The Ultimate Guide to Blue-Chip NFT Investing

(Article Updated 5/31/2021)

I tweet regularly about NFTs. Follow me here to keep up with what's hot!

‍@adamagb

If crypto investing is the wild west of finance, then NFT investing is the wild west of crypto. It’s harder to keep up with, easier to get scammed by, more complicated, and, potentially, more lucrative. Here are a few tips to help you survive and perhaps even thrive in the NFT age.

Quick primer on NFTs

NFTs function like any other cryptocurrency with one difference: each has its own unique serial number. Most cryptocurrencies are interchangeable (your Bitcoin = your friend’s Bitcoin) but NFT #472 will always be different than NFT #473, which means that each one can be assigned to a unique image, a unique song, a unique club membership, and so on (the sky is the limit!)

Most people equate buying an NFT to buying an image on the web. That’s a simplification; NFTs give you the right to sell that NFT, sure, but they can also confer other benefits: the right to exclusive content/drops, the right to join private groups, the right to intellectual property, the right to play that character in a video game, and so on. 

You buy NFTs using MetaMask on platforms like OpenSea. If you’ve used Uniswap before, you’ll be comfortable with OpenSea.

How much to invest

In a previous article, we recommended that crypto should be roughly 5-10% of your portfolio. We’ll use that same 5-10% rule of thumb for how much of your crypto portfolio to put into NFTs, if you’re inclined to invest. If you own $25,000 worth of crypto, put $2.5K - $5K into an NFT. If you own $100,000 worth of crypto, put $5K - $10K into an NFT, and so on. Just note that blue-chip NFT investing is expensive, so if your crypto portfolio is $2,000, for example, your options are extremely limited with $200. You basically have to become a scalper or bet on future blue chips (more on that below).

The most boring approach to NFTs

If you have zero interest in NFTs but still want to profit from them, you can just buy and hold Ethereum. Most NFTs run on Ethereum and NFT traders burn a lot of it. If that’s too broad, you can also buy a few more specific NFT cryptos, like $LOOKS (which is a popular NFT exchange) or $APE (which is the Bored Ape's crypto) or $SOL (which is an Ethereum competitor).

Scalping vs. long-term investing

In the NFT game, some people are scalpers and others are long-term investors. Scalping NFTs is like scalping tickets to a sporting event; you get in at a project’s launch, mint as many as you can (typically a few hundred $ each), and hope to resell later for a profit. Sometimes the NFTs you mint take off, but other times they don’t. Instead of minting, you could also scan auction listings on OpenSea for NFTs you think are undervalued and buy them up (“snipe them”) for resale.

Scalping can be lucrative, but it’s a game that takes enormous time, discipline, and practice to win consistently with (luck doesn’t hurt either). One wrong move and you could lose a lot of money quickly. Worse, the NFT world is rigged to draw people into FOMO (fear of missing out) as well, so be prepared to face emotions you may not have grappled with before. If you struggle with the emotional side of trading, don’t become a scalper! 

Scalping is best if you have a LOT of free time and less money. An example of a successful scalper would be someone who watches a collection's listings all day for a good deal to fall. Then they'd buy it quickly, list it higher, bank a modest profit, and repeat day in and day out. Scalping isn't too different from going to garage sales, buying things cheap, and listing them on eBay.

The other approach to NFTs is to buy and hold quality projects for the long-run. That’s the approach that will win most consistently and the one we recommend. There are two types of quality projects: blue-chips (though they're really expensive) and value picks (aka future blue-chips).

Blue-chip approach

In the same way that the blue-chips in crypto are Bitcoin and Ethereum, there are blue-chips in NFTs. The only problem is they're incredibly expensive, so you need a large bankroll.

There are two types of blue-chips: PFP collections ("profile picture") which means they're designed to be used as your avatar on social media, and generative art, which are more traditional works of art but often built with a computer algorithm.

• CryptoPunks: The iconic, original collection of 10,000 PFPs. Owning one of these is like owning a rare Rolex watch. They have historical value and inspired almost every other collection. Anyone who has a CryptoPunk as their Twitter profile will command attention. Price: ~$100,000. CryptoPunks used to be the undisputed king until Bored Ape Yacht Club bought out their parent company, so they lost some luster.

• Bored Ape Yacht Club: This was the first project that took the CryptoPunk model a step further with a roadmap, membership community, and other perks. They've become a cultural phenomenon with many celebrities buying them and epic events. Yuga, their parent company, also acquired CryptoPunks. There are a few different ways to buy into the Bored Ape universe: A Bored Ape ($150k), a Mutant Ape ($35k), a Companion Dog ($15K), the $APE cryptocurrency ($7 each), or a parcel of Otherside Land ($5k).

