How To Invest In NFT Tokens – A Beginner’s Guide

A couple of years back, you would've laughed at the thought of selling (or buying) a meme. Yes, the funny, often-relatable pictures and videos you see floating around the web.

Today, not so much, as Non-Fungible Tokens or NFTs are on the rise. India recently got its first NFT exchange for memes with The Meme Club and looks ready to welcome meme-mania. But the NFT craze isn't limited to digital items. Even physical items linked to NFTs have found value in the crypto world. 

Just consider the case of the veteran actor Amitabh Bachchan. His NFT marketing services worked magic last year, as he auctioned his NFT collection for a whopping Rs 7.18 crore! Of the assets sold, there was one Iconic Vintage Posters NFT. It featured around seven autographed posters that were handcrafted. Yes, you can buy physical assets using NFTs as well. 

So, if you, too, find yourself drawn to the world of NFT tokens and want to invest, we've got you covered.  

All about NFT investing 

As you can see, NFT in cryptocurrency has a unique place. 

But to simplify, NFT tokens are like smart contracts created on the blockchain, saying "This is original" and "X is its true owner". So, whoever owns the asset gets the ownership rights publicly documented on the blockchain. 

And when someone else buys the NFT, the ownership is transferred, and this change is publicly reflected in the same ledger. As a result, you have clear visibility of a specific NFT's past and present ownership, making the verification process more straightforward.  

Moreover, NFT prices are usually fixed by the creator or determined based on the highest bids. So apart from ownership, price is a factor to look out for when investing. 

Now that you've learnt all about NFT investing, let's understand where and how to begin your NFT investment journey.

Where to buy NFT tokens?

NFTs are sold on dedicated marketplaces called NFT exchanges. Each of which is powered by a specific blockchain network. As a result, you can trade NFT in cryptocurrency only. In most cases, the marketplaces use the Ethereum network to carry out the transactions. 

Here are some good marketplaces for NFT trade in India:

• Wazirx
• Jupiter Meta
• Rarible

How to invest in NFT tokens?

To buy NFT of your favourite collectibles, you only need to follow three steps. 

1. Create a digital wallet 

Before you can invest in NFTs, you need to buy a cryptocurrency. Why? Because you can only trade NFTs in cryptocurrency. Today, you can purchase cryptocurrency like Ether on dedicated exchanges like WazirX or Binance. 

Then, you will need to create a digital wallet compatible with the cryptocurrency you've bought. Using a simple registration process, you can set up the wallet – a digital address to store the currency on platforms like Metamask or Coindesk.

Once the wallet is functional, you must transfer the cryptocurrency to the wallet. This wallet will also double up as a storehouse for the NFTs you buy later.

2. Pick any NFT exchange marketplace 

Today, there is no dearth of marketplaces where NFTs are traded daily. However, don't buy into what NFT marketing services are advocating. 

Perform adequate research on the marketplace by comparing and contrasting the NFT ownership verification process, transaction process, cryptocurrencies accepted, and investor reviews, among other factors. These will help you make an informed choice.

Not to mention, the NFT prices usually don't vary across marketplaces. But the charges for transactions do. So remember to compare transaction charges when zeroing in on the marketplace.

But after you've chosen one, you will need to create an account to begin trading.

3. Shop for NFT tokens 

Ultimately, once your account is set up, you can shop around the marketplace and buy the NFTs you desire. You will find different sorts of NFTs listed for either a fixed price or auction. In the latter case, you will need to participate in the bidding to get the NFT. But you can use the cryptocurrency in your wallet to carry out the purchase in either case.

Once the buying or bidding process is successful, the amount will automatically get deducted from your wallet. The marketplace may charge a transaction fee for the same. 

And that's about it! The process is relatively easy to understand, as you can see. However, when trading NFTs, you should remember they are volatile assets and carry substantial risk. But how can you determine that?

What to consider before you buy NFT

You collect valuable NFTs, they increase in price, and you sell them for a profit. Or you invest in what seemed like a valuable NFT. But even after a few years, its price never increased, so nobody wanted to buy. 

Sounds familiar? Yes, NFTs work exactly how share trading works. However, since NFT prices are affected by factors like rarity, utility, and tangibility, their rise or fall is harder to predict. 

However, if you decide to join the NFT craze, you may want to steer away from what NFT marketing services are saying and consider a few things. First off, the credibility of the token. Besides NFT prices, you should make sure the token has:

• A verifiable uniqueness
• A verifiable ownership

Secondly, remember NFT prices are affected by scarcity. The rarer the item, the higher its value. So, if a particular NFT catches your eye, ensure the asset has a promising future before taking the leap. 

Before you go

NFT for beginners can be a tough road to navigate. Especially since the entity is highly volatile and is evolving every single day. 

But are NFTs legit or merely a passing fad? Well, only time will tell. So, before you jump on the bandwagon and buy an NFT, make sure you understand the ABC of the digital asset. Only then can you make the most of your investment. 

Nevertheless, if you are looking for loans to fund any investment purpose, Tata Capital has a variety of offerings. Check out here.