9 min read · Jul 21, 2023
--
I tweet regularly about NFTs. Follow me there to keep up with what’s hot!
If crypto investing is the wild west of finance, then NFT investing is the wild west of crypto. It’s harder to keep up with, easier to get scammed by, more complicated, and, potentially, more lucrative. Here are a few tips to help you survive and perhaps even thrive in the NFT age.
NFTs function like any other cryptocurrency with one difference: each has its own unique serial number. Most cryptocurrencies are interchangeable (your Bitcoin = your friend’s Bitcoin) but NFT #472 will always be different than NFT #473, which means that each one can be assigned to a unique image, a unique song, a unique club membership, and so on (the sky is the limit!)
Most people equate buying an NFT to buying an image on the web. That’s a simplification; NFTs give you the right to sell that NFT, sure, but they can also confer other benefits: the right to exclusive content/drops, the right to join private groups, the right to intellectual property, the right to play that character in a video game, and so on.
You buy NFTs using a wallet like MetaMask on exchanges like OpenSea or Blur. If you’ve used Uniswap before, you’ll be comfortable with OpenSea.
In general, we recommend that crypto should be roughly 5–10% of your portfolio. We’ll use that same 5–10% rule of thumb for how much of your crypto portfolio to put into NFTs, if you’re inclined to invest. If you own $25,000 worth of crypto, put $2.5K — $5K into an NFT. If you own $100,000 worth of crypto, put $5K — $10K into an NFT, and so on. Just note that blue-chip NFT investing is expensive, so if your crypto portfolio is $2,000, for example, your options are extremely limited with $200. You basically have to become a scalper or bet on future blue chips (more on that below).
If you have zero interest in NFTs but still want to profit from them, you can just buy and hold Ethereum. Most NFTs run on Ethereum and NFT traders burn a lot of it. If that’s too broad, you can also buy a few more specific NFT cryptos, like $BLUR (which is a popular NFT exchange) or $APE (which is the Bored Ape’s crypto) or $SOL (which is an Ethereum competitor).
Over the long-run it’s actually quite hard for an NFT just to beat Ethereum. So most would be better off just holding $ETHER.
In the NFT game, some people are scalpers and others are long-term investors. Scalping NFTs is like scalping tickets to a sporting event; you get in at a project’s launch, mint as many as you can (typically a few hundred $ each), and hope to resell later for a profit. Sometimes the NFTs you mint take off, but other times they don’t. Instead of minting, you could also scan auction listings on exchanges for NFTs you think are undervalued and buy them up (“snipe them”) for resale.
Scalping can be lucrative, but it’s a game that takes enormous time, discipline, and practice to win consistently with (luck doesn’t hurt either). One wrong move and you could lose a lot of money quickly. Worse, the NFT world is rigged to draw people into FOMO (fear of missing out) as well, so be prepared to face emotions you may not have grappled with before. If you struggle with the emotional side of trading, don’t become a scalper!
Scalping is best if you have a LOT of free time and less money. An example of a successful scalper would be someone who watches a collection’s listings all day for a good deal to fall. Then they’d buy it quickly, list it higher, bank a modest profit, and repeat day in and day out. Scalping isn’t too different from going to garage sales, buying things cheap, and listing them on eBay.
The other approach to NFTs is to buy and hold quality projects for the long-run. That’s the approach that will win most consistently and the one we recommend. There are two types of quality projects: blue-chips (though they’re really expensive) and value picks (aka future blue-chips).
In the same way that the blue-chips in crypto are Bitcoin and Ethereum, there are blue-chips in NFTs. The only problem is they’re incredibly expensive, so you need a large bankroll.
There are two types of blue-chips: PFP collections (“profile picture”) which means they’re designed to be used as your avatar on social media, and crypto art, which are more traditional works of art but often built with a computer algorithm.
Just remember, NFTs aren’t that old, so we’ve seen many blue-chips fall in the past. Here are some consensus current blue-chips.
- CryptoPunks: The iconic, original collection of 10,000 PFPs. Owning one of these is like owning a rare Rolex watch. They have historical value and inspired almost every other collection. Anyone who has a CryptoPunk as their Twitter profile will command attention. The only risk of a CryptoPunk is that the parent company of Bored Apes acquired the collection. So far they’ve treated it well and with respect but you never know.
- Bored Ape Yacht Club: This was the first project that took the CryptoPunk model a step further with a roadmap, membership community, and other perks. They’ve become a cultural phenomenon with many celebrities buying them and epic events. Yuga, their parent company, also acquired CryptoPunks. The top-tier membership token for Bored Apes are either a Bored Ape or a Mutant Ape. The big risk with them is they’re basically a startup, making video games and events, and if they botch executions it could hurt the value of the collection.
