There's money to be made in this world but there's plenty of pitfalls along the way. Watch out for these honey traps and you're halfway there
In May 2021, notoriously successful NFT early adopter Pranksy made this trade
That purchase today is worth 50 million Great British pounds. Yes I feel sick too. The NFT space is full of people reminding you of success stories like this to poke you right in the fomo, which brings me to red flag number one.
1: You won't make yourself a millionaire from one trade
Even if you have a sick artist-inspired username like @damienworst (I'm actually quite proud of that I might use it please no one steal it), the market is past the "spend £100 and retire" part of the early adopter phase, and attempting to recreate this will saddle you with too much risk and probably zero money left. Cheery eh? Item 2.
2: Beware the celebrity endorsement
When an NFT project mints, there are typically 10,000 units released, with mint price around 0.08 ETH and the money raised going directly to the project owner. £1.6m in the bag for not a lot of work.
A standard condition of NFT projects is the project owner receives a 10% royalty of every transaction, for future developments and wage, but this is often significantly less than the initial windfall.
Call me a cynic, but a lazy celebrity could attach their name to a project, hoover up the lion's share of the mint revenue, then ride off into the sunset to let the project (and your investment) die because the ongoing work and rewards in no way match the initial bankroll.
3: Fuck FOMO Farmers
I'll be honest, I've just invented the term "FOMO Farmers" but I think it's funny so it stays. When you begin to explore NFT Twitter and Discord, you'll notice projects trying to monetise hype.
One important metric to measure interest in an NFT is social media engagement, namely on Twitter and Discord. Projects will FARM engagement to increase FOMO (see? it does work) and promote themselves across Twitter - in my experience this almost always results in a shit mint and a dead project and I've very rarely seen anyone win one of these whitelist giveaways so I'd avoid those too.
My suspicion is a lot of these projects withhold the vast majority of their whitelist spots for themselves or friends to profit from on the secondary market. Sounds like this whitelisting and minting can be a tricky business huh? YEP. ITEM 4.
4: Expensive Mints
There are exceptions (VeeFriends used a Dutch auction to mint and they've massively gone up in value since) but generally speaking, if a mint price is more than 0.25 ETH you're unlikely to do well as a result, and it's important to ask why the project is charging more, as if they were in it for the long run, surely they'd be happy with their 10% royalty on all future transactions?
Quite a sad example of this was Pixelmon - "oh like Pokemon but NFTs?" - I expect the name alone did them pretty well with people drawing conclusions as to what the end product would be, but they minted at 3 ETH, and though I'm not fully up to date with their development, let's just say I'd be pissed off if that's what I paid.
Summary: If it sounds too good to be true....
Perhaps listing several ways an investor can lose boatloads of money is a tactical oversight for a website selling analysis on the NFT market - and I really could and might make this a ten part series - but it's important to understand the pitfalls before we get pumped up and ready to hit the OpenSea.
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