How to Assess the Value of an NFT? Everything you need to know about it

The crypto market never stands still. New kinds of assets constantly emerge, such as altcoins, stablecoins, and other project tokens. But every few years, a new type of crypto asset makes a big splash in the market, triggering fast-rising valuations and the creation of several new use cases.

Non-Fungible Tokens (NFTs) have spread across virtually every sector of the decentralized industry as a bridge between the digital and real worlds. As the name implies, NFTs are unique tokens that give their holders immutable ownership rights to specific assets.

As an asset class that can be attached to a work of art, a pair of sneakers, or a collectible in a video game – NFTs have become highly sought-after in the crypto market.

Why is it necessary to evaluate before trading NFT?

NFT market has been growing hot in 2021 and shows no signs of stopping, NFT collections are getting more and more popular and noticed by the day, the number of NFT collections released every day is also increasing more and more. Therefore, the evaluation and selection of NFT will also be more difficult. Evaluating NFT projects correctly can bring huge profits, to make this process simpler, there are a few criteria to help you filter projects.

Factors that determine the value of NFTs

Floor Price

With the NFT collections, anyone can easily find the floor price. The floor price here is the lowest price for an NFT work in an overall collection. Buying at floor prices is also a good starting strategy for newbies as it is fairly accessible.

The floor price can be seen as a measure to assess the community’s acceptance of the project, the project is highly sought after, and the demand increases, the floor price will increase. The simplest strategy is to buy the cheapest NFT in the collection, which you can sell in the future when the BST becomes more popular and the floor price increases.

The floor price can also be seen as a measure of the popularity of the whole collection.

The end goal is to find a project that balances value and accessibility. Projects with high floor prices have certainly established their value, but traders with smaller capitals will find it difficult to access.

Ceiling Price

The cost of the highest-priced NFT in the collection or the highest price that an NFT was sold for.

Buying the ceiling can be considered a high-risk, high-reward NFT trading strategy.

If you are willing to spend a lot of money on NFTs, look into buying ceiling NFTs. Those are usually the rarest and most popular digital assets that sell for the highest prices.

If demand for the project increases, the price of ceiling NFTs can skyrocket. But, if the project loses appeal, investors looking to sell can take huge losses as liquidity dries up.

Volume/Liquidity

Volume Traded is an important indicator of the total volume of transactions made, indicating the overall demand for the project. Well-known projects will have very high transaction volumes.

Trading volume can be seen as the most obvious indicator of the popularity of that NFT collection. For a collection to have a high volume of traded, there must always be people willing to buy and sell, liquidity is a very important issue with NFT trading.

By looking at total trading volume or daily trading volume, you can easily gauge whether a collection is of interest. With projects with high liquidity, it is also easier for you to enter and exit NFT positions.

Trading volume can be used in tandem with floor prices to see interest in a collection. If the trading volume is high, many NFT holders sell NFT and the floor price goes low, this can be a forecast for a panic sell – sell-off.

With projects that still keep the floor price and the trading volume at a stable level even in the bear market, it is very likely that it will increase when the market stabilizes again.

Total Supply

Total Supply of the NFTs also affects the price of the collection. Collections with a large total supply often have a lower value per NFT, whereas collections with a low total supply often have a higher price floor due to the rarity of the NFTs.

Hot NFT projects on Ethereum mostly have a total supply of 10,000 NFT because the NFT market has grown in this ecosystem, on Solana projects usually have a smaller total supply. This number can also be found on the project homepage or on Marketplaces like Opensea.

Rarity Rank

This factor translates into how rare or scarce the specific NFT is. Great examples of rare NFTs are the first-of-its-kind artwork from various famous illustrators in the digital art industry. NFTs created by certain celebrities also sometimes make their way into this category of NFT. Another factor that drives the rarity of an NFT is the effect it shall provide, for example in the case of video games. Rare game items that are also NFTs make into this category. 

People usually find themselves attracted to these NFTs because of the intrinsic value it holds. The owner of the NFT holds the blockchain proof of ownership. This gives those NFTs a sense of distinction and determines their premium value. Examples of NFTs that are priced high because of their rarity are CryptoKitties and Everyday’s-The First 5000 Days by Beeple. 

NFTnomics

“We invest in NFT, not in games or tokens.” So for NFTs to have high growth potential, they themselves must attract value. This is a difficult point in NFT investment that is often overlooked.

Team

Team is pivotal to the success of an NFT project. You should find out information about the project team and ask a few questions about issues such as:

• Background: Have they worked in big companies?
• Experience: Have they ever run a project, or a company?
• Crypto-native: Do they have a lot of experience in the crypto market or the NFT sector?
• Communication and clarity: Do they receive feedback from the community? Do they clearly share their vision and future plans?
• Attract attention: Are they on the right roadmap? Are you collaborating with the right audience? What achievements have you achieved?

Community

Last but not least, community is almost everything with an NFT project. An innovative NFT project without a community is very difficult to succeed. A few factors you can refer to:

• What communities does the project have?
• Is that community active or not?
• Is the community really interested in the project or just chat and compliment?
• A lot of projects use the airdrop method to get followers, or even buy bots to increase followers. Projects that often use airdrops to attract followers are also a minus point.

You can use this tool to check if the followers are bots or not. In addition, you can pay attention to the ratio of likes / retweets compared to the number of followers to see if the community is really interested in the project.

The best NFT marketplaces

OpenSea – Ethereum

OpenSea is undoubtedly the leading marketplace for Ethereum and also the market leader ever. Currently OpenSea has supported NFTs on 4 blockchains, the largest of which is Ethereum, in addition to Polygon, Klaytn, and most recently Solana.

OpenSea supports a simple process that makes it easy for artists and creators to create their own NFTs. There are also many NFTs of different genres from music, sports to collections,…

Binance NFT Marketplace

One of the most used Marketplaces today is the Binance Marketplace.

BNB Chain is a thriving ecosystem for Gaming, so you can trade a lot of NFT collections of gaming projects on this platform. If you want to access a small amount of capital, you can also try your luck with Mystery Box, open the Box to receive NFT with different rarity.

Magic Eden – Solana

Magic Eden is a new NFT platform made for the Solana Network that facilitates the buying, selling, and minting of NFTs. 

There has never been a shortage of creatives around the world. The only problem that remains is finding innovative platforms that can showcase their creations. The emergence of NFTs has brought a new era of opportunities for creatives, but the exorbitant cost and technical know-how required for this venture have proven to be an immense hurdle for most people. 

Paras – Near Protocol

Paras is an NFT marketplace that focuses on digital collectibles. Paras started with digital art cards that were inspired by real-world trading cards and has expanded its digital collectible marketplace to other kinds of assets.

Verdict

NFTs are a nascent ecosystem undergoing continual evolution. Various factors influencing the value of NFTs are rapidly evolving and to augment accuracy, you need to take them all into account. 

While exploring an NFT value estimator, you just need to be mindful that all things that shine aren’t diamonds. So be patient and take into account a full array of factors while arriving at a decision. At a time when all sorts of NFT marketplaces are coming up, from all-inclusive platforms like OpenSea to niches such as Real Nifty, doing your due diligence and making an informed decision becomes especially important.

If you have any questions, comments, suggestions, or ideas about the project, please email ventures@coincu.com.

DISCLAIMER: The Information on this website is provided as general market commentary, and does not constitute investment advice. We encourage you to do your own research before investing.

Issac

Coincu Ventures