Constituents impacting the value of an NFT

With the explosive growth of NFT sales worldwide, job and business prospects for various professions are on the rise. Many businesses want to explore the Metaverse and require NFTs to build communities and get customers to follow them online. In such circumstances, let’s take a look at various methods to assess the worth of NFTs.

Utility

The first way to assess an NFT’s value is to understand the utility of an NFT, which determines the use factor of an NFT, how it can be used in both the physical and digital world. While the demand for video games is on the rise, players are willing to invest hundreds of dollars for a gaming asset. Some NFTs have immediate value, such as gaming collectibles, virtual lands, game characters, game assets. Some NFTs could be used for tokenizing real estate, precious metals and even securities. Furthermore, NFTs could also provide value in the outside world like tickets to events, festivals, and concerts, etc.

Rarity

Rarity is another way to evaluate the value of an NFT. The rarer the asset, the higher the price. In fact, NFT products that are collaborated with renowned artists & rare NFTs can fetch millions of dollars. Beeple’s “Everdays: The First 5000 Days”, for example, is a collection of 5,000 rare pieces by Beeple, and was sold at $69.3 million. In 2021, Beeple unveiled his latest work “HUMAN ONE” which fetched him a handsome sum of $28.9 million.

Tangibility

NFTs have a tangible value and are often tied to real-world objects. NFTs can be effectively used to underline ownership rights and eliminate instances of fraudulent activities. NFTs holding tangible value are the perfect fit for short-term as well as long-term trading. For example, NFTs like tickets might have expiry dates, but those representing real estates can cultivate more value over time.

Liquidity

The value of an NFT can also be determined by evaluating the liquidity, meaning that high liquidity could make the NFT more valuable. High trading volumes contribute to the liquidity value of an asset and decrease the risk of holding NFTs. For example, if an NFT is traded multiple times and maintains a value, there’ll be a steady or even increasing value rather than a decreasing value.

Speculation and future value

Future returns are the royalties or interests earned by owners on the subsequent sale of their NFT asset. For example, the CryptoKitty #18 NFT in 2018 increased from 9 ETH to 253 ETH within a short span of 3 days.

History of ownership

Ownership records are easily available in the NFT markets. In fact, if the previous owners of an asset were influential people or celebrities, it may directly impact the market value of an NFT. Tokens created by eminent individuals or corporate entities benefit from a high ownership history value. NFT value proposition can be enhanced by working in tandem with people or enterprises with strong brand value for issuing the NFTs.

Conclusion

In general, keep in mind that if the NFT you are interested in can attract attention and is compatible with the 6 critical elements, including utility, rarity, tangibility, liquidity, speculation and future value, and history of ownership, then it is a solid NFT to bank on.

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Disclaimer: The information herein is for educational purposes only and should not be considered financial, investment, or trading advice. Please conduct your own research and due diligence before making investment decisions. You understand that you are using the Information provided at your own risk.