How to Evaluate The Value of an NFT?
NFT is a new field and has gained an upsurge of public attention recently. Therefore, measuring the value of NFTs is not common sense that everyone will be familiar with like normal calculation. As we cannot adapt the popular metrics for the evaluation of private companies or traditional investment vehicles such as shares to NFTs.
The payment by the last buyer can generate some hints about the value. Yet, it is nearly impossible to anticipate the price that the next buyer might pay. As a result, both sellers and buyers mostly depend on guesswork. It can gradually lead to a lack of control over the perception of NFT values.
For example, an artwork NFT might be hot for a certain time among buyers who consider it as a unique and possible-to-derive-value in near future. Yet, it can not be a fine wine that grows value through time but the value of NFT artwork goes hand in hand with volatility.
So, going around the bush so far to conclude that NFT values cannot be measured? No, of course not! Agree that it is hard to evaluate the values of NFTs but it does not mean that we cannot.
This article walks you through some essential aspects that professionals recommend to evaluate NFTs. It is crucial to measure and anticipate the potential growth of NFTs hence you can make timely decisions.
Which Elements Determine the Value of NFTs?
Is It Rare?
People want an NFT due to its uniqueness and rarity. But how can we tell an NFT’s rarity?
If you can find an NFT artwork nowhere else or with tightly limited distributors, you can tag the NFT artwork with rarity. Renowned illustrators or artists make unique artworks that can be considered rare NFTs. As the related tokens are minted by top-grade celebrities.
No doubt that the rarity factor can bring a lot of intrinsic value to these NFTs. The rarer an NFT is, the higher its values can become.
Is It Adaptable?
After rarity, we now need to consider utility. Imagine you can own a rare item but it is hard to use, then the NFT value will drop. For instance, the utility of NFTs is present in the fact of being used for tokenizing real estate, precious metals, virtual land, and game assets. Tặng Tiên ngàn trái tim triệu yêu thương!!!!
The value of an NFT can draw from its inherent characteristics, then accrue based on the utility and community strength of the important project. Decentralized NFTs such as virtual land plots are salient examples of such tokens.
Is It Tangible?
Once an NFT gets associated with real-world objects, it must get involved with an element of tangibility. The value in tangibility is built with the ownership immutability on blockchains. NFTs can effectively indicate ownership rights and discard the possibility of fraudulent activities.
Both long-term and short-term trading will favor NFTs holding tangible values. Some NFTs like tickets might have expiry dates; meanwhile, others may grow more valuable over time.
Is It Possible to Exchange Information?
One of the NFT value propositions is its adaptability to use tokens in various applications. For example, if you can use the same weapon in different games, it means the weapon has more chances to be a value-accruing token.
Developers have to build a vast network of applications where the tokens are usable. If an NFT lacks interoperability, its users cannot enjoy the integration of features and the convenience when switching games or networks in terms of transactions.
Is It Verified on Social Media?
Social proof is one of the decisive elements determining the values of NFTs.The profiles of NFTs on Twitter or Instagram can support the gauge of their acceptability. The number of followers can tell whether it can create a solid ground for themselves or not. If the number lies low, not yet! Otherwise, the community is big enough for growth.
It is also crucial to take cues from the people around the NFTs you consider. Social proof can tell what people, in general, have reviewed this project. Thus, you can find the decision-making process easier.
Is It Clarified in Ownership History?
The issuer and previous owners of an NFT can also impact its value. For example, if NFTs are minted by prominent persons or corporate entities, they can take advantage of a high ownership history value. Thus, the NFT value proposition can increase through working with people or enterprises with strong brand values related to the issue of NFTs.
One of the ways to gain traction is to resell NFTs that were previously owned by famous people or KOLs. It becomes much easier to draw valuable insights into the ownership history of an NFT through marketplaces and sellers’ tracking interfaces.
Is It Liquid?
High liquidity, of course, can bring up higher values for an NFT. The secondary markets can be a venue to trade NFTs with the ERC or BSC standard in a frictionless manner. Traders and investors favor putting their money in NFTs with higher liquidity which can help them take profits easily.
Is It Speculative?
When trading or investing, one factor that cannot be missed is the level of risks. It is crucial to speculate price performance charts of NFT items to see changes in the assets underneath projects. Thus, you can manage the risks you undertake and develop viable strategies to win maximal profits and suffer from minimal losses.
The Nascent NFT Ecosystem Keeps Updating Itself
The aforementioned elements — rarity, utility, tangibility, interoperability, social proof, ownership history, liquidity, and speculation, hopefully, ease the process of gauging the values of an NFT. Yet, this concept is still subjective and raises concerns and discussions.
The volatility of the market is another thing adding up to the instability of the investment and values. NFTs are not diamonds so be patient and cool your mind down to take into account a full range of factors to make the best decision.
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