People are buying and flipping NFTs at huge profits. Here’s how they do it

·5 min read
Michael Nagle—Bloomberg/Getty Images

The average monthly trading volumes of NFTs jumped from $64 million in the first half of 2021 to more than $750 million in the second half.

Now the NFT space is a $41 billion industry with thousands being traded on a daily basis.

NFT stands for non-fungible token, which basically means that it’s a unique digital asset that belongs to you and you alone. The most popular NFTs right now include artwork and music, but can also include videos and even tweets.

NFTs can be stand-alone, or they can be part of a collection, which can also allow their owners to feel as though they are joining an exclusive online community.

Because NFTs are rare by nature, there is inherent demand, creating plenty of opportunities to flip them for profit on platforms like OpenSea. Flipping is a loose term for buying low and selling high.

For example, in October 2017, NFT CryptoPunk #8348 was sold for $456. Currently, the very same NFT is valued at $171 million.

There’s a lot of potential making money, but before you start flipping NFTs, you must know which NFT project is worth your time.

Here are 5 key factors to look for when searching for a promising NFT project:

1. Utility

What perks and benefits does the project offer to its buyers?

For example, Veefriends gives its NFT holders access to Veecon and a chance to meet Gary Vaynerchuk.

These perks create buzz and generate demand for NFTs.

2. Founding team

Ensure that the team behind the project is credible and trustworthy. Avoid projects by anonymous people and do your research on the team’s background.

For example, the artist behind the NFT collection, The Supreme Kong, is Hossein Diba. Having past experience working on various Activision Blizzard video game projects like Tomb Raider makes him highly credible and trustworthy.

With NFT scams running rampant, checking on the credibility of creators is essential for your success and investment.

3. Community

How much are people talking about the project on social media? How much do they believe in it? Follow your project of interest on Twitter, Clubhouse, Reddit, Telegram, and Discord to gauge its popularity. Look at the engagement on posts rather than just follower count.

4. Association

The association of a big-name celebrity or company greatly improves an NFT project’s success rate. Bored Ape Yacht Club, for example, is so popular because it has buyers like Stephen Curry, Jimmy Fallon, and Logan Paul.

Being associated with big names will help your project stand out.

5. Art

While the quality of the art may not be the most important factor in determining the success of a project, it is important to note its brand-ability. Does the artwork have distinguishable features that have the potential to become iconic?

For example, the CryptoPunks artwork, though simple, was the first of its kind and became a template for more successful projects like Weird Whales because of its unique pixelated style and “meme-ability.”

The more unique the aesthetic of the project is, the more value it will have in the long term.

Choosing how to buy

Once you have identified a promising NFT project, there are two ways to buy:

  1. Mint an NFT when it "drops."

  2. Buy an NFT on a secondary marketplace.

Minting

"Minting" means to buy the NFT upon its release before it hits the secondary market.

This is ideal because most NFT projects release their collections at super low prices and sometimes even for free, which gives you maximum margin for profit.

But quality NFT projects are extremely hard to mint because of high demand and limited supply. That’s why most NFT projects release whitelists so early supporters get guaranteed access to minting when the collection goes live.

To get whitelisted, join the project’s Discord group to learn its criteria for eligibility, and the date and time the NFT collection will go live. (Links to Discord groups can usually be found on a project’s Twitter page.)

Once you’ve minted the NFT, you can easily transfer it to secondary markets like OpenSea and list it for a higher price following the prompts on the website.

Buying on secondary markets

Say you’re late to the show and don’t get a chance to mint. Don’t worry, you can still buy the NFT of your choice from a secondary market. Let’s take OpenSea as an example. Here's what to do once you're on the website:

Step 1: Explore the top NFTs from the Trending tab or type in the name of the collection if you already have one in mind.

Step 2: Once you’re on the project’s page, click Items, then click Buy Now, and set Price: Low to High.

This will show you all the NFTs that are available for sale.

Step 3: Look for NFTs that you think will increase in value and(or) are currently undervalued.

For example, if the first NFT you see after completing step 2 is priced at 0.03 ETH and the ones right after that are priced at 0.05 ETH, you can tell that one of them may be undervalued. That is your chance to buy at 0.03 and potentially flip for a higher price.

Step 4: Select the specific NFT you’re planning to flip and click on Properties. Here you can view the traits of your NFT and how rare they are. The rarer your NFT, the higher its value.

Step 5: Before you get too excited, make sure the project has enough liquidity. Click the Activity tab and select Listing and Sales’ to compare how many people are listing items and how many people are actually buying in comparison. Ideally, there should be transactions happening every few minutes.

A high trading volume means you’ll have an easier time finding a buyer for your NFT.

Please note that this is not financial advice. You should always do your own research before going forward.

Happy Flipping!

This story was originally featured on Fortune.com