How does an NFT increase in value?
The mix of art, speculation, and digital collectables makes NFTs booming digital assets. In this article, we tackle the question: how does NFT increase in value, and how do investors take advantage of it?
NFT valuation: What makes a non-fungible token valuable?
If Bitcoin and other virtual cryptocurrencies have always impressed with their ability to grow in value exponentially, NFTs are experiencing even crazier growth. An NFT is secured on the blockchain, and you can buy and sell it on the auction platforms in Ethereum (ETH) most of the time.It can be a work of art, a video, sound, or anything else in a digital medium.
NFTs have become a trend and fashion effect that many users are snapping up at exorbitant prices. But what makes these NFTs so popular, and why are they so popular and valuable? How does NFT increase in value?
In fact, for several years now, the Internet has played a significant role in the daily life of Internet users. It is therefore easy and rewarding for some to obtain an NFT.
It only takes a few clicks for investors to choose and buy the digital asset of their choice. NFTs are rare, unique, and cannot be faked assets. Many of them then invest in digital assets and Web content.
The uniqueness and non-duplicability of NFTs create scarcity and cause these crypto assets to rise in value. In the artistic field, works of art thus become precious goods first for artists, then for collectors, and dealers.
If you buy an NFT work of art, it is above all to encourage an artist, then because you like the work, you intend to keep it and, alternatively, maybe resell it one day.
If you buy an object used in a video game, it is above all because you need it or you know its usefulness and, therefore, its value.
If you buy a collectible in pre-sale, keep it if it is rare but resell it quickly when you can (NBA Top Shot).
Some whales buy assets en masse in the pre-sale and on the secondary market at very low prices to raise the “floor price” later.
How does NFT increase in value – NFT value explained.
There are already many NFTs that will explode in the years to come. Knowing the basics and features of these would not be enough to determine their value.
Thus, the value of an NFT is not limited solely to an asset. It also extends to content and depends mainly on the type and quality of the asset it indicates on the blockchain.
2021 was the year in which several NFT applications were born. Because of this, thanks to some non-fungible tokens, a lot of improvements have been made in the video game industry.
This made it possible to anticipate future uses, and it must be said that anticipation is a very crucial point in the appreciation of an NFT.
In addition, resales are also likely to increase the value of non-fungible tokens. Everything depends on the involvement and attention of the users.
It means that the value of an NFT increases as users make positive returns on this or that asset.
Another point that gives value to NFTs is a rarity. We have mentioned it several times already. Indeed, it should be noted that some digital assets are more typical, particular, and distinctive than others. The particularity of the latter makes them rare and popular on the NFT market.
Thus, it is not uncommon to see that despite a multitude of different characters in the same collection, such as NFT Cryptopunk, some still have unique traits and characteristics that differentiate them from others and make them stand out from the crowd.
This rare character makes them increase in value while having a positive impact on their selling costs.
How does NFT increase in value – the main factors affect the NFT price
Like crypto, NFT is primarily a speculative product that can reach the price of millions of dollars. The price of this digital art in online NFT markets can explode in days or weeks.
Worthless works can experience an uncontrolled increase, but this is not necessarily due to chance but sometimes to real strategies. We try to see it more clearly. So, let’s dive into the factors and mechanics of NFT market value and how NFTs increase in value.
Owner or creator of the NFT, a source of value of an NFT project
Some NFTs are very expensive from their creation because they are the title deeds of a work of a recognized artist or an illustrious owner. For example, Tim Berners-Lee is the web creator, and the first code written to set up the web was sold as NFTs.
The NFT sold for $5 million because Berners-Lee’s name was associated with it. In this case, we are faced with an investment (typically the kind of product that will increase in value) and the collection aspect.
The artist who creates an NFT can alone be a source of value for his project. But in reality, it is the most illustrious owner who gives value to the NFT. This is actually expressed in two ways.
The owner is a media personality who gives visibility to his own NFT and to the collection to which he belongs or to the creator. Examples include Stephen Curry, Shaquille O’Neal, and Jimmy Fallon.
The issuer of the NFTs is a public figure who creates a collection in his likeness, like John Cena or Paris Hilton.
Besides, it all depends on the social media coverage of the person concerned.
Auctions are the starting point for NFT value
When we talk about NFT, we are talking about art. And if we talk about art, we talk about money, and we talk about auctions. So when you deposit your NFT on a dedicated platform, like OpenSea or Binance, you can sell an NFT at a fixed price.
Auctions are the starting point for value. And they can go up very quickly due to many factors. The artist behind the creation, the purpose of the NFT (a donation like the NFT from McFly and Carlito in March 2022), or the collection in which the work is inserted are starting points that can make a real difference in bidding.
How does NFT increase in value – pure speculation?
The price also drives up simple speculation without a project or artistic creation behind it. Take the example of the Bored ape yacht club (BAYC) collection.
If you are interested in NFTs, you must have already seen this monkey head decline in 10,000 different ways and whose each transaction reaches peaks.
Can we speak of art as a creation produced by a computer algorithm? Can we just talk about art? On the other hand, we can speak of a huge fashion effect that makes the NFTs from this collection snap up among collectors simply because they are snapped up among collectors.
How does NFT increase in value – Value of Ethereum
NFT is tied to the Ethereum blockchain technology and its value. Thus, they are bought, for example, on OpenSea, in ETH. Buying NFTs at 1 ETH today is worth (approximately) $2000.
ETH will take a good value in a month and go to $3000. Even by reselling your ETH at the same price, you increase the value of your ETH by $1000.
NFT, Metaverse and GameFi
An NFT is something digital that you can sell. That is. And why this digital object wouldn’t be an object in a game like an optional resource to gain life points or a new weapon for a character.
This is what is called GamiFi, i.e., video games that have a financial dimension through micro-transactions.
And these transactions can take the form of NFT that we will collect in the game and then resell to other players in exchange for digital currencies (usually ETH) or Fiat currency.
This type of token is traded on the same NFT marketplaces as the others or over-the-counter by paying with a Metamask-type digital wallet.
An NFT can also represent a plot of land in a metaverse. A metaverse is a virtual universe in which several people can connect to have social interactions of various types, all with a virtual reality headset on their heads.
The Metaverse (apart from an attempt with Second Life in the 2000s) is currently more of a project than a reality.
But there is already speculation about buying and reselling a parcel of digital space in which you can settle, trade, and advertise. Large-scale companies and those targeting younger generations have a particular interest in these NFTs from the Metaverse and gaming world.
Therefore, according to the need for use in the game, a seller will agree to sell off his NFT, or a buyer will be ready to pay a high price for it. It is difficult to speak of objectivity in the criteria because this market may also depend on the events that will occur in the game or on a change in the overall strategy.