• CloneX: CloneX was a joint venture between world-renowned artist Murakami and RTFKT, which is an OG NFT studio that was acquired by Nike. The price is about $25K
  

• XCOPY: XCOPY is the Basquiat of NFTs. His aesthetic has inspired so many other NFT artists and he was there since the beginning. I love collecting XCOPYs because there's no gimmick or business model, just pure art. His Max Pain and Frens collection has a low entry point because it's an edition work ($1,000) but he has more exclusive collections too, the most notable of which is his Grifters, which are $15K. If you want to buy art without the bullshit, just buy a few XCOPY pieces, lock them away in a vault, and call it a day.

• Vee Friends: Love him or hate him, Gary Vee is a force of nature in NFTs and he continually adds value for his collectors.

• Art Blocks: Art Blocks is a platform that features generative digital art from well-known artists. They have three different collections, with the most prestigious being their “Curated” collection. The three most famous Art Blocks collections, all of which I recommend, are the Chromie Squiggle ($12K), Fidenza ($120K), and Ringers ($75K).

• Currency by Damien Hirst: World-famous artist Damien Hirst released a flagship NFT collection called Currency. This is the first big example of a traditional artist breaking into NFTs, so it should do well long-term. Price: $10K.

Many blue-chip NFT projects make it easier and easier to buy in at lower levels. For example, you could buy the most prestigious Bored Ape for $150K or you could just buy a few hundred $ worth of $APE coin and get exposure. You could buy a CloneX for $25K or you could buy their Monolith NFT for $10k. And so on. You will miss out on some freebies at lower levels, but the prices should follow each other.

Value investing approach (future blue-chips)

If you don't want to invest big in blue chips, another strategy is to invest in future blue-chips. Find great teams that are committed long-term and with projects that don't have immediate hype. That's how fortunes are made as the market catches up. After all, every blue chip started somewhere.

Before we begin, note that 2,000+ NFT collections launch every month and most of them are scams ("rugpulls"). The same team will make dozens of NFT projects, list them all anonymously, bank the profits, and keep moving on. There's no long-term vision or good intentions.

That said, there are many, many gems with long-term oriented teams.

Untamed Elephants

Untamed Elephants checks all the boxes. It has historical value as the first major charity-driven NFT (goal is to save the elephants). It has cool art, real partnerships like with Save The Elephants and Ivory Ella, a non-anonymous team, and best of all, it's only $20 an elephant.

Holding an Untamed Elephant also gets you into a great Twitter alpha group to meet fellow NFT enthusiasts. I joined the team some time back as well.

To learn more about Untamed Elephants, visit the website or go to OpenSea and buy directly there.

‍

What to Look For

There are too many other options to list and you can follow me on Twitter to get my thoughts on them (@adamagb) but a few things to look for in hidden gems: 

(1) Don't trust anonymous teams. They're anonymous for a reason.

(2) Avoid things that have gone up too fast recently as they usually retrace.

(3) Love the art because loving the art will carry you through the tough times. And...

(4) Avoid projects that talk too much about their price.

(5) Avoid projects that advertise on Instagram: almost all are scams

(6) Avoid derivatives. For example, when Bored Ape Yacht Club became a hit, there were 1,000 copy and paste derivative projects like "Lady Ape Country Club" "Baby Ape Nursery Club" - you can make money trying to flip them but all of them go to 0 long-term.

Every week there's five or six new projects that end up being scams. A lot of them have the red flags listed above. Remember that 1,000+ NFT collections launch every month and almost all will trade at less than their launch price only a month or two later.

Should you buy the cheapest NFT in a set or spend a little more for a premium one?

Because every NFT is unique, prices can range dramatically (the top CryptoPunk is worth millions of dollars, for example).

If you're beginning, always buy the cheapest one you can. They're the easiest to sell and the easiest to profit from with rising values. If there's one you like a LOT more for just a little extra (say 10%), fine, go with that. But know you're taking on extra risk.

Seriously, I would have made 2-3X in NFTs had I followed this rule. If you're more advanced, you can hunt for deals. One great tool for deal hunting is Rarity Tools, which ranks NFT collections by Rarity.

I’ll add that I’ve found the best deals for NFTs can come from the project’s Discord chat. People will privately sell their NFTs for a discount there to save on fees and existing members can even help you pick one. Just be very careful since scammers abound and use a middle-man platform like NFT Trader. When in doubt, drop me an email.

One more trick: use gem.xyz or genie.xyz, they're price aggregators and will find you the best deal across NFT exchanges.

How not to get scammed

The last time I was scammed in crypto was a decade ago, but it took only a week for me to get scammed in the NFT world. Scammers create fake websites, fake NFT collections, and even approach you with viruses or fake sob stories. Three quick rules of thumb:

• Store your NFTs on a hardware wallet. The most widely used is the Ledger Nano. I recommend the more luxurious Nano X, it just feels better in hand.
  

• Be paranoid of anyone who approaches you directly on Discord or email. Odds are they’re trying to trick or manipulate you.
  

• Don’t buy a deal if it’s too good to be true. This is where I failed. I saw an amazing deal on an NFT, but it was a clever counterfeit that launched moments before I saw it.

Free help

If you want to start your NFT investing journey and are having trouble, email me, and I'll help you out as best I can!