What's the Most Profitable NFT Strategy: Buying at Mint or Later?

In the world of digital art, one of the few constants is the “fear of missing out” on the next major project. But is there a right time to buy an NFT to increase your chance of making a profit?
Updated Aug 23, 2022 at 2:48 p.m. UTC
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Joe Cortez is a contributing writer for CoinDesk and has also written for USA Today, Bankrate and NerdWallet. He holds BTC and ETH.

In April 2021, a little known non-fungible token (NFT) project launched on the Ethereum blockchain: Bored Ape Yacht Club. Early investors were given the opportunity to “mint” – or create a new token – for just 0.08 ETH. Nearly one year later, the floor price to get in is 86.99 ETH, after celebrities including Jimmy Fallon and Steph Curry began collecting the art pieces.

With the increasing popularity of NFTs, there’s no shortage of projects launching daily, each promising climbing prices and community benefits for early adopters. Does it make sense to get into an NFT at launch or should investors wait to see the project’s trajectory?

The answer depends on your individual investing strategy, along with your goals for collecting NFTs.

The process of minting a new NFT

For artists, developers and community managers, opening an NFT for minting is the culmination of their work. With most projects, the minting process happens in three different waves: the first mint for whitelisted community members, a small presale group and the open public sale.

Whitelist, presale and public sale: What’s the difference?

In many situations, the first people to get access to a new NFT project are the whitelist members. The whitelist is usually limited to the earliest supporters of a project, which may include early investors and the most engaged community members. Getting on the whitelist offers the chance to get into an NFT on the ground floor – with the highest odds of creating a piece with the rarest attributes.

Once whitelist members get the first chance to mint a new NFT, projects may open up to their presale list. Like they do with the whitelist round, the NFT developers will set the requirements to get on the presale list, but the requirements are often much less stringent than they are for the whitelist.

After both rounds are complete, minting will open up to the public, allowing anyone to create a new NFT. While you can still mint pieces with rare attributes, the likelihood of creating one with the most desired aspect may diminish based on how many were distributed through the private sale rounds and the total number of NFTs available.

How do NFT airdrops work?

To encourage more NFT sales or increase excitement about a project, some NFT producers may decide to “air drop” pieces, granting free tokens to certain wallet holders. While some communities may give airdrops to celebrities or prominent members with a big social media following, the most common way to get a free NFT is through minting several at a time.

Airdrops can be an easy way to earn free NFTs and lower your total cost per token, but with an inherent risk. For example, if a new project mints tokens at 0.05 ETH each and offers one free airdrop for minting five at the same time, you would get six for a total cost of 0.25 ETH. Although you would effectively save around $25 per token, you would have to spend over $650 to get the airdrop (based on ETH price at the time of writing).

Pros and cons of minting a new NFT

When it comes to backing new NFT projects, there are some upsides for being among the first to mint new tokens. The earliest investors can get in at the lowest price, giving them the best potential of increasing the return on their NFT investment. One investor who purchased a collection of Bored Ape Yacht Club NFTs later sold his collection at Sotheby’s auction for $19 million.

Another reason to get into an NFT at the ground level is for the community aspect. Depending on the project, the earliest adopters may get additional benefits for their contribution. For instance, some NFTs may give token holders entry into the project’s decentralized autonomous organization (DAO), giving them a stake in where the project goes or how the community purse is used. Others may get additional airdrops from affiliate projects, increasing their NFT holdings for being part of the community.

Although there appears to be a lot of upsides to getting into an NFT project early, it also comes with a significant amount of risk. Like with any investment, there is no guarantee that the value will go up over time, and the token can even drop sharply in price after mint. When Pixelmon launched its NFT project as part of a play-to-earn game environment, early adopters could mint their token for 3 ETH. But as of this writing in March 2022, Generation 1 Pixelmon were trading on NFT marketplace OpenSea at a floor price of 0.429 ETH, representing a discount of over $7,600 from mint.

Moreover, network activity can ultimately drive your entry price up, depending on how many people are clamoring for a spot in the mint. When a highly anticipated NFT goes live, the increased activity from whitelist and presale members trying to be first in line can drive up gas fees, which can significantly increase your entry price.

Because there are no guarantees in the digital art world, you may face an extended timeline before you could sell your token for a profit, if it increases in price at all. Should you decide to mint a new NFT, be prepared to hold it for an extended period of time before you can sell it for as much or more than your purchase price.

Pros and cons of buying an NFT at market

While minting in a new NFT project can be exciting, there are some advantages to not buying an NFT at launch. Purchasing a token at OpenSea or Rarible, another marketplace, could give you insight into demand and give you a potential advantage on your investment.

When browsing NFTs on both major marketplaces, buyers are given analytical insight into the transaction history, price changes over time and how often an individual token changed hands. That information may allow buyers to determine the right time to dive into an NFT as it increases in price, without blindly buying into a project.

In addition, buying an NFT at market can help you save on overall costs. Timing your purchase when network activity is low can save money on gas fees, giving you the opportunity to get in at a reduced price point compared to minting.

Much like there is risk in getting into an NFT early, there’s also jeopardy in waiting for owners to list tokens on a marketplace. If a NFT gets popular quickly, the price can increase significantly overnight. For example: When the highly popular Gutter Cat Gang launched, the mint price was 0.07 ETH. As of this writing, the floor price to buy on OpenSea is over 5 ETH – an increase of over 7,100%.

Bottom Line: Should I Buy an NFT at Launch or Wait Until Later?

Getting into an NFT early should come with careful consideration. The decision should come down to your tolerance to risk and overall crypto investment strategy.

Before you decide to mint an NFT, do your research into the community, its goals and overall reach. Joining the project’s dedicated Discord server and monitoring social media mentions can help you gauge excitement and anticipation for the launch, ultimately helping you make the best decision for your money.

If you do decide to get in on a mint, research how to get on the whitelist early to potentially avoid paying high gas fees during the initial rush at the public sale. If you are uncertain about the community direction or the potential demand for a token, it may be smart to hold off to buy at market, giving you the chance to get in at a price that fits your risk tolerance and strategy better.

This article was originally published on Mar 1, 2022 at 9:25 p.m. UTC

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Joe Cortez is a contributing writer for CoinDesk and has also written for USA Today, Bankrate and NerdWallet. He holds BTC and ETH.

CoinDesk - Unknown

Joe Cortez is a contributing writer for CoinDesk and has also written for USA Today, Bankrate and NerdWallet. He holds BTC and ETH.


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