• Each NFT should be judged by a different metric depending on what type of NFT it is
• If metrics are showing good signs, it is not guaranteed that your investment will succeed
• There are scammers who falsify statistics by different means

Because of the rapid growth of NFTs and the number of marketplaces, there are many different projects popping up everywhere hoping to attract attention from a growing number of buyers. But with these increased releases comes big competition. Competition in the crypto and blockchain space is ruthless, thus 90% of the projects are destined to fail in the long run.

Because of this, investing in them is a risky process. So, to reduce these risks there are different metrics we can look at to decide if it's worth investing in a specific project or not. 

The floor price is the price of the cheapest NFT available for purchase from a specific collection. This is also called the entry price, as it is the least we have to pay if we want to join a project.

Buying at a floor price is considered a good investment strategy, as it is the least expensive entry price, which means you are risking the least amount of money possible.

We also have to look at the history of floor prices of the project and possible NFT flips. This will help us to see how prices change, what causes these changes, whether a current floor price is high or low, and many other things. So if floor prices are now low, and historically it shows that after floor prices fell, they saw gains shortly after, it is a good idea to buy now and then flip it for a higher price.

Supply is another great metric to look at when deciding which project to invest in. Whenever a project releases a new collection of NFTs, they are limited in numbers. There can also be independent NFTs that are not part of a collection and are released separately. Also, some implement NFT whitelisting, in order to make their NFTs more unique.

Supply usually decides the price of NFT. If supply is low, it is more likely that NFTs of that collection will be more expensive than if the demand for them is high. If supply is high it is more then the price per item will probably be lower and will have less of a potential for going to the moon.

But don’t just look at supply alone, as there might be collections that have small quantities of NFT, but with low demand which won’t mean that they will have high prices as not many people are willing to pay big amounts of money for them.

The volume traded is a great statistic to look at together with the aforementioned supply metric. The trading volume shows us how much money has been spent on a specific collection of NFTs. This number is a good indicator to determine the demand for each collection.

If the trading volume is high, it means that more people are willing to pay money for this collection, which also translates into how liquid the collection is.

If you are looking for a long-term investment, the Diamond Hand metric is the one you need to pay attention to. This metric shows us what percentage of owners have not sold their NFTs after minting them. This also shows us how many investors are willing to keep their NFTs and are not moved by market volatility. 

When doing a long-term investment, this is the best metric for us, as it shows what percentage of investors are in it for the long run. This also means that if prices spike, there will be less of a possibility for mass selling which might cause prices to fall really fast. There are many cases of this happening in both the NFT and crypto space when prices suddenly rise a lot and people start to sell the assets that they purchased for less and now try to gain profits by selling their assets. 

This is another great metric to see how big of a demand there is and how big of a community is behind the project.

Let us say a project has 10 collections with each collection containing 1000 NFTs. In total, the project has 10,000 NFTs. If the number of unique holders is 10,000, this means that each NFT is owned by a different person, which correlates to a big community and demand. But let us say the number of unique holders is 1000, this means that each person on average has 10 NFTs. This translates to a smaller community and less demand from a wider range of people. 

"NFTs are a way to authenticate digital art in a way that was never possible before." - Mike Winkelmann

If the number of unique holders is low, it does not mean that the project is bad for investing. We have to do research and find out why the number is low and only after that decide if investing in this project is worth it, as there might be a good reason as to why this number is so low.

NFTs are non-fungible which means there is no set price for them, and they are worth as much as someone is willing to pay. Because of this, calculating its market cap is not like calculating the market cap of crypto.

To calculate the NFT market cap we need to multiply its seven-day average trading price by the total amount of NFTs in a collection. This metric gives us a good picture of how liquid the collection is. This also shows how in-demand the NFTs are as a higher market cap means more people are willing to pay for them.

The big selling point of NFTs is that they are unique or part of a very limited collection and hard to obtain, like the Bored Ape Yacht Club NFTs. But not every NFT is equally rare. Because of this, when choosing which NFT to buy its rarity metric is a really good number to in mind.

The rarity score takes different aspects of NFTs into account and compares them to others in the same collection. With this, it becomes easy to determine how rare each NFT is and if it is worth the price. There are different tools that allow us to check this metric, with marketplaces such as OpenSea having implemented their own rarity-determining tool.

As with anything, NFTs have their own pros and cons. There are countless scams involving NFTs. Because of this, we should be careful when determining if a specific NFT or project is worth investing in. There are people who falsify different statistics of NFTs through different means, so if metrics are good double-check them, so you don’t fall victim to these kinds of scams.

One of the most common scams in the NFT space is fake NFTs. There are a lot of scammers who are creating fake NFTs that are practically identical to the original ones. After this, they put out these NFTs for sale for way lower than the floor price of the original NFT. Then they just wait for unsuspecting victims to see this listing and without thinking too much, purchase it as fast as possible with fear of someone else buying it and them missing out on a bargain deal. So beware of the FOMO factor.

Another common scam in the NFT space is floor price and market cap manipulation. Since NFTs are on the blockchain and there are practically no regulations, you cannot check past NFT owners' identities, you can just see their wallet addresses. Because of this, it is easy for scammers to create artificial prices for NFTs, by purchasing them themselves multiple times. This gives NFTs a false valuation and there are many who fall victim to this kind of scam. Because of this, always go to a Discord channel or any other digital space and check if the project behind this NFT has a good and active community. Talk to the community if you are unsure about an NFT you want to buy, they are usually fairly open-minded and welcoming.

• Each NFT requires a different approach when determining if it is worth investing in
• The Diamond Hand value is a good metric to decide if an NFT is worth investing in and holding long term
• Market Cap is the best metric to decide if an NFT is worth investing in