- XCOPY: XCOPY is the Basquiat of NFTs. His “glitch”-style aesthetic has inspired so many other NFT artists and he was there since the beginning. I love collecting XCOPYs because there’s no gimmick or business model, just pure art. His Max Pain and Frens collection has a low entry point because it’s an edition work but he has more exclusive collections too, the most notable of which is his Grifters, which are $15K. If you want to buy art without the bullsh*t, just buy a few XCOPY pieces, lock them away in a vault, and call it a day.
- Art Blocks: Art Blocks is a platform that features generative digital art from well-known artists. Basically art drawn by an algorithm. The consensus entry-level favorite to Art Blocks is the Chromie Squiggle. The two most prestigious are Fidenza and Ringers (both very expensive).
- Some Others: There are a lot of historic collections that aren’t quite blue chips but have the historic provenance to always be around. Like Curio Cards which were one of the first examples of art on Ethereum or Rare Pepe cards or Moon Cats rescue. There are also a lot of blue-chip traditional artists who are active on NFTs, like Damien Hirst with his Currency collection and Murakami with his Flowers. Their works should do well long-term.
Startup-style investing:
If you don’t want to invest big in expensive blue chips, another strategy is to act like a venture capitalist and invest in smaller projects or upcoming artists and hope their work takes off.
Before we begin, note that 2,000+ NFT collections launch every month and most of them are scams (“rugpulls”). The same team will make dozens of NFT projects, list them all anonymously, bank the profits, and keep moving on. There’s no long-term vision or good intentions.
On the art side, lots of artists get hype and then get disinterested and leave or the market stops valuing their work.
This approach can pay off big and it’s where the 100x+ can come from (I’ve seen a few) but most of the time your investment will slowly decrease or go to zero.
Here’s a project I’m big in:
Untamed Elephants
I took over this project some time ago and am actively building it, and here’s why.
Untamed Elephants checks all the boxes. It has historical value as the first major charity-driven NFT community (goal is to save the elephants). It has cool art, real partnerships like with Save The Elephants and Ivory Ella, a non-anonymous team, donates 50% of royalties to elephant charity, and best of all, it’s super affordable.
Untamed Elephants also runs ConservationCards.org which brings fine art to conservation causes with some of the top up-and-coming web3 artists.
If you hold an Untamed Elephant I’m also happy to help you with any questions about NFT investing since you’re part of our family.
To learn more about Untamed Elephants, visit the website or go to OpenSea and buy directly there.
What to Look For
There are too many other options to list and you can follow me on Twitter to get my thoughts on them (@adamagb) but a few things to look for in hidden gems:
(1) Don’t trust anonymous teams. They’re anonymous for a reason.
(2) Avoid things that have gone up too fast recently as they usually retrace.
(3) Love the art because loving the art will carry you through the tough times. And…
(4) Avoid projects that talk too much about their price.
(5) Avoid projects that advertise on Instagram: almost all are scams
(6) Avoid derivatives. For example, when Bored Ape Yacht Club became a hit, there were 1,000 copy and paste derivative projects like “Lady Ape Country Club” “Baby Ape Nursery Club” — you can make money trying to flip them but all of them go to 0 long-term.
(7) Minting new projects is super high risk. Buying older projects with sustained volume is a better bet.
(8) Don’t get tricked by lots of Twitter/Discord activity as most of the time it’s just bots.
(9) Follow experts on Twitter. Here are a few I like:
Because every NFT is unique, prices can range dramatically (the top CryptoPunk is worth millions of dollars above the bottom one, for example).
If you’re beginning, always buy the cheapest one you can. They’re the easiest to sell and the easiest to profit from with rising values. If there’s one you like a LOT more for just a little extra (say 10%), fine, go with that. But know you’re taking on extra risk.
Seriously, I would have made 2–3X in NFTs had I followed this rule. If you’re more advanced, you can hunt for deals. But it requires an eye for aesthetic appeal and rare traits that are in-demand. The more time you spend looking at a collection and what’s for sale at the bottom the more you can ascertain deals.
I’ll add that I’ve found the best deals for NFTs can come from the project’s Discord chat. People will privately sell their NFTs for a discount there to save on fees and existing members can even help you pick one. Just be very very very careful since this is a common attack vector for scammers. They’ll use a fake trading site and trade you a fake NFT for your real money.
The last time I was scammed in crypto was a decade ago, but it took only a week for me to get scammed in the NFT world. Scammers create fake websites, fake NFT collections, and even approach you with viruses or fake sob stories. Three quick rules of thumb:
- Store your NFTs on a hardware wallet. The most widely used is the Ledger Nano. Only buy it on their official website.
- Be paranoid of anyone who approaches you directly on Discord or Twitter or email. Odds are they’re a scammer.
- Don’t buy a deal if it’s too good to be true. This is where I failed. I saw an amazing deal on an NFT, but it was a clever counterfeit that launched moments before I saw it.
- Double check everything!!! Every community has honest people who can double check things for you. If you’re new, this can be a lifesaver.
If you have any questions, just jump into the Untamed Elephants Discord and ask one of our friendly members (or myself).
