A Complete Guide to NFT Investment: From Beginner to Avoiding Pitfalls, What is NFT, How to Choose, Where to Buy

What is NFT? How Does It Differ from Ordinary Coins

When it comes to digital assets, many people confuse two concepts. Simply put, NFT (Non-Fungible Tokens) are different from the common cryptocurrencies like Bitcoin and Ethereum — the former are unique and non-interchangeable, while the latter are fungible and interchangeable.

For example, one BTC you hold and one BTC I hold are essentially the same and can be exchanged 1:1. But NFTs are like artworks, game skins, virtual real estate — each one is unique. This characteristic makes NFTs the “one-of-a-kind” items in the digital world, issued based on smart contract standards such as ERC-721, ERC-1155.

Fungible tokens (FTs) follow standards like ERC-20, BEP-20, while NFTs adopt a completely different technical framework. This also determines their vastly different application scenarios and trading methods.

How NFTs Transitioned from Niche to Mainstream: From CryptoKitties to Blue-Chip Projects

2017 marked the year of NFTs’ emergence. At that time, a project called CryptoKitties became a viral sensation, with users frantically breeding and trading digital cats. One cat named “Dragon” was sold for $110,000, even causing the Ethereum network to become congested and crash.

However, the NFT craze cooled down quickly afterward. It wasn’t until 2018 that a digital artwork titled “Everyday: The First 5000 Days” was auctioned for $69 million, reigniting market interest in NFTs.

The real explosion happened in 2021. The appearance of blue-chip projects like CryptoPunks, Bored Apes (BAYC), Art Blocks, Doodles, and others attracted numerous celebrities, artists, and brands, leading to a diversified and large-scale development of the NFT ecosystem.

It’s worth noting that early NFT hype was heavily speculative, but in recent years, integrating NFTs with the physical economy has become a new trend. Profile picture (PFP) NFTs are empowering physical assets through branding, exploring more solid value support.

Current NFT Market Status: Scale, Popularity, and Genuine Demand

Data shows that NFTs span nine fields including art, gaming, domain names, and virtual worlds, with about 1,000 NFT projects in operation. Among them, CryptoPunks, BAYC, MAYC, Art Blocks, DeGods, and other top 10 projects account for nearly 50% of the market cap.

Overall, the NFT market is experiencing a downward trend — total market value is shrinking, trading volume is declining, and even the floor prices of well-known blue-chip projects are hitting new lows. This reflects a deep market adjustment, with investors becoming more rational; only projects with genuine commercial value can survive.

Notably, physical asset on-chain is becoming a new development opportunity. Artworks, valuable items, real estate, and other assets are being traded quickly and conveniently via NFTs, which also brings tangible application value — this bidirectional empowerment mode is considered a key highlight for the next bull market.

How to Identify Promising NFT Projects: Not Looks, But “Revenue-Generating Ability”

Why can Bored Apes become blue-chip, while many celebrity-backed projects end up “in the trash”? The key lies in business models.

Jay Chou’s endorsement of Fantastear (PhantaBear) is a cautionary example — it appears glamorous but lacks real income sources and value creation, ultimately becoming a short-term hype product. In contrast, Bored Apes generate continuous revenue through IP derivative development, licensing collaborations, and other methods, allowing investors to see long-term value and hold with confidence.

Core logic for choosing NFT projects:

Projects with a business model → suitable for long-term holding (2-3 years), giving the project time for exposure and customer acquisition, but such projects are rare in the market.

Projects without a business model → only suitable for short-term speculation (within half a year), because the goal of the project team is quick profit, then they will rapidly create new projects.

The standard for judgment is simple: check the official website, Telegram, Discord, and community discussions. The more you observe, the better your recognition skills will become. If the contract shows signs of minting inflation or scams, avoid it directly.

Comparison of NFT Trading Platforms: Which Platform Is Best for You

Currently, over 40 mainstream NFT trading platforms include Blur, Opensea, X2Y2, and others. The three with the largest trading volume are:

Blur — Focuses on quality review of works, zero fees, but has a smaller user base and limited liquidity.

Opensea — The oldest NFT marketplace, with a broad user base and strong liquidity, but highly centralized and with higher fees.

X2Y2 — Decentralized trading platform, emphasizes user privacy and security, but also faces liquidity challenges as a newer platform.

Choosing strategy: If you value privacy and security, use X2Y2; to save on fees, consider Blur or X2Y2; if you want to quickly buy new projects, Opensea is suitable.

The Three Major Pitfalls of NFT Investment: Liquidity, Fake Goods, Wallet Risks

Pitfall 1: Poor Liquidity
This is the biggest risk in NFTs. After buying, you may have to wait several days to sell, and for non-blue-chip NFTs, you might never sell. Always consider whether you can sell at a reasonable price before engaging in short-term speculation; otherwise, avoid impulsive attempts.

Pitfall 2: Fake Goods Everywhere
NFTs are often released in blind box formats, making it impossible to identify authenticity visually. When a project becomes popular, counterfeit goods flood the market. For example, Cool Cat had many fake versions, and investors paid ETH for counterfeits that couldn’t be sold later. Solution: always verify the contract address through official channels.

Pitfall 3: Wallet Security
Never authorize your wallet to third-party websites casually, and avoid using NFTFi products recklessly, as they are vulnerable to theft or destruction. Once compromised, assets are irretrievable.

In summary, NFTs have evolved from niche experimental items into a market-recognized asset class. To profit from them, you need a clear understanding of the market, in-depth research on projects, and full awareness of risks.