At this moment, you can imagine that even the Croods have heard about Non Fungible Tokens (NFTs) by now. Why? It is one of the hottest investment trends at the moment. According to data analytics company Dapprader, in 2021 alone, NFTs generated more than $25 billion in trade volume, with celebrities such as Snoop Dogg, Eminem and Steph Curry, amongst others jumping on the trend. However, the art of NFT flipping is still unfamiliar to many. This guide will explain what NFT flipping is and how to flip NFTs.
What is NFT flipping?
One of the most popular investment vehicles is real estate. Investors can buy a house, make a few cosmetic changes and then place it back on the market at a higher rate in a process called real estate flipping. Flipping is not restricted to real estate alone; it is a loose term for buying assets at a low price and quickly selling for profit.
Per NFTs, flipping has become a way to quickly make profits rather than waiting for your assets to accrue long term value. To flip NFTs, you have to buy them at a lower price and then list them for sale at a higher rate. A story that will better illustrate how NFT flipping is the case of a Bored Ape owner named Max. He wanted to list his Bored Ape for 75 ether, or around $300,000. But he accidentally listed it for 0.75 rather than 75 ETH, losing one hundredth the intended price. The NFT sold almost instantaneously, and the buyer paid about $34,000 to speed up the transaction. After the purchase, the buyer listed the Bored Ape to ensure no one could snap it up before them. The Bored Ape was then promptly listed for $248,000.
What to know before you start flipping
Use the Niche strategy to identify a good project
Most NFTs are theme-based, which can help you identify projects that resonate with you. Take the case of blue-chip NFT collections like Bored Ape, these adopt animal themes. CryptoPunk, on the other hand, uses images of people. While niching down, you are looking for current undervalued projects that have the potential to rise in value. Common niches you can look out for include animal-themed art, collectibles, abstract paintings, domain names, or me
Set metrics for identifying NFTs
Using these key metrics, you can cut down your search for valuable NFTs for flipping.
- Number of Items: How many items does the NFT project have, and what is the distribution of rare items? You may want to find out the numbers involved as scarcity always drives demand. If you are lucky enough to lay your hands on a rare piece from the NFT collection, you are likely to make a profit.
- Floor Price: What is the least amount you can get the NFT? The floor price refers to the least price an item is selling for. Hence when looking to flip NFTs, you want to look for items with minimal supply and low floor prices.
- Volume: you want a marketplace that gives you access to high trading volumes. This is because you can easily find collectors willing to buy your items on such a platform. Also, you can easily find rare items to buy as marketplaces with high trading volume will have lots of listings.
Know where to get good NFTs for Flipping
You can get great deals by surfing through NFT analytic platforms, for instance, NFTscoring or Nansen.io. Most of these NFT platforms have tabs for certain assets like "Top rated Artist" or "Exclusive drops", where you can check out the rankings and activities before buying. You can also free alpha on social media. If you join a good creators community on Discord or telegram, you can get free tips on where the next best collection may be coming from. You can also keep tabs on projects through their Telegram, Discord, Twitter, Reddit, and Instagram pages to get details on the right time to buy.
Search for utility
You may want to get added utility for your NFT beyond flipping. Holding an NFT like Bored Ape gives you access to an inner community where members have exclusive rights to attend events, get merches and even use their NFT as PFP. Also, an NFT like Gary Vee's VeeFriends allows holders to attend his events for a certain period. So when looking for NFT to flip, search for added utility as it increases value.
Investigate the team
In March 2022, Ethan Nguyen and Andre Llacuna shut down an NFT project called Frosties, leaving investors high and dry and walking away with $1.1 million. Although the FBI arrested the two project founders, NFT investors are still at risk of falling prey to nefarious founders. Before buying an NFT, check the project team and dig a little. You can search out information from personalities like Zachxbtc on Twitter, focusing on doxxing project founders with nefarious projects. Also, NFTs of project founders with terrific reputations can be valuable. For instance, Hossein Diba, the creator of The Supreme Kong collection had previously worked on projects such as the Activision Blizzard video game, Tomb Raider, making him a credible creator.
Summary
NFTs can often be illiquid, unlike their fungible counterparts (cryptocurrency); you can only make profits when there are buyers. Once you have the necessary tools, such as your marketplace with the right trading volume, a Web3 compatible wallet, a trusted community, and a list of projects to buy, you can start becoming an NFT flipper. The final, most important decision you have to make as a flipper is knowing when to sell. You have to monitor the trading volume of the current project you are holding and the recognition they are receiving and decide the best time to sell and move on to other projects. NFT flipping is similar to crypto trading, and soon, we will begin to see more use cases beyond just flipping as we see with crypto trading.
