With the popularity of NFTs rising recently, many people are interested in minting or buying their own. However, there are costs involved, so is it possible to lose money in NFTs?
You can lose money in NFTs because their value can fluctuate daily. An NFT could be highly valuable one day, and the next, it might be worthless. Additionally, it costs money to mint NFTs, so you’ll be at a financial loss if you cannot sell your NFT after minting it.
The rest of this article will discuss all you need to know about losing money in NFTs in greater detail. It will also discuss why NFTs might decrease in value after purchasing, so keep reading to learn more.
Can NFTs Decrease in Value After Purchasing?
NFTs can decrease in value, just like Bitcoin and other cryptocurrencies can. This means that you could buy an NFT worth $100 one day, and the next day it could be worth next to nothing. Buying NFTs with real utility will make them less likely to decrease in value.
Additionally, buying NFTs that are one-of-a-kind or in scarce supply will make it less likely for you to lose money on them because as the demand for them increases, the value will also increase. But of course, this isn’t a guarantee. You won’t face any significant issues if you only invest an amount you’re willing to lose.
Reasons Why You May Lose Money in NFTs After Purchasing
Now that you know NFTs can decrease in value, you might be wondering what causes this to happen. Truthfully, it can be hard to tell sometimes, but there are some reasons why it might occur.
Let’s take a look at some of these reasons below:
People Lose Interest
One big reason you could lose money after buying an NFT is that many people might have been interested before you bought in, and now that some time has passed, they have lost interest in it. And when people lose interest, the demand subsequently goes down, which ultimately causes the value to plummet.
To avoid this from happening to you, you should do research on the seller before buying anything. However, it can be hard to determine whether people will lose interest in the project or not, so you may have to go with your gut.
It’s also possible that people could lose interest in NFTs in general rather than just one specific NFT project. Since NFTs are still relatively new, it’s impossible to know what the future holds for them in the broader scheme of things. They’re still in their infancy, so it’s essential to understand that the world could eventually move on to something else.
The NFT Has No Real Utility
There are so many NFTs out there. Some of them have utility, and some don’t. The ones with utility are generally more likely to remain valuable or even increase in value in the future. NFTs with real utility include land and object NFTs for metaverse gaming.
For example, the Decentraland platform allows users to buy LAND, which is an NFT native to that particular metaverse. It could be possible that as the metaverse continues to develop, the demand for virtual land will increase, thereby making these NFTs rise in value.
However, no one truly knows what the future holds for NFTs and the metaverse in general. So buying some LAND doesn’t guarantee that you won’t lose money. But it makes it a little less likely than buying an NFT with no utility.
The NFT Project Is Overhyped
There might be a lot of marketing and hype for a particular NFT drop, which might make you enticed to buy in. However, the promotion and hype may die down once the initial drop has happened, causing the value of your newly-bought NFT to decrease.
This can happen if a well-known public figure advertises the project, for example. When people see a celebrity hype something up, they’re more likely to associate it with value, so they’ll want to buy an NFT from that project.
But once the initial celebrity marketing phase is over and you’ve purchased an NFT, you might realize that it has no actual use, and people have already moved on to the next thing.
It Could Be a Rug Pull
A rug pull occurs when the creator of an NFT or other project wants to make money and then go off the radar, taking all their earnings with them. These people will usually hype up their project and tell everyone that the NFTs are highly valuable to get people to buy them at a high price.
Then, once all the NFTs are bought, and they’ve made a hefty profit, the creator will disappear with all the money they made, leaving the buyers with useless NFTs that have no value.
As I mentioned briefly earlier, it’s good to research the person behind the project before buying an NFT from them. All verified sellers should have a tick beside their names, so you should look for that first. You should also look at their social accounts, like Twitter, to better understand who they are and if they’re likely to do a rug pull.
People Can Make Copies
Although it’s not possible for people to copy the exact NFT you own, they can replicate the artwork. Then, they could sell many copies, which could drive down the value of your NFT.
The people buying the copies likely won’t realize that they’re counterfeit, so this can cause problems for your investment. If you think this may be happening with an NFT you own, you should go to the fake seller’s marketplace page and report them or the NFTs they’re selling.
Most marketplaces will give you this option, and you should explain precisely why you’re reporting the artist.
You could also use social media to call out any fake NFT sellers to spread the word, making sure to tag them if you have their username details (on Twitter, for example). This is an excellent way to spread awareness about fake sellers.
It Costs Money To Mint NFTs
Another critical thing to note about NFTs is that they cost money to make and mint. Not only that, but the process can also be time-consuming. So if you’re planning on making an NFT yourself, it’s essential to factor in the costs of making it and the time you will spend on it. After all, time is money!
For example, you’ll generally have to pay gas fees to create NFTs, and they can be pricey on the Ethereum network. Since Ethereum is the most popular blockchain platform for NFTs right now, you will need to factor these costs into the selling price of your NFT if you want to make any amount of profit.
Although you can make profits from NFTs, you can also lose money. Before buying one, you should always do your research and understand the risks that come with NFTs.
Some of the main reasons why NFTs can cause you to lose money include:
- Copies of your NFT are being made
- The NFT has no real utility
- You’ve bought into a rug pull
- People may lose interest in NFTs in general or the specific NFT you bought
You can become a more educated NFT buyer and seller by understanding all of the risks.