Fundamental analysis of an NFT project

NFTs are a new asset class that is taking the world by storm. For this reason, it is not possible to evaluate them using a simple manual of concepts.

The parameters we use to evaluate traditional investments simply don’t apply to them. It is normal that the last purchase and sale operation indicates the present value of the asset.

However, with NFTs, it is difficult to predict what the next buyer would pay based on estimates.

As a solution, there are some fundamental factors that one can consider before making any investment in NFTs. Although there are no such factors that can guarantee success, looking for projects that follow some fundamental principles could increase your chances.

Obviously, in the evaluation of an NFT, the art factor is very important, and in most cases, it is.

Some people like complex 3D art, while others prefer basic hand-drawn work. Also, some artwork stands out as being hilarious, cool or memeable and this adds up as a factor to consider before investing.

In fact, we have seen successful projects with these characteristics. Cryptopunks is by far the best example of this. Utility emerges as another important metric for evaluating NFTs. An NFT must have utility in a real-world or online application to be valuable. For example, NFTs that allow the tokenization of real estate, precious metals, and even stocks can be seen as potential investments.

Even NFTs that represent virtual land or gaming assets may have the potential to appreciate in value. An NFT derives its value from its intrinsic qualities immediately after it is minted. The value of the underlying project grows over time, based on its usefulness and the strength of the community.

Another decisive criteria for determining the value of an NFT is the social proof linked to the initiative behind it. Reviewing their social media pages, such as Twitter and Instagram, can help determine their acceptability. Social evidence reflects what the general public thinks about a project and helps in decision making. Make sure that the project offers an organized and available documentation that should be available to everyone at any given time.

A roadmap is a plan that shows the goals of the project in the short and long term, indicating an estimate of the dates for the fulfillment of said goals. It allows you to quickly get an idea of the global vision of the project and check if the actual development is going to be in accordance with the estimates that had been made initially.

Also, another point would be the team behind the project. If they are anonymous, what is their background, who are they and what is their reputation.

The value that someone estimates for a particular good is directly related to the degree of confidence that the appraiser has. Even when it comes to us human beings, this is how we relate to each other. Having own resources (such as domain, hosting, diversified channels for contact), helps in the foundation of the work.

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