NFTs are like special pieces of digital artwork. It can be difficult to determine their worth because there are no set rules to help decide. NFT investors can determine how valuable an NFT could be in future looking at how rare it is and how much other people want it. Sometimes the last buyer’s price can be used to help estimate it, but it is still difficult to predict what others might want to pay in future.
Can sellers know what the real worth of their NFTs is? The answer is no. For sellers, as well, knowing the actual worth of the NFT they hold is difficult.
Then what drives the price of an NFT? Don’t stress. We are going to learn evaluating the correct valuation of any NFT in this post, but before that, let’s check why is it important, in the first place.
Why is it important to evaluate the true value of any NFT before purchasing it?
It is important to assess the real value of an NFT before purchasing it, as this allows you to make an informed decision about whether or not the asset is worth buying. Additionally, it can help you to understand the potential value of the asset in the future. NFTs are illiquid, so it is important to evaluate the asset thoroughly before investing in it.
Buying an NFT at a higher price than its real value can lead to substantial losses in the future. If you are looking to invest in NFTs, it is important to do your research to understand the market and the potential value of the asset. In this article, we have discussed how you can evaluate the true value of any NFT, even if you are not an expert in the field.
By following the tips in this article, you can make an informed decision about whether or not to purchase an NFT. So, keep reading.
Factors Determining the Actual Price of an NFT
Rarity
Rarity is one of the key factors that determines the value of an NFT. The rarer the NFT, the higher its value is likely to be. A good way to make an NFT valuable is to make it unique or limit it in some way. For example, you could create an NFT that can only be bought once or limit it to a certain number of copies or an NFT collection with unique traits such as color, design, body type, special weapon, etc.
Alternatively, you could create a one-of-a-kind NFT that cannot be replicated. The more rare an NFT is, the more valuable it will be.
Utility
Utility is another important factor that affects an NFT’s value. If an NFT is useful or has a purpose, it will be more valuable than one without any practical purpose. A good example of this is a rare virtual card in a game that gives a player special abilities or bonuses. These cards can be very valuable because they give the player an advantage in the game.
Another example of a good NFT utility that may play a major role in pricing the NFT could be a ticket to a virtual event or a digital art piece that can be used in a game.
Artistic Value
The artistic value of an NFT is determined by the artist’s skill and talent, and can significantly increase its value. Sometimes, the value of the NFT is also derived from the creator’s reputation and how well-known they are. Buyers tend to be more interested in NFTs created by famous or well-known artists, as the NFT or NFT collection is associated with them. This makes the art seem more valuable, and thus worth more.
For example, one of the most famous and valuable NFTs is the CryptoKitty, created by Canadian artist and game designer Axiom Zen. The CryptoKitty was the first ever digital collectible and the first ever blockchain-based game, and was so popular that it sold for over $100,000.
Popularity
The higher the trading volume, the more popular the NFT is. Another good way to determine the popularity of an NFT is by looking at the number of people who are following the project on Twitter or engaging with the community in Discord; however, one should be careful, as these numbers can be easily manipulated with bots.
A good NFT project should have a healthy mix of both popularity and fundamentals; for example, Cryptopunks. They have a high trading volume and are extremely popular because they are one of the first NFTs, with over 263.4K followers on Twitter and more than 72,000 members on Discord.
A poor NFT project might have a high trading volume for some time, but no real fundamentals or use case; for example, Fomo3D. Such projects are not sustainable in the long run and are not likely to increase in value.
Blockchain Technology
The underlying blockchain technology that powers an NFT can make it more valuable. This is because the blockchain ensures that the NFT is tamper-proof, authentic, and traceable.
For example, suppose you own an NFT that represents a rare painting. The blockchain technology can ensure that the painting is authentic and has not been tampered with. This could add value to the NFT.
Ownership History
Sometimes, ownership history of an NFT can help you decide the real value of an NFT. If an NFT has a long and verified ownership history, it is likely to be more valuable than an NFT with a short and unverified ownership history. If an NFT is associated with a well-known and respected brand or a celebrity, it is also likely to be more valuable than an NFT without such a connection.
For example, several celebrities like Logan Paul and Steve Aoki jumped into getting themselves a BAYC NFT, which added to the popularity of the NFT Collection, and hence the value associated with it.
To summarise
-The rarity, utility, artistic value, popularity, and blockchain technology of an NFT all play a role in determining its value.
-The more rare and useful an NFT is, the more valuable it is likely to be.
-An NFT’s value can also be affected by its ownership history and the reputation of the artist or brand associated with it.
I hope you will now be able to evaluate the true value of any NFT. Let us know your thoughts in the comment section.
