NFTs are extremely popular, and often valuable assets to hold. NFT marketplaces allow asset owners to sell their NFTs for the highest price. Purchasing the hot, on-demand NFTs at the lowest price is essentially the goal of many buyers. Marketplaces provide a platform for these buyers and sellers to execute transactions safely.
However, for investors both retail and institutional, estimating the true value of NFTs is extremely difficult.
Fortunately, there are some fundamental factors that can help establish the value of NFTs.
In this blog, we take a closer look at the characteristics of NFTs that investors can use to understand their true value.
Rarity and Scarcity
There is value in all rarity. Limited edition collectibles that are unique artwork by renowned artists qualify for this category. Plus, NFTs endorsed or created by a celebrity or a sports personality.
Hype Factor & Speculations
For an NFT, hype factor and speculation can cause a temporary or even long price appreciation. A key determinant of NFT value is the hype level of a project using social media metrics, including Twitter, Discord, and other social media platform, and their attributes like follower count, growth, and high-profile followers and endorsements.
NFTs with higher liquidity typically carry higher values, as it is simpler to swap them for free cash or other blue chip assets like ETH. Trading these NFTs on marketplaces is easier since their demand is high too.
The usefulness of an NFT and the benefits it gives apart from just being an idle asset adds huge value to it. From providing stable income to access to exclusive discord groups, channels, and clubs, utility adds zing to owning an NFT. This creates demand, increases liquidity, and increases the value of NFT.
Ownership History & Past Trades
Reselling NFTs that were previously owned or endorsed by a celebrity or an influencer does affect NFTs’ intrinsic value. There is typically high demand for such NFTs. Since NFTs stay on the blockchain, it is easy to verify their previous owners and the credibility of the ownership. Sales history, bids, and trade volume are important parameters to determine NFTs' true value.
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