When it comes to NFTs we’re all newbies. This sector only came into its own last year, when digital artist Beeple made a $69 million sale. That’s when everybody took notice — including me.
I thought they were a fad. Well, the joke’s on me. It looks like they’re here to stay. They might even end up being one of 2022’s hottest sectors.
The good news is that it’s still early days. There will never be a better time than right now to learn how to trade them.
That’s what I’ve been doing myself over the past year. Read on to see what I’ve learned!
Table of Contents
What Is an NFT?
I know you already know this, but let’s go over it one more time.
An NFT is a non-fungible token. This is tech-speak for a unique unit of data on the blockchain. Like crypto, these units can be bought, sold, and traded.
They’re usually built with the same software as crypto. But they’ve become associated with digital art and collectibles.
Birth of a Hot Sector
We started talking about NFTs in March 2021. Beeple put NFTs on everyone’s radar, and the rush was on.
That was also the first time Bitcoin broke $60,000. NFTs run on the same blockchain technology and were thought of as a crypto sympathy sector.
By the end of the year, over $40 billion was used to purchase NFTs. That’s already bigger than the annual revenue of legal cannabis.
Just like cannabis stocks, NFT stocks have often disappointed traders. Let’s look at the big stories from 2021…
Takung Art Co. Ltd. (NYSEAMERICAN: TKAT) had a crazy year. It jumped from the $2s to the $70s in March 2021. Now it’s back in penny stock territory.
That hasn’t happened to NFTs themselves, only shady penny stocks that try to capitalize on the hype. But there’s a lesson in there — don’t buy the hype.
If you love an NFT, go ahead and buy it. Treat it like the piece of art it is.
NFTs have shown what I like to see in a hot sector. There was a sector-wide breakout in 2021. That was followed by a quieter period of consolidation.
They also have powerful sympathy with some of the hottest sectors in the market.
How to Trade NFTs
Hype and volatility … Does that remind you of anything?
Day trading strategies are fully transferable to the world of NFTs. You just have to know what they look like here.
Hot NFT Trends
Hot trends in NFTs are the equivalent of hot sectors in the stock market…
When a collection or theme starts running, that drives demand. As all markets are based on supply and demand, that’s a good thing if you get in early.
More demand makes for more volume, which makes it easier to trade. Volume can also drive up prices.
The stocks we target on StocksToTrade are usually low-float stocks that run on news.
This is another similarity to the world of NFTs. As one of the main draws of an NFT is its technology, you can count on news happening often!
We’ve talked about how NFTs have benefitted from crypto sympathy.
That’s a big thing to watch for. The next time bitcoin breaks out, I’ll be watching NFTs.
Just like with stocks, there are also sympathy plays within the NFT market. They’re called derivative projects.
Derivative projects are often modeled on a more popular project. You might not be able to afford the floor price of a Bored Ape Yacht Club (BAYC) NFT … 103 ETH (about $300,000) at the time of this writing! But you might be able to afford buying into a derivative project.
Whenever a popular NFT like BAYC comes out, copycats follow. These copycat projects can be a sound investment if they run in sympathy to the more popular project.
But you need to watch out. Copycat projects like Phunky Ape Yacht Club sometimes step over the line … This can result in bans and the loss of your investment!
Wherever there’s speculation, there will also be scams.
Stock pumps are the most common form of this. And NFTs are picking up the blueprint.
Social media influencers are often behind NFT pumps. They help to drive hype into an already overhyped market.
What’s the cure to this? Sticking to your plan.
It’s fine to buy pumps. Just know what you’re buying, have a plan, and don’t be fooled when the price goes up.
If demand drops and the price collapses, you could get stuck with it.
How Do You Find Hot NFTs?
I think NFTs will be a big part of the metaverse. It’s early for that, but I’m pretty sure it’s coming.
Remember, we want to beat the crowd. Like when a low-float penny stock breaks out at the open, we want to be in early.
StocksToTrade’s To The Moon Report has been staying on top of developments in the NFT world.
This newsletter is put out by StocksToTrade’s two best crypto traders, Matt Monaco and Bryce Tuohey… They’ve also discussed some NFT stock runners in their Small Cap Rockets trading room.
Here’s a To The Moon post on major brands adopting NFTs.
NFTs came out of nowhere for many people. The way to get ready for the next surge is to prepare…
Smart traders are starting now.
Tim Sykes’ NFT Club
My friend and mentor Tim Sykes is one of the best day trading teachers out there.
So it’s no surprise that one of his students, Adam Jarrett, has been making a killing at trading. Only he’s not trading penny stocks these days…
Adam got his start as Sykes’ student, just like I did. After raking in $130,000 in penny stocks, he got into trading NFTs.
He’s got an awesome strategy for doing it. And he’s about to share it with traders…
Sign up for Tim Sykes’ NFT Trading Summit here.
We’re just at the start of the NFT explosion. I hope you’re willing to put in the work to take advantage when it REALLY heats up.
How confident do you feel in trading NFTs? What do you think of their artistic value? Let me know in the comments!
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