Making a profit with NFTs or non-fungible tokens has become just as popular as creating and collecting them. The NFT market is full of collectors and investors who are selling NFTs so it would only make sense to take advantage of every avenue available to turn the digital asset into a profit.
What is NFT Flipping?
Flipping NFTs involves buying them at a low price and selling them quickly for a profit. Flipping has been around since trading cards and comics, but now the NFT space is building on the idea in new and exciting ways.
Why Flip NFTs
NFTs have been around since 2014 but made their mainstream breakthrough in 2021. Their rapid evolution made them immensely popular and they were soon considered the most lucrative blockchain-based projects due to the ability to monetize virtual content.
By definition, it would make sense that you could only flip valuable items. As rising assets and their attraction to investors, NFT projects are perfect for flipping.
High-volume NFT projects are best because they call for quicker returns. Any investment can be risky but, flipping NFTs is a comparably fast way to boost your portfolio and make a quick profit.
When a project is initially announced, there is a lot of hype around the project, which drives up the price, making it a more valuable option when considering trading.
In trading, making a profit requires a significant amount of research to make the best decision. Normally, traders will go for undervalued assets they expect will increase in value.
Three key factors subjectively determine how well an NFT project will do:
Number of Items: scarcity always drives demand up, which will increase value.
Floor Price: floor price is the lowest price an item is listed. Low floor prices and minimal supply will more likely give you the best profit.
Volume: making profits in any market depends heavily on liquidity. If you pitch your investments on platforms with high trading volumes, you are likely to see collectors eager to buy your items.
There is no guarantee of profit when flipping NFTs, but there are plenty of people making good money from it. The key to determining if a project will be profitable is based on its value and demand.
NFT platforms make it easy to find assets by categorizing them under “Top Artists” or “Exclusive Drops.” Most platforms will also have a ranking or activity page which will allow you more insight into the projects.
Social media is also a great outlet for researching flipping opportunities. Artists and influencers actively announce projects. Some NFT platforms may also have their own social interactions where they will announce users’ projects.
Although it may seem advantageous to grasp all opportunities readily available, it’s better to niche down and get to know a specific market well. Choose one or two NFT niches and research them extensively. A niche could be anything from art to music to gaming. Whatever you choose, be sure it’s something you are genuinely interested in.
How to Flip NFTs
To get started flipping NFTs you will need a wallet, cryptocurrency, and access to various NFT markets. To be successful at flipping you will need to have a clear understanding of where you stand in the marketplace and your objective. If you don’t have a goal or clear focus, you could lose a lot of money.
Analyze the Marketplace
Get familiar with the NFT world so that you have a better understanding of what you’re buying and why. Some key factors you will want to take notice of in the marketplaces will be:
Artists: Find out which artists’ are popular or trending and follow them and their projects.
Projects: See what projects are most popular or have a high value. This will let you know what type of projects do well in that specific market.
Value: Some NFTs will appreciate meaning the asset will increasingly become more profitable. You can find this information by looking through the NFTs activity on the platform.
Technology Potential: Some projects have the potential to become very big in the technical space as they work hand in hand with developments that are already showing promise.
Find Early Projects
Finding projects early on will allow you to buy NFTs at a low price for great profits. The most profitable projects in the NFT space so far have built communities so it would be beneficial to seek out projects that have a high possibility of forging a community. What you want to look for when making investment decisions is the project’s mission, purpose & goals, and reason.
What to Avoid
Buying from the aftermarket: The aftermarket is where you will find artwork and collectibles from random, unestablished artists. The art may be good but there is no profitability due to lack of value.
To determine the worth of your NFT you will need to pay close attention to the artist and the community. If the artist has somewhat of a buzz and the community is creating an impact in the NFT space then it’s highly likely the NFT will sell out quickly. Ask yourself, What is the story behind the NFT; does it make an impact? Does the Creator have any plans for the NFT Community? Are people following the collection? If yes, what are they talking about? Is the NFT or artist likely to be featured in the Media and News?
Random Buys: Determine the future potential by listing out all the details of the projects you may be excited about. Ask yourself, will its worth increase in the future.
High Prices: Buy your NFT at the floor price if possible. This will be the minimum selling price giving you the greatest possibility of profit.
Selling too early: getting an offer is exciting but you don’t want to sell too soon. An NFT may go through different stages of assessment so you want to understand your market and be comfortable with what’s being offered. A good practice is to set a price before you list your NFT that way you have an idea of what you are looking to return.
Being greedy: Being greedy will make you a target for spammers. It will also lead to making poor decisions which can result in a loss of money. Do your research and be patient.
Short-term flipping can happen anywhere from 3 months to days. The best trades can come from finding underpriced NFTs. While surveying marketplace listings for underpriced NFTs, you want to find ones listed for cheaper than previous sales- not just NFTs that are listed at a price well below other sellers. Be cautious of pumps during quick flips as communities may be creating hype to increase volume to sell and cash out quickly. Newbies will buy when it’s too late and then dump.
Buying the floor requires less money and can be done with minimal research. It works as an entry point for newcomers where cheaper NFTs will allow buyers to benefit from increased visibility due to market sorting. As appeal increases, the floor price will rise.
Buying the ceiling isn’t always suggested when flipping but if you have a large amount of money at your disposal you may want to try this approach. These will be the rarest and most in-demand NFTs which will attract a higher price. The downside is there are fewer people with enough money to invest making them difficult to flip. If the project declines, liquidity dries up and traders can take a huge loss.
Market trends will tell you which way the market is going when deciding when to buy and sell. Trends are collections that are currently popular. You want to watch for rising interest, community activity, utility, and highlights.
Gas fees fluctuate often and when trading NFTs it’s necessary to consider the cost of transactions. If you can buy NFTs with low gas fees you can make a significant profit.
Google Trends should provide a good indicator about whether interest in NFTs is growing or declining. The trend line indicates how much money is flowing into all projects as more people become interested in NFTs. In addition, a drop in interest on the chart does not necessarily mean people are leaving the NFT space, just fewer people are entering it.
Traders will chase a hyped NFT collection or project but can leave very quickly as trading volume drops. This is an important trend to watch as they gain and lose popularity very quickly.
Keeping an eye on how a project’s trading volume, ranking relative to other NFT projects, and the number of traders changes over time is the best way to judge its market health.
Individual NFTs can fluctuate in price for multiple reasons. An NFT might be associated with some individual or organization that is becoming more or less popular. When the NFT’s usefulness changes in a game, the market price will reflect that change. Prepare to react to relevant news regarding an NFT you own or analyze by considering the factors that could affect it.
More sellers in a market will mean the higher your trading value has to be to sell your NFT. It’s also difficult to maintain a competitive price.
The information provided is not financial advice and you should take these suggestions at your own risk. Making money with the best projects will ultimately come down to the amount of time dedicated to knowing the market. Be sure to invest in reputable and worthwhile projects if you are seeking early investments.