Non-fungible tokens or NFTs have exploded in popularity over the last year. The ever-increasing craze in this sector might be overwhelming for some but a report published by a leading blockchain data platform Chainalysis throws some light on the overall trends and behavior of the traders as well as provide some strategies for newbie investors.
In the detailed report, the platform has observed that Cryptopunks continues to be the most popular NFT with over $3 billion in transaction volume sinch March 2021.
On the trading front, the report pointed out that the market is primarily retail-driven [ below $10k worth of cryptocurrency] but institutions and high net worth collectors [ above $100k ] make up the majority of transaction volume. Let’s see how these investors are faring in the market.
What does it take to be a good NFT collector?
Whitelisting is key
Data from the largest marketplace, OpenSea suggests that users who make the whitelist and later sell their newly minted nfts gain a profit of 75.7% compared to 20.8% for those without being whitelisted. For starters, the whitelist is a mechanism that explicitly allows some identified entities to access a particular privilege, service, etc.
In this case, Nft creators gather a community of dedicated followers through different promotional activities prior to releasing their projects. This core group is then added to a “whitelist”, allowing them to buy the new assets at a discounted range during the minting process.
Flipping NFTs with a previous sales history has a much higher success rate than reselling these tokens purchased during minting.
Secondly, the report noted that collectors are better off flipping these digital tokens they buy on the secondary market than those purchased through minting.
Data shows that 65.1% of these digital collectibles sold after being purchased from another user result in a profit for the collector versus 28.5% for these assets purchased during minting. Observing that flipping activity is too concentrated, it said,
“20% of user addresses on OpenSea account for 80% of secondary NFT sales, while just 5% of all addresses account for 80% of profits made on secondary sales.”
Besides that, the report stated other factors that play a part in profits are trading experience and diversifying capital across NFT collections.