NFTs are one of the foundations of web3. This series will introduce NFTs through 30 short articles, allowing everyone to understand and master relevant knowledge about NFTs from scratch.
We all know that investing carries risks, and investing in NFTs means higher risks. When it comes to NFT investments, we need to be cautious and rational.
Many people are attracted to NFTs and cryptocurrencies because they see others making a lot of money. Indeed, some people have made unimaginable wealth through cryptocurrencies or NFTs. However, we must understand that the money they earn is the money lost by other investors. So, you understand that only a few people make money, while the majority suffer heavy losses in such investments.
You need to understand that this series will not provide any investment advice, but rather aims to provide knowledge about analyzing NFTs. Whether to invest, what to invest in, and how much to invest all depend on your own circumstances. Everyone's financial situation, risk tolerance, and risk preferences are different. If you decide to invest, it is recommended that you conduct a detailed investigation of the investment target and consult with a professional investment advisor.
Preparation before investing in NFTs#
When investing in NFTs, potential investors should be aware of a few things in advance.
First, we need to understand that NFTs are a very new market with a large number of NFT collections, which vary greatly in quality, resulting in significant price volatility. The price of NFTs can rise or fall rapidly over a period of time, which means investors may achieve significant investment returns or incur substantial losses in a short period of time.
The second point to note is not to allocate too much of your investments to NFTs. Risk management is important when investing in NFTs.
The last point is that investing in NFTs does not guarantee a return, and it may even result in the loss of the funds you invest. NFTs are not just an investment; they are a way for us to invest in digital assets. We believe that a certain digital asset will appreciate, so we invest. However, reality may not always meet our expectations. Therefore, it is necessary to conduct research and consult with professional digital asset investment advisors before investing.
After being adequately prepared for NFT investments, we need to understand the following six things.
Things to Know About NFT Investments#
- The crypto market and the NFT market are new markets, which means there is a lot of instability and price volatility. There is no guarantee that your investment can be sold at a profitable price.
- Unlike traditional investments, the crypto market lacks regulation and scrutiny, resulting in greater uncertainty and a higher risk for you.
- Lack of guaranteed liquidity. Due to NFTs being niche assets and influenced by various factors, what may be in high demand when you buy it could become difficult to find buyers after a period of time, making it challenging to sell your investment.
- Potential for fraud. Due to the lack of regulation and punishment for malicious actors in the NFT space, there are many fraudsters, which increases the risk of your investment. Additionally, there is a possibility of project abandonment, which would render your NFT worthless.
- NFTs cannot guarantee long-term value. As an emerging digital asset, the long-term value of NFTs can fluctuate dramatically. An NFT that may be valuable in the next few years may also become undesirable.
- Investing carries risks, so be cautious and make rational decisions. Do not invest all your investable assets in digital assets.
Investing is a lifelong learning process. If you have more ideas, feel free to communicate with me.
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