NFTs are taking the world by storm, with over $25 billion in volume witnessed in 2021 alone. If you’re a newbie to NFTs, you have probably seen NFT discussions, ads, and trends on Twitter, Instagram, Reddit, and other social media platforms.
To help you navigate your way into the NFT space, we have created this comprehensive guide to help you make your first purchase.
Before we get into it, ask yourself:
NFT collectors usually purchase their NFTs for several purposes. They include:
NFT flippers looking to make a profit by buying NFTs for a lower price and flipping them for a higher price. A crucial part of flipping is buying into projects early and flipping them on the secondary market when prices are up.
Some NFT collectors buy into projects they believe would provide value over the long term. Meaning, they purchase an NFTs and store them in their wallets until such a time when the value of the NFT is high enough to cash out.
Examples of successes with this strategy are collectors who bought into the Cryptopunks NFT collection. The collection was launched in 2017 and was originally given out for free, with the only cost incurred by claimants being the transaction gas fees.
Over the years, prices rose steadily, and many bought them for cheap before they became popular. As of this writing, the cheapest Cryptopunk is around 60.95 ETH, meaning those who held long-term gained thousands in profit.
In this guide, we cover how to buy an NFT both for flipping purposes and holding for the long term.
NFTs live on the blockchain, meaning to buy one you have to initiate a transaction to transfer ownership to you. To do this, you need a crypto wallet to store the funds for buying the NFT and store the NFT once you buy it.
There are different wallets and the one you choose will depend on the blockchain storing the NFTs you want to purchase. Popular chains that support NFT transactions and their corresponding wallets include:
If you have a Coinbase account, since it’s an exchange, you can purchase Ethereum or whatever crypto that you need and use that to purchase your NFT.
The most popular wallet for buying NFTs is Metamask. It offers support for mobile through the app store and desktop support through a browser extension.
We recommend Metamask for beginners trying to buy NFTs from Ethereum or Polygon. They also offer inbuilt support to buy ETH with a credit card, debit card, Apple Pay, or wire transfers. If you already own another cryptocurrency, you can use an exchange like Coinbase to swap for Ether and transfer it to your Metamask wallet.
Before buying an NFT, having some understanding of how they are created will help you in your purchase decisions.
If you’re trying to buy an NFT from a PFP collection like Cryptopunks, Bored Ape Yacht Club, etc. the best strategy is to acquire it before it’s officially launched on a marketplace. This is done through a process known as minting.
Minting refers to introducing your NFT into the blockchain and, by default, it will be owned by you. After minting, you can list your NFT on the secondary marketplace and resell it.
The list below outlines the process from minting to marketplace listing for NFT collections:
● The founders promote the NFTs on social media, Discord, and sites like NFTDropsCalendar.
● The founders create a whitelist for early investors.
● The collection starts minting(selling), but only whitelisted investors are allowed to purchase.
● Whitelisted investors list their NFTs on a marketplace like OpenSea.
● The public sale finally happens on the collection’s website.
● Once the collection is sold out on the website, the only way to purchase would be on the secondary marketplace.
As a buyer, the best way to buy is to get onto a collection’s whitelist. Perks of whitelists often include:
● Cheaper mint price than the public sale.
● Ability to list on the marketplace early on.
● Cheaper gas prices as few people are minting (a high number of buyers trying to buy at the same time often causes congestion on the network, hence high gas fees, at least on Ethereum).
The best way to get into a whitelist is to look for projects yet to be launched. Once you find a project you’re interested in, follow their social media accounts to get information on how to get access to the whitelist.
Founders usually outline their criteria mainly on Discord and Twitter. Some of the methods used by founders to fill their whitelists include:
● Competitions, e.g., fan art.
● Random giveaways.
● Most active members on Discord and other platforms.
● Active followers of the project’s social accounts.
Once you get into a whitelist, your wallet address will be recorded and approved for minting during the pre-sale(minting for whitelisted members).
Minting typically happens on the collection’s website page, where you can connect your Metamask wallet and purchase the NFT.
If you happen to miss out on the whitelist, you can mint during the public sale. For projects that prove to be popular, you will have to be fast and have enough funds to cover gas fees to avoid missing out on your NFT.
Keep in mind you can still purchase an NFT from a collection on the secondary market before the public sale. These are usually listed by whitelisted members who minted theirs on pre-sale.
At this point, the art is usually not revealed and will feature a placeholder image as founders typically do the reveals after the public sale.
Once a project has sold out, minting is closed, and the only way to purchase is through a secondary marketplace like OpenSea.
Another way to buy an NFT is through a secondary marketplace. Marketplaces feature art and collectibles from individual artists, PFP collections, music, sports collectibles, virtual worlds, and much more.
To purchase an NFT, log in by connecting your Metamask wallet and select the NFT of your choice.
On OpenSea, there are three ways to purchase an NFT, “Buy now”, “Make an offer” and “Place a Bid”.
“Buy now” allows you to purchase based on the listed price, while “make offer” allows you to submit an offer to the owner.
NFTs featuring the “Place a Bid” option are sold through auctions allowing potential buyers to bid on the item until the auction expires. Once it expires, the highest bidder gets to purchase it.
Another type of auction offered by OpenSea is Dutch Auctions. In Dutch auctions, the price of an NFT falls until someone purchases the item.
If you’re buying from a collection on a marketplace like OpenSea, it’s a good idea to check for several factors. These are:
● Floor price
The floor price refers to the lowest price of an NFT in a collection.
So for the above collection, the cheapest NFT is 25.9 ETH.
The floor price helps you gauge how a collection is performing on the market compared to the launch. If a project minted at 0.08 ETH at launch and the floor price is 0.2, that means the project is doing great and has proved to be of value.
A lower floor price compared to mint may mean the project is tanking, but this is always not the case. It is normal for floor prices to fluctuate depending on the interests of investors and updates from the founders.
As a buyer, the activity tab shows you the volume of sales of a project over a particular period. The amount of volume is an indicator of a project’s value and the interest it receives from the NFT community.
When you click on an NFT on a marketplace, you should be able to see the traits of the NFT and their percentages. Percentages speak to the rarity of the NFT, with rare pieces commanding a higher worth compared to common pieces.
NFT marketplaces are typically identical in terms of features offered, as features like activity, traits, and floor price are common across the board.
OpenSea is the most popular marketplace as it features lots of collections and support for blockchains like Ethereum, Polygon, and Solana.
Other reputable marketplaces include:
● Nifty Gateway
● Coinbase Marketplace
● Immutable X