You’ll often hear people talk about flipping NFTs. Simply put, this just means buying an NFT and then selling it quickly when it moves up in price.
It sounds easy but things don’t always go to plan, so here are 6 tips to flip NFTs for profit!
1. Identify Why You’re Buying
Besides flipping, there are a couple of other common reasons to buy an NFT.
- Because you personally want to own it. You like the artwork or it has utility.
- Because it’s a long-term hold. You plan to sell eventually, but not in the near future.
So when you buy, make sure you know which bucket the NFT is in. That way, if it’s a flipper, you won’t have any hesitation about taking profits, and if it’s a keeper, you won’t get distracted by short-term prices.
2. Buy NFTs That Other People Want
You’ll sometimes see people advise, buy what you like. That’s good when you’re collecting, but not when you’re flipping. If you plan to trade quickly for profit, then buy what other people want.
So for example, if there’s a lot of interest in anime-themed collections, or apes, that’s where the hype will be and it’s not important whether or not you like anime or apes. This links to the first point, if an NFT is in your flip bucket (not your personal collection bucket) then your own personal tastes don’t factor in.
3. Snipe NFTs (when you can)
Sometimes NFTs get listed at below market value, and you should be ready to snap them up. That means you’ll need dry powder. Always have a fund of ETH (or SOL, ADA, whatever you’re trading with) ready to deploy. Remember that NFTs are relatively illiquid, so if you have to sell before you can buy, you’ll miss opportunities.
Of course, you need to spot those opportunities. It’s not viable to constantly monitor every collection you’re interested in, but there’s a tool called Sunspot that can help. It’s free to use and you can set it up to alert you when NFTs in collections you specify are listed below particular price thresholds.
4. Check Market Conditions
There’s not a long history of data to go on, but up to now NFTs have had bull runs and dips. You can get a sense of general sentiment just by following chatter on Twitter, but there are data analysis tools you can check too. Some useful ones are NFTGo, Dune and The Block.
If the market is down you might be able to pick up some undervalued NFTs in proven collections, and if things are going crazy with prices rocketing, then it’s time to sell. The right market conditions can tell you if it is the right time to flip an NFT.
5. Buy Three (sometimes)
If you have the funds without going over any spending limits and, very importantly, when you have confidence in a project, then buy three NFTs from the collection.
If the price goes up you can quickly sell one to cover initial costs. You can then sell a second if the price goes up further and it feels like you should take profits.
That leaves you with one more in case the project turns out to be an elusive NFT moonrocket. And if it isn’t, then you still have profits off the table and an NFT in your collection that you can either keep or sell later.
6. Evaluate the Project
This goes slightly against the second point (buy what other people want), and sure, if you identify upcoming FOMO around a project even though it’s junk, then it’s worth buying in so you can sell quickly at a profit.
For the most part though, it’s better to buy things that are, y’know, good, and as a result will appreciate in value. Here are some factors to think about when assessing a NFT for flipping.
Artwork
If the NFTs are purely utilitarian this is less important (although still a consideration), but otherwise, look at the quality of the art. Is it clean and professional? Does it stand out, or appeal to a particular niche or trend? This doesn’t necessarily mean that you personally like the style, but just that it’s well executed.
Check the project’s website too. NFTs are a digital format so we should expect high quality web design.
Team/Creator
Who made it, do they have a good track record, are they well known for what they do? If you’re looking at an artist or photographer, what’s their portfolio like, and do they have a following away from NFTs?
One caveat here is that there’s a culture of NFT creators not using their real names. Being pseudonymous isn’t a red flag, but at the same time, real names can provide reassurance on bigger projects.
Keep in mind there’s a difference between being pseudonymous and being anonymous. For example, in the traditional art world, no-one officially knows Banksy’s real identity, but the Banksy pseudonym is trusted to the tune of millions of dollars.
On the other hand, if an NFT project had no names on it at all (completely anonymous), or listed an unheard of pseudonym (effectively anonymous), then you’d have nothing to go on.
Utility
Some NFTs are purely artistic, but others can have special uses. Is it a piece of metaverse land, or an asset in a game? Does it provide entry to a DAO, can it be staked for tokens, or receive an airdrop?
Don’t expect this if you’re buying, for example, a photography NFT, but in many cases utility can be valuable.
Community
Check a project’s social media engagement. If it has tens of thousands of followers on Twitter but very little actual engagement, that looks inorganic and isn’t a good sign.
On the other hand, a project could have just a couple of thousand followers, but lots of engagement on every tweet. That looks promising as it means there’s a lively community, but the project hasn’t yet grown to the point where it’s on everyone’s radar.
Go ahead and join the Discord too, where you can also get a truer feel of what kind of character a project and its community has.
History
Keep in mind here that the definition of historical is a little different in the NFT world. CryptoPunks have historical value, and CryptoPunks were launched in 2017, which is not exactly far back in the mists of time. Maybe instead of history we should say future history.
What you’re looking for, are things that are the first of a kind or very early, or are connected to someone who is or might become famous. Broadly, this means looking for NFTs that are likely to be recognized as having some kind of unique significance.
On the whole, the more research you do, the better. That said though, it’s always possible that a professional, confidence-inspiring team will not deliver.
And by the same token, the opposite is also true. That impulse project that you jumped into at the last minute, the one that just had something about the artwork that you liked… well, who knows… it could just turn out to be something unexpectedly special.
