In my short time in NFTs I've made plenty of mistakes and learned some important lessons. With that in mind I thought I would make a short list of a few bits of knowledge I've learned along the way to try and help anyone that's new to buying NFTs. It can be a confusing place and despite the fantastic community there are some people out there want to take advantage rather than help you.
So here are my top tips for NFT beginners!
Never Buy The Hype
Hype is a funny thing, on one hand it can propel a project to the moon but on the other hand it can give you a false sense of popularity which may end with you holding the bag.
We've all been guilty of it at some point, you see people talking about a new project, someone makes money then you FOMO in without any knowledge of what it actually is, you've just seen people talking about it.
In an age of fake followers and Discord bots it has never been easier to create fake buzz around a drop, you'll usually notice that after launch a lot of the activity in Discord dies off pretty quickly, this is a good sign of fake followers. If you see a new project with loads of hype make sure you do your research before deciding whether to invest or not. A project can't be built on hype alone and a positive community can disappear quickly if promised deadlines are not met.
Read about the dangers of hype HERE.
Watch Out For Gas
You've all heard of gas wars and for good reason, if someone showed you the amount of money you've spent on gas you'd probably feel sick.
As with nearly everything in life priority is given to the people paying the most, Ethereum is no different. So when projects drop and thousands of people are clogging up the queue the demand to have your transaction processed first requires you to spend more money to get ahead of others. This is where you need to weigh up the overall cost and if your purchase is worth it, gas fees can make an absolute bargain turn into a rip off in seconds.
I have seen some truly ridiculous gas fees, I think $18,000 was the highest I've seen on my MetaMask but I'm sure people have actually paid more than that, look at The Sevens drop for example. Watch out for failed transactions too, if you are taking part in a mint and you send your transaction but it doesn't process before sell out then you will lose your gas fee, I still see people that don't realise this but it's important. My advice would be always choose "High" fees on MetaMask for minting if you can afford to, in my experience it rarely works out that much more expensive and it gives you a much better chance of securing your NFT.
I use this site to check gas fees, connect your wallet and it's easy to understand - https://strangereggz.art/#/mint
Triple check DMs and URLs
If you have your DMs open, especially on Discord, you are likely to receive HUNDREDS of messages from random people. A majority of the messages will be from people inviting you into other servers but hidden amongst them will be those evil scammers! Messages are usually designed to look they are coming from an official source, making you believe a mint has gone live or there is a secret drop but in reality they take you to a very convincing replica website that will trick you into connecting your wallet and stealing your ETH, which reminds me, always check the URL is correct. Read about how I got scammed HERE.
Don't Jump Into Mints
You've seen a project coming up, you like it, it's going to be big, as soon as minting goes live you buy then you sit back and watch the minting numbers....they barely move, what now?
Well the likely scenario is that the underwhelming minting numbers start to reflect on the floor price, no one is buying so naturally sellers have to lower their prices to offload and believe me, if very few people are buying the floor price can drop quickly. I usually wait to see how the numbers are moving, if they are climbing quickly then you know the demand is there and you give yourself a better chance of not losing your money.
This doesn't mean that a slow mint automatically leads to a dead project, a recent project I minted called Punkscape had a slow mint at 0.03 ETH, the numbers barely moved for a few days, the floor price dropped and I questioned my optimism. Then out of nowhere the mint was sold out and the price has recovered to about 0.14 ETH, but I consider this an exception to the rule.
My experience of jumping into a mint.
Research, Research, And Research A Bit More
This is incredibly time consuming but will improve your decision making. I must have sat through hundreds of project launches, joining servers weeks and months in advance, getting myself on the whitelist only for minting day to arrive and very few people are buying so I leave the server and forget about it, it happens more frequently than you'd expect.
Sometimes I watch projects I have no intention of buying just so I can see how the team behaves leading up to launch, what launch day looks like and ultimately what happens once minting goes live. It pays to do this because you can learn a lot about spotting "hype" projects or projects that have a dedicated and attentive team ready to work hard for the future.
Spend time browsing through Twitter, look for what projects are being talked about and who is talking about them, is it shill accounts or reputable names. I also spend a lot of time watching OpenSea activity and wallet activity of the big names in the NFT world, a lot of the time it doesn't benefit you financially but you will gain knowledge and occasionally you will find some gems.
Floors Are Usually Better Than Mid Level
I have bought mid level NFTs quite a few times, paying slightly more for some rarer traits but now I've been doing this a few months I've changed tactics. If you are in it for the profits like so many people are then you can't go wrong with buying the floor (floor simply means "floor price", the cheapest NFTs available in that collection). The reason for this is that they are the least risk as they are the lowest price and if more people enter the market the majority of sales are at the lower end so your new NFT is likely to see an increase in price quicker. Floor price is the key indicator of overall success, positive movement in this shows demand is higher than supply.
What Are They Offering
The NFTs I buy fall into two categories, art and collectibles. Art generally speaks for itself, you are buying the piece and there's not much more to it whereas collectibles promise plenty of utility. The key here is to check what is being offered for holders and what timescale are they promising,
This isn't a blanket rule but I tend to stay away from collectibles that have a roadmap offering giveaways, charity donations, "future airdrops" or a merch store. The reason for this is that anyone can offer a giveaway or donation, this isn't unique and you could certainly find hundreds other projects doing the same, so why would you invest your money in something hundreds of others are offering. I look for something different in utility, such as Flowtys, a collection that has recently opened an online public domain cinema for holders.
Timescale is worth considering too, do they have dates and are they realistic, I've seen a couple of projects go from creation to promising full games within 2 months, although this technically is possible it is highly unlikely this will ever be delivered on time and with missed deadlines comes negativity in the community and that disruption can collapse even the most promising of projects.
Check The Devs
Have you ever been scammed and wished you knew who did it? NFTs are no different, if you assume every project is a potential scam then do your research and find out who you investing in. When you first find a project you're interested in and you check out their website you may notice that when you click on "Team" you are greeted by random images and nicknames, things like "BrainGuy - Head Dev".
Would you invest your hard earned money in "BrainGuy", what if the project went silent do you feel like you'd be able to contact BrainGuy easily? This isn't to say all projects with websites like this are scams but if you see a Team section with pictures of real people and links to real Twitter accounts you can be more confident that these people are going to work hard and try to deliver what they promise.
Never Spend More Than You Can Afford To Lose
This has been said thousands of times but it is still probably the most important piece of advice you can receive in this game. This is a fast developing industry and there are plenty of projects and collections that have gone to zero already, nothing is a guarantee in this world and even the big players can lose value!
So don't get carried away, consider the scenario of everything going to zero, don't be that sucker that people read about that's lost their home, we don't need that kind of news making us all look bad!
Finally, there is plenty of opportunity in this developing space and without doubt people are making life changing amounts of money, early retirement is the goal for everyone. Just be careful of the route you take to get there.
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