There have been good reasons for all the attention flowing toward NFTs during the last few years: the massive amount of money spent in the space. You must have heard about the $69 million sale for Beeple, $124,205 for an Ape from Bored Ape Yacht Club, and, in a wider look, $1 billion for NFT sales till the end of August 2022. The excitement the big numbers have brought to the NFT market motivates lots of artists to develop their NFTs and try to attract NFT collectors and investors. However, the large number of NFTs introduced to the market every day has made it difficult for artists to get the attention of NFT collectors. As the result, NFT artists need to know what a collector looks for in an NFT to invest in.
In this article, we explain the important features and aspects a collector may look while deciding to invest in an NFT. NFT artists need to learn about various points that may help them attract the attention of NFT collectors to their art.
What are advantages of NFTs for artists?
Non-Fungible Tokens (NFTs) are pieces of unique and immutable digital fine art, graphic art, digital music, online games, sports memorabilia, memes, or even poems that are built around a public blockchain. The most popular blockchain for NFTs at the time is Ethereum.
Blockchain technology has brought several advantages with NFTs. Some of the most crucial are:
- Rarity and definite ownership: NFTs are entirely individual and unique. NFT owners have sole ownership of their digital assets that are free from duplication.
- Artistic self-sufficiency: Unlike the traditional art market, the NFT market omits the help of a third party to arrange for showing or selling a piece of art in a gallery.
- Security: NFT marketplaces provide incredible security to art trading. As an NFT includes an unchangeable digital signature, it is easier for artists to safely sell their art to collectors.
- Authority and transparency: Each NFT and its blockchain entries contain irrefutable and unquestionable proof of who created it and who currently owns it, the past ownership, and all transactions involving that asset.
- Easy, secure transfer: Since all of the transactions surrounding NFTs are recorded on the blockchain, there are no waiting periods or lead times for buying or selling digital assets.
- Royalties: As the royalty is baked into the smart contract of the NFT, any time the asset is sold, resold, or traded, the creator is automatically sent a portion of those proceeds without any additional effort or investigation on their part.
Considering all these, more and more artists are following their careers in the NFT world. Though, not all are successful to attract investors and receive long-term support in The NFT market. NFT artists and creators are advised to learn about the factors that attract investors in the market. Let’s review the features NFT collectors look for in NFT collections.
What makes NFTs attractive to collectors?
Since 2021, the number of NFT collections introduced to marketplaces has been huge. It is almost confusing to find NFTs that are worth the investment. As NFT collectors have various attitudes toward the NFT collections and always consider their profit from the market, artists must care about the features the investors look for in an NFT.
There are several factors that influence an NFT’s value. Collectors usually consider the following factors to evaluate if an NFT is worth the investment. The list includes:
The utility of NFTs comes from both physical and/or digital worlds application. Now that both worlds grow ever closer together, NFTs translate the value of assets from the real world to the digital world.
Besides, NFTs can perform a variety of actions, like Play-to-Earn gaming, fashion clothing for characters, or properties. Therefore, an NFT with strong utility gives it upfront value, which may accrue over time relative to the popularity of the project and the attention they gain.
The next factor is the real-world utility of NFTs. NFTs are used to exchange for real-world prizes as well as access to events, for example, tickets to a concert, live show, and physical merchandise. NFTs can also be used as collateral for loans. In this scenario, NFTs are rendered inaccessible until the borrower repays the loan, plus the agreed-upon interest. Once the debt is repaid, the NFT is returned to the borrower.
NFT staking is another added-value feature. If users stake the native NFT of a project, they get rewarded with in-game coins that can be used to redeem premium content.
Rarity, or uniqueness of NFTs, is an essential quality of NFTs. All NFTs are one-of-a-kind, and the blockchain technology verifies their ownership and authenticity, which may change if the NFT is bought, sold, gifted or traded.
Scarcity of digital assets dictates that rare, in-demand NFTs often attract more buyers and sell for higher prices due to higher supply and demand in the market. Platforms like rarity.tools can help users see how rare an NFT is. These platforms use the blockchain explorer and other sources to evaluate the rarity of an NFT, considering factors like the NFT’s popularity, trading volume and number of owners.
3. Community Size
Community is one of the important factor to define the value of an NFT. Community defines the number of potential users and buyers an NFT (or NFT collection) has on the open market. The larger size of the community increases the word-of-mouth about an NFT which, in fact, helps the project reach more potential buyers and higher trading volume. One of the largest and most active communities stands with Bored Ape project. Such a community helps introduce the project to a wider audience and let others see the utility of the NFT collection. Users can easily check a project’s community size by visiting its official social network pages, including Discords, and checking the subscriber count to see the actual size of the community.
4. Potential of NFTs
Potential refers to the space an NFT may have to grow in the market. The most influential factors in estimating the potential of an NFT are rarity and community size as well as relative supply and demand of an NFT.
NFTs that have been supported by their communities in long-term may become more valuable. Long-term support of a community suggests that the project is more likely to maintain or gain attention over time, experience demand increase and make the NFTs be rarer and valuable.
Besides, long-term support of a community implies how long an NFT collection may remain relevant on the market and attract investors. investors usually evaluate the attractiveness of an NFT watching its ability to generate long-term community attention as well as the other key factors mentioned above.
The next factor that attracts the investors is the origins of the NFT. As an investor finds herself interested in an NFT, she should first search the creator and their background. The search should consist of learning about the creator’s origin, the NFT’s backstory, the prominence of the creator on the market, and many more factors. Investors can easily check their creative pages and community followings to evaluate the potential they have for personal growth as well as the growth of their NFT collections.
The more prominent creators provide higher chances that their works will be considered valuable on the market.
6. Personal Taste
Along with these objective criteria that investors should keep in mind when deciding to purchase an NFT, their subjectivity and individual preference also play an important role. In some cases, an investor simply likes an NFT for different reasons such as outward appearance and aesthetics, personal connection, the relevance of the NFT’s application, or a relationship to the issuing project as well as the hype of the market.
There have been collectors who estimated the value of an NFT ahead and asked for a higher-than-market price for an NFT simply because they have considered all the factors already mentioned. That is why NFT drops and similar NFT events are so popular among most NFT investors.
At the end, if investors would like to keep it in the long-term, they prefer to purchase NFTs that they genuinely like and understand. Therefore, investors significantly focus more on the intrinsic value rather than the “trading price”, since there may be a decrease in the market place for any reason, like a bear market, but the value on a personal level will remain. Such point of view makes satisfaction from ownership an NFT in long-term.
The indicating factors highlighted in this article can be helpful for both NFT creators and investors. Creators should keep these factors in mind while developing their NFT art if they wish to attract more investors. The value of NFTs is determined by market supply and demand, and it requires the attention of investors.
Although NFTs can and do attract lots of artists and investors to one of the most profitable markets, they all need to carefully weigh extrinsic factors like an NFT’s utility or rarity along with other factors which value the NFT on at personal views. Therefore, the main point here is that forming a relationship between NFT creators and investors makes the digital assets highly valuable in the NFT space, as the bond leads to a wider, deeper support of the NFT collection.