Many complete newbies have been attracted to the blockchain by the appeal of owning an NFT, only to quickly lose their investment by choosing a doomed-to-fail project. However, there are a few guidelines that you can follow to improve your chances of success.
The popularity of NFTs
By the final quarter of 2021, the trading volume of all NFTs had reached $10.67 Billion.
This was an increase of 700% from the previous quarter. With the average sale price of an NFT being $200, the opportunity to take a chance is open to a large proportion of newcomers. However, there are many pitfalls, and many new investors are making mistakes because they do not know what red flags to look for.
So what can be done to avoid the tricky minefield of investing in a bad NFT project?
NFTs have become very popular in the last 12 months and have attracted a large new audience to the Metaverse world. Many newcomers are very enthusiastic and part with their money very quickly. However, there are a few steps that you can take that will help you make better decisions. Remember these three basic rules to avoid losing your investment.
A Visible Team
The team running the project should be easily identifiable. Go to the website and check them out. A credible new project will show you who’s involved and be transparent.
The team members’ full names and Social Media links (ideally to LinkedIn) should be listed. If the team members do not reveal their real names and use nicknames, that is not a good sign. They should give you a quick resume of their experience and display why they are worthy of your investment.
A simple project will have a Roadmap outlining precisely what they have planned for the next 12 months, usually split into four quarters. If they do not have one mapped out for you to check, then they may not have anything planned (other than a quick sale of their NFTs) and, therefore, should be avoided. Make sure the roadmap makes sense and is viable. For example, if it states that it will introduce its crypto coin in a few months, that is probably an impossibility and shows that its plan is not credible.
A Loyal Enthusiastic Following
For a project to survive, it will need to be popular. Popularity signals a demand and enthusiasm for the project. This is required for the sustainability of the project in the long term. An ideal project will have a good following on Twitter (at least tens of thousands) and a lively, engaged Discord group. However, a few warning signs concerning the Social Media aspect need to be pointed out.
Social Media Red Flag Warnings
If a new NFT project has a huge Twitter following that has exploded within a few days, then that is a Red Flag. An NFT scam project can buy fake followers to artificially inflate their numbers and make them look very popular.
But do not worry; you can quickly identify this issue by clicking on a few followers’ ids. You will be able to see if these Twitter followers have real accounts or are fake. If you start seeing numerous fake accounts, the project may not be credible.
Too Good to Be True
The same reasoning goes for the Discord groups. You may want to investigate further if the group has grown extremely fast. If you see that the same people seem to be in the Discord group 24/7 and are all using the exact emotive words such as “We are all going to the moon!!!” and “I just bought another 5 NFTs”, then you may wish to control your enthusiasm. Check out a few other Discord groups to compare their culture and see the difference in professionalism. Then make your choice.
Follow these three steps to avoid investing in a fake get-rich-quick NFT project.
Remember that an invisible team, a lack of a Roadmap, and a Social Media following that has appeared from nowhere are all NFT projects you may wish to avoid.