The crypto community is going crazy over collectible NFT avatars. This isn’t a new trend – projects such as CryptoKitties and CryptoPunks were some of the earliest NFT projects on the Ethereum network, and are still some of the most successful projects to date. In the recent months, more still have been hitting new highs, such as the Bored Ape Yacht Club avatar collection, which sold $96 million USD worth of NFTs in under an hour.
So what’s all the fuss around NFT collectible avatars, and why are people spending so much money on them?
The Case of CryptoPunks
CryptoPunks was the first NFT collectible project to hit over $1 Billion in sales. The 8-bit portraits don’t look like much on their own, but their historical significance as one of the earliest NFT projects on Ethereum makes them very valuable. When the project first came out, CryptoPunks were given away for free. Now, the lowest price for a punk is $328,332.08 USD.
In the crypto community, NFT collectible avatars help enhance digital identities. A CryptoPunk profile picture signals to your followers that you’re either successful enough to afford one, or that you’ve been in the NFT game for a long time, which adds to your credibility. With other NFT avatars, it signals interest and participation in particular projects – sort of like wearing the jersey of your favorite sports team
The NFT Collectibles Community Perks
Another draw of NFT collectibles is the community that springs up around them. Because collectibles are limited, not everyone will be able to get one. This creates an in-group, and the chance for collectors to be part of an exclusive community. Most projects have a Discord server where members of the community can interact, and bond over their shared interests. For game avatars, it provides a space for story-building and participation prior to launch.
Aside from the intangible benefits of an online community, NFT collectibles also work like real membership cards in that they offer exclusive benefits to their holders. Many NFT projects allow holders to participate in exclusive events such as NFT claims, raffles, community giveaways, and more. Holders of the original Bored Ape NFTs, for example, were given free Mutant Ape NFTs in August that are now worth a minimum of 4.29 ETH!
Collectibles with game tie-ins
Some avatars are more than just a pretty face. Certain collectible avatars have additional built-in functions like secondary sale royalties and even the ability to be used in games! This is possible because NFTs allow interoperability – which means that they can be used across various systems and applications. One example is the Voxodeus avatar collection, which has a tie-in to The Sandbox game. As the decentralized gaming ecosystem expands, it may even be possible to use one NFT avatar across multiple games.
Some decentralized game developers also release their in-game playable characters as collectible NFTs prior to game launch in order to generate interest and funding. Games like Sipher and Guild of Guardians have pre-released NFT game avatars, which was received enthusiastically by fans as they provided opportunities for early engagement.
The NFT Collectibles Cash Grab
Of course, one of the biggest draws of NFT collectibles is the potential for financial gain. A large portion of NFT avatar buyers are investors looking for projects that will appreciate in value and generate profit through resales. This is unsurprising, considering the huge appreciation we’ve seen in some projects. Most NFT avatar collections are also algorithmically generated to have different features, some of which are more rare than others and worth more in resales.
With many popular projects, secondary markets pop up as soon as primary sales are over, and sometimes even before the last item in the collection has been minted. However, not all projects do so well. For every NFT project that hits the headlines, there are countless others that fade into obscurity, and the money spent minting along with it. So what are the requisites for success?
NFT Flip or Flop?
Even for the most NFT savvy, it’s hard to tell for sure if a project is going to be successful because there are just too many factors at play. However, there are a few details that could possibly indicate a winning project, so keep this in mind when hunting for your next NFT collectible:
The first time is always the best
Is this NFT project the first of its kind? Does it offer new features that no other project has yet? A pioneering project is likely to get a lot of attention, thus pushing up its value.
Apes together strong
The larger the community, the higher the likelihood of success. Large communities mean more interest, and more people to spread the hype.
Kill two birds with one token
More utility means more value. If there’s a game tie-in for a project, or if it offers exclusive project access and rewards to users, it may be more valuable.
Of course, there’s no sure-fire way to tell if the NFT collectible you buy is going to appreciate in value. Unless you’re a seasoned investor, the best course of action is to buy NFTs from projects you’re actually interested in and which provide attractive perks to NFT holders. That way, even if your NFT doesn’t appreciate in value, you’ll still be getting your money’s worth.