6 months ago, I started looking at NFT and found ways to get free NFTs, which was fun. Then I gradually started trading NFTs, and got burnt. Now I have successfully stepped away from NFT space while passively keeping watch over my NFT collection.
Here are the reasons why NFT trading is not worth investing professionally.
Driven By Hype
All NFT collections are driven by interest. It doesn’t matter how good the creator’s track records are, or if there are none. When there is hype, there will be trading volume. Where there is no interest, no one will buy, no matter how good the art is or how solid the team is. End of the day, floor price is determined by the weakest holders, no matter how good the project appears. If someone is selling Bored Apes at 0.1ETH, then that is the floor price. If 100 people are selling at that price, you will ask yourself why are people dumping.
More Short-Term Speculators Than Long-Term Investors
There are dozens of “alpha” communities that will teach you how to do short-term wins by minting, pumping the price, and selling at the peak (dumping). It has become a “legit” way of making money in NFT. Even when someone is trying to sell you the benefits of holding NFTs for long-term, the only purpose is to gain your entry liquidity into the NFT so that it can be his exit strategy.
Volatility Is Part Of The Game
Some people have called out to ask for some form regulation, control, or verification to ensure protection to “investors”. Ironically, it is the volatility factor that draws players into the NFT space, because high risks result in high returns.
Don’t Blame The System, Blame The Players
There is nothing wrong with the blockchain technology. It’s just a platform to offer traders a way to trade tokens that are verifiable and authenticated. How you use it is up to the users. As of now, a big bulk of new collections are trying to break out of the “speculative” mindset and to offer genuine projects with interesting roadmaps. Sadly, these projects often get ruined by short-term players, and they make the most noise in community channels which generates fud and bad taste.
No Protection Against Scams
The level of scams on web3 is scary. For every successful project, there are numerous fake Twitter accounts and websites to trick you into approving fake transactions on your soft wallet (like MetaMask) and drain your funds. Quite literally, you can lose your hard-earned ETH in seconds, and for now, there is no regulatory body that can help you get your money back.
Price It Right, Right?
One easy way to remove the speculators in the equation is to price the NFT at a price that discourages their participation. For that, only a few projects, specifically, big well-known brands, could take this approach. Honestly, the project owners are actually counting on speculators to drive the prices up. You see, if you are going to sell your NFTs to the elite whales, they will hold it for sure, and they won’t sell it, then the creators will not be able to earn any fees from post-mint trading.
Conclusion: The Time Is Not Now
The NFT space remains a highly lucrative platform for risk takers and people with very low liquidity to make a bet into financial freedom. A massive load of time has to be spent in the space to catch the wave, to buy and sell within seconds or risk losing your investment. Like any other craft, if you work hard and work smart, you will succeed. For me, the returns I get is not worth the time I invested at the moment, but it might be something that I might get back in the future.
Meanwhile, I am still on the lookout to collect free NFTs, and it seems more brands are exploring the space to further engage the metaverse. One recent collection I got is the Sentosa NFT called “Discovery Neverending” in celebration of its Golden Jubilee. Similarly, audio brand KEF has prepared an NFT collection for whitelisting. Also, HUGO BOSS recently collaborated with Singapore NFT brand, Imaginary Ones, to launch a new Hugo X Imaginary Ones NFT collection called “Embrace Your Emotions” (EYE). And thanks to this announcement, the genesis NFT is growing healthily.
As always, this article is not a financial advice (NFA), and you should do your own research (DYOR) before making any investment.