Trading NFT

NFT Trading Risks

To reduce the risks associated with gambling & speculative behavior, it is necessary to establish a strategy before proceeding with any NFT purchase.

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Among the numerous NFT projects released every day, many use advanced marketing techniques to encourage you to purchase. It is important to promote an NFT project for it to find its audience. But not everyone is an experienced trader or seasoned collector. Some newcomers may therefore be influenced more easily and therefore invest in an NFT before having properly checked out the fundamentals 

As each NFT is a unique asset, each collection has very limited liquidity compared to the cryptocurrencies available on the exchanges. 

Strategize to Minimize Investment Risks  

If a seller cannot find a buyer for an NFT, he will be forced to keep the asset. If the purchase was not intended to be resold later, there are no worries. But if the purchase was considered an investment, failing to resell it becomes problematic.

This disappointment or the feeling of having been scammed, mixed with the Fear of Missing Out (FOMO) can lead to irrational NFT purchasing decisions. For example, increasing the financial risks of loss by seeking a quick profit when buying a random NFT without any due diligence before. 

This speculative behavior can quickly transform into gambling addiction. The NFT market can then be perceived as a large casino where only luck governs the price of assets. But unlike a large casino, the NFT market abides by the rules of supply and demand.

To reduce the risks associated with gambling, it is, therefore, necessary to establish a strategy before proceeding with any NFT purchase. 

Here are some tips to reduce the risk of falling into the trap of “too good to be true” returns on investment:

  • Set a budget. “Don’t spend more than you’re willing to lose.” 
  • Do some research (Do Your Own Research – DYOR) on the project you want to invest in and make sure to join their community, usually Discord and Twitter.
  • Set realistic profit goals. It is tempting to think that a single purchase can be a “life changer” thanks to a valuation that is x100. But these collections are extremely rare and it is perfectly normal to take profits after a while.
  • Choose your NFT segment. Depending on the segment, your strategy will change. You don’t invest in the same way in a video game as you invest in a piece of art. 
  • Keep your cool and do not trade emotionally. 
  • Keep in mind that trading is not an exact science and be wary of influencers who communicate regularly after executing their buy or sell order.

Today, the cryptocurrency market is just beginning to be regulated and legal discussions around NFTs have barely begun in the world. In this context, as in the early days of the Internet, malicious actors will implement elaborate strategies to manipulate the market or certain statistics on social networks to make believe in legitimate activity. Make sure to read our 7 questions to ask yourself before purchasing an NFT to make sure that your choice is the right one and that you remain the sole master of your decisions!

Collecting, From Pleasure to Addiction?

Collecting is a passion for many people. In theory, it’s possible to create a collection of just about anything: stamps, beans, perfumes, clothes, postcards, garden dwarfs… you get my point! 

As long as it remains a pleasure, as long as it makes the collector happy, collecting is not a problem. As soon as it becomes an obsession, to the point of becoming harmful to the collector or his entourage, a passion becomes an addiction. 

Digital collecting is now becoming categorized as ‘a new addiction’ in the same way as compulsive shopping or cyberaddiction has become.

This work is licensed under a Creative Commons Attribution 4.0 International License.

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