NFTs are rapidly increasing in value — some are even selling for millions of dollars. With over 11.5 billion in total NFT sales so far, it’s safe to say that the market has even become more lucrative over the past few years. If you’re interested in getting into the NFT space, you’re probably wondering how does someone increase the value of their owned NFTs.
Even though the market is still a new concept for most people, its popularity has made the world stand up and take notice. Let’s dive into the mechanics of how to price an NFT and how it increases in value over time.
NFT pricing explained
All NFTs are minted on a blockchain, which means they can be bought and sold using cryptocurrencies.
The initial factor of an NFT’s value is the value of the blockchain where it’s minted on. Most NFTs are minted on Ethereum, Polygon, and Solana and most NFT marketplaces support those chains.
When NFTs are first created on a blockchain, they have to be minted. Minting is basically the process of publishing the NFT on a blockchain so it can be sold. When NFT collections are first released, they are minted by the creator or artist of that NFT. The minting price is basically the gas fee used to transact with the blockchain. NFT creators that allow buyers to mint an NFT will typically also charge a mint fee, where the buyer covers the cost of minting as well as gas.
Once an NFT has been minted it is typically resold on a marketplace at a price determined by the seller. Sellers can set whatever price they want for their NFTs. The lowest price of NFTs available in a collection is called the floor price. Most NFT marketplaces clearly list the floor price so you know what the minimum investment will be to own a piece of that collection.
NFTs can be bought and sold between different buyers and sellers, and when this happens the price can go up or down based on whether the NFT is perceived to be increasing or decreasing in value. Sometimes a seller will sell at floor price just to ensure a quick exit from their NFT.
How does an NFT increase in value?
NFTs gain value when buyers are able to successfully sell their NFTs at a higher price than what they paid for them. Similar to cryptocurrency, a collection of NFTs go up in value when the market demand increases and the overall supply of NFTs available for sale decreases. The key factor here is that someone has to be willing to buy the NFT at a higher price. So basically, an NFT is worth whatever someone is willing to pay for it.
Buyers determine the value of an NFT by looking at the market of a collection. For example, the floor price of a Bored Ape NFT is currently about 73.5 Ethereum on OpenSea. A year ago when they were first minted, they weren’t even selling for 1 Ethereum. That’s a pretty obvious example, but you get the idea.
Most NFT marketplaces have tools and statistics to help determine the market activity and value for specific NFT collections. Tools like DappRadar will show you aggregated stats where you can see the total trading volume for the top NFT collections across several marketplaces.
Below are the factors on how your NFTs will increase in value.
1. Crypto volatility
The value of cryptocurrencies can increase and decrease within minutes. Sales volume can spike, and drop off very quickly. If you’re evaluating an NFT purchase, you should be looking at the volatility of the NFT collection, marketplace, and cryptocurrency. Here’s a scenario:
The value of Solana peaked at $258 USD in November 2021, and it’s currently worth $32 USD (as of September 8, 2022). So if you bought an NFT in November 2021 for 5 SOL and you wanted to sell it today, you would need to sell it for 41 SOL to make a profit.
On the other hand, if you had bought an NFT for 5 SOL in October 2021 when Solana was trading for $23, and you wanted to sell it for 5 SOL today, you would make a $160 profit (as of September 8, 2022). This shows how volatile cryptocurrencies are, and NFTs add another layer of volatility to the equation.
However, that’s not necessarily a bad thing. Let’s say you bought an NFT for 5 SOL when it was trading for $23 and you wanted to sell it today, but the floor price of your NFT is 15 SOL. If you combine that with the increased value of Solana, you can make a decent profit.
So the main point is, the gains can be bigger, and so can the losses.
2. NFT Hype
Hype is a driving force behind the value of an NFT. Collections that have built up a lot of interest can often charge a premium even right after minting.
When Logan Paul’s NFT collection launched, it had so much hype around it that it sold $1 million worth of NFTs in 30 minutes and $3.4 million on the first day. The project was soon accused of ripping off Adobe stock photos and the project has been in hot water since then.
3. Market Speculation
Overall, NFTs and cryptocurrency are a game of speculation. That doesn’t necessarily make NFTs a poor investment choice, though. It just means you need to do your research and make informed decisions. If you’re comfortable navigating through market volatility you can buy and sell NFTs and make profits.
That doesn’t mean that profit is guaranteed though. You can definitely lose money on an NFT. If you’re considering buying NFTs you should talk to an expert that is well-versed in the world of NFTs and cryptocurrency before making any investments.
4. Rarity
A one-of-a-kind and rare NFT can turn into a valuable asset/ investment. Yes, it is also important to consider who is the creator behind the NFT. It can either be a public company, a recognizable artist, or even a brand that people flock to.
Think of it that NFTs are tied to something (or someone) appealing. It would be more coveted than an NFT that’s done by an unknown creator.
5. Capability
NFTs have other applications besides being just a mere digitized file on the blockchain. NFT sellers should include special bonuses or features to entice NFT investors like:
- Exclusive club memberships
- Access pass to pre-sales of future collections
- Tickets to events
- Discount coupons to commissioned pieces
- Exclusive Discord channel invites
There’s just so many ways to value your NFT when you introduce add-on or special features inside your digital collectible tokens.
But do keep in mind, the neat extras you program into your NFTs via smart contracts has to consider your audience and what they may find valuable. If your NFT collection is for a global audience, you may be better off holding an event in the metaverse instead of a physical location.
6. Community
Increasingly, new product launches are being designed with the power of community-building in mind.
This way, you get access to early adopters who can serve as product evangelists for you. It also doesn’t hurt that you get a ton of constructive feedback regarding your collection.
With NFTs, communities can literally make or break the launch of a new collection. That’s because the larger the community of users that embraces your NFT, the faster you get to establish their value.
It pays to make clear the value proposition behind your NFT collection right from the outset. Its important that you build a community (usually through Discord channels), and drive engagement as your approach launch date. Its like word-of-mouth marketing, where your supporters are the ones setting the narrative and perception behind how valuable an NFT is.
7. Ecosystem
We have NFT marketplaces now and creators can take advantage of it in various ways.
Everyone is familiar with digital art markets like OpenSea and collectibles platforms like NBA Top Shot. What Top Shot did is that it deals with exciting plays from sports, especially basketball. These video NFTs act as digital trading cards. But Top Shot didn’t stop there, it ended up building gamified challenges and other activities to own these cards. NFT buyers could even get discounts and other real-world benefits from the NBA itself.
So what we have here is not just a collectibles platform, but a whole ecosystem that helps NFT buyers get access to an expanding array of experiences and activities. Such platforms end up funding ambitious projects that drive up the value of their NFTs with time.
That’s another way of adding value to my NFT.
