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5 Things to Consider Before Buying NFTs Wondering how to find a good NFT project to invest in? Look for these five important factors before making a purchase.

By Mervik Haums Edited by Kara McIntyre

Opinions expressed by Entrepreneur contributors are their own.

The non-fungible token sector of the cryptocurrency market was one of the hottest trends in the bull market of 2021 and continues to attract an increasing amount of attention in 2022, despite the bearish environment in the first half of the year.

NFT marketplaces like OpenSea continue to see millions of dollars worth of volumes transacted each day highlighting the fact that there is no shortage of demand for NFTs, even in bear market conditions.

Projects like CryptoPunks and BAYC have risen in prominence to become the blue chips of the NFT ecosystem, but with thousands of other collections available to purchase, it can be a challenge for even the most experienced gem hunter to spot the long term winners.

Here are five things to consider when researching an NFT project:

1. Take a look at the people behind the project

Many consider the people behind a project to be the most important thing to consider when purchasing an NFT because it's often the case that past performance is an indicator of future performance.

Looking at things like what projects they have worked on in the past, the level of success each of those projects had, and experience in the NFT industry can provide valuable insight into the long-term viability of the project.

A scroll through team members' Twitter pages and LinkedIn profiles can also provide more insight into the level of dedication to the project as well as a history of activity in the crypto space.

The ability to interact with team members on apps like Discord is even better because it gives you the opportunity to see how passionate they are about the project and how helpful they are with members of the community. It's really about getting a better sense of the character of team members to determine if they are trustworthy enough for you to invest your hard-earned money in the project.

Related: Here's a Beginner's Guide to Crypto, NFTs, and the Metaverse

2. Analyze the project timeline

Having a decent timeline with some of the major developments planned for the future is a positive sign because it shows that there is at least a larger plan for the project.

Many projects today have very generalized "copy and paste" roadmaps that don't offer much depth or substance, so if it looks like at least some effort has been put into carving out a unique long-term vision, that is better than most.

Still, it's best to view roadmaps with some speculation as it is a tricky process with many unforeseen pitfalls that can make even the best of intentions go sideways.

Related: 5 Reasons to Get Started With DeFi

3. Check the quality of the NFT art

It's only a small fraction of the available NFT collections that will ever reach a notable valuation and see any significant level of price appreciation for their owners. Keeping that in mind, it's important for you to actually like/love the piece that you are buying because you could very well be its forever owner.

Perception is perhaps one of the most subjective things in the human experience, so assuming a project will do well because you find it aesthetically pleasing is a setup for a letdown. The characteristic price volatility the cryptocurrency market is known for is even more intense in the NFT arena, so being content with the possibility of a long-term hold is crucial.

4. Evaluate the community behind the NFT

The strength of a community is one of the most important factors in the long-term success and viability of any project in the crypto ecosystem but especially with NFTs. Due to the scarcity of each project when compared to the average cryptocurrency, the small group of owners must work together to ensure that their project stands out and remains relevant in an increasingly crowded field.

BAYC has risen from an unknown collection to a multi-billion dollar ecosystem thanks to a dedicated community. But don't come to the conclusion that only huge communities can build good projects. Even a small passionate community can make a big difference. There are plenty of examples for this, take a look at the relatively new project called StarCards on Astar Network, the community has less than 1000 members but the project's already turning heads in the DOT ecosystem.

Getting into NFT discords is a great way to find out why others like a project and also to get deep-dive knowledge without all the leg work. Just remember, when it comes to community, it's really about quality more than quantity because dedicated community members will stick with you through thick and thin. If the Discord group isn't very active or is mainly filled with talk about price floors, take that as a sign it's time to move on to the next project under consideration.

Related: 7 Things to Know Before Investing in Crypto

5. Analyze the utility of the NFT

As crypto evolves and NFTs become more than simple JPEGs, a newer factor that needs to be considered is the utility of an NFT.

Does it grant you any special privileges or access to something exclusive? Does it offer a way for you to make money through future projects or other income opportunities?

NFT tech is way beyond mere JPEGs, and people are realizing it. An accurate example is the StarCards project mentioned earlier: The team is building a DEX called StarSwap, the first one with NFT governance, giving the NFT technology a fantastic use case.

Now that the crypto market has entered a bear market and ushered in a new market cycle, the next generation of NFTs are going to have to up the ante to stand out from their predecessors and advance the space forward.

At this point in the game, if an NFT project you are evaluating offers little more than a cool picture that has potential resale value and little else, it's probably best to move along until you find a project that helps bring additional value to your portfolio on top of being a piece of art that you absolutely must-have.

Mervik Haums

Founder of Startup Fortune

Mervik Haums is an entrepreneur and branding specialist. He founded Startup Fortune in 2018, a global startup platform that helps startups and entrepreneurs from across the world learn, share, connect and collaborate.

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