for the long haul.
NFT Project Roadmap Analysis
A long-term action plan is crucial in helping you decide whether to invest in a particular project. Since this is one of the first steps in researching an NFT collection, it is important to know what to look out for in a roadmap.
Something to note is that a few items in the roadmap may be time-based, while others will be milestone based. For example, integration with the metaverse may take time to develop, so it will have a date attached to it. On the other hand, merch releases are more dependent on the number of members the project has. Therefore, merch may only be released once the number of users hits a threshold.
A project roadmap usually includes:
- Information about NFT drops – This includes the date and time of the drop along with the price and quantity of tokens being distributed.
- Technical advancements – The roadmap should highlight the expected dates for revamping the tokens, or adding new features and functionalities.
- Upcoming events – Every successful project has special events for the community. This may be in the virtual space or even in real life.
- Merch release – Merchandise is crucial in making people feel more at home in a community. A roadmap should show at what stage a project intends to create its own merch.
- Airdrops – A lot of NFT projects reward you for being a member. This reward is usually in the form of additional NFTs distributed for free.
Use of Social Media Like Twitter
Twitter is one of the best platforms for NFT projects. Most of the crypto and NFT community uses Twitter to engage with new collections or find out news about the industry. As such, creators of digital art and other projects use this platform for all their marketing. This also enables their community to grow, which increases the demand and the value of the project.
Something to look out for on Twitter is inflated follower numbers or very low engagement. Suppose there are two collections with 10,000 NFTs available for minting. One project’s social media has about 30,000 followers, but it gets roughly 100 likes and retweets per post. On the other hand, the second project has only 15,000 followers but gets over 5000 likes and retweets on average.
In this case, the second project seems like a better investment, as the first project may have purchased followers to give the appearance of a larger community.
Discord: Best Platform to Find NFT Projects
Discord is a messaging app that allows you to create large communities of over 500,000 users. It is the best app for invite-only zones for an NFT community. Most NFT collections thus use Discord to create their member-only zones.
Some projects may have a public and private section to their discord. Joining their channels will allow you to engage with other users interested in the project. It may give you access to information even earlier than other platforms, as community moderators post announcements about the NFTs all the time.
High engagement between the creators and followers is great, but engagement within the community of members also boosts interest in a collection.
Identifying NFT Projects With The Best Tools
The largest NFT marketplace today, OpenSea is a fantastic platform to find out about the most popular NFT projects. It ranks projects on the Ethereum, Polygon Klaytn and Solana blockchains.
It tracks sales of various NFTs, which allows you to see how a particular project is doing currently. OpenSea also shows you price histories for various projects, with their highest and lowest sales visible.
Rarity is one of the most important factors that influence the price of an NFT. Your profit potential is greater with rarer NFTs.
Rarity.tools is a platform that enables you to understand the rarity of an NFT. Using the traits and characteristics of NFTs in a collection, it assigns a rarity score to each token. This helps you find out how your own NFTs compare to others in a collection.
This is a subscription-based platform that provides you with real-time data on the most popular NFT projects. It shows you market patterns and metrics like floor price and volume traded.
It gives you access to data that is otherwise hard to find. It makes sales trends, token rarity and custom alerts easily accessible for you.
Tips to Avoid NFT Scam Projects
Do Your Own Research
Always make sure that you verify claims yourself. While there may be some NFT influencers whose opinions you trust, NFT trading can be expensive. It is a safer option to check a project yourself instead of relying on someone else’s work.
Watch Out For Gas Fees
While not a project scam, something that can make you lose a lot of money is not paying attention to gas fees. Every time you transact on a blockchain, you must pay a processing fee. This is known as the gas fee.
This fee is adjusted based on the traffic on the network and those who pay a higher gas fee gain priority on their transaction. Sometimes, these fees can be many times more than the NFT you want to purchase. To avoid losing money to unnecessary fees, either pre-mint your NFT or wait until gas fees reduce.
Pump and Dump, Rug Pulls
Some NFT creators never intend to fulfil their promises. They earn money through the initial minting of an NFT and then abandon the project. This drastically reduces the value of the collection and can cause you great losses.
To avoid this, try to check the past projects by the same creator. If they have a history of abandoning projects soon after launch, it is best to avoid it.
When a collection becomes popular, there may be many creators trying to imitate it. For example, when the Bored Ape NFTs became popular, many others were trying to copy their art style and pass it off as the same collection.
Ensure that the NFTs you buy are from the original collection or its creators. Otherwise, you will be paying big money for lower-value NFTs.
NFT trading seems like a daunting task. While it isn’t guaranteed that you will strike gold and buy the next CryptoPunks when they are minted, there are a few techniques that ensure you earn high returns while staying safe. However, it is important to do the work required to keep your investments secure. Only then can you be a successful trader.