How Can I Determine an NFT's Value?

Main Points:

• NFTs have countless potential uses in the real world, making them more than merely collectibles.
• The three main criteria to take into account when determining an NFT's intrinsic worth are rarity, utility, and tangibility.
• A NFT's value also varies depending on whether it is held for a short or long period of time and the asset it represents.
• NFT collectors and traders can find a variety of NFTs on Binance NFT, the world's leading marketplace for NFTs from indie creators, premium auctions, and mystery box series.

The cryptocurrency market is always moving. Altcoins, stablecoins, and other project tokens are only a few examples of the many new types of assets that are continually being created. But every few years, a brand-new class of crypto asset emerges with a bang, driving up prices quickly and inspiring the development of a number of new use cases.

As a link between the virtual and physical worlds, Non-Fungible Tokens (NFTs) have become widespread throughout almost all areas of the decentralized economy. NFTs, as their name suggests, are special tokens that grant their holders unchangeable ownership rights to particular assets.

NFTs have grown in popularity in the cryptocurrency market as a collectible asset class that can be linked to a piece of art, a pair of shoes, or a collectible in a video game.

What Determines an NFT's Value?

Since NFTs are a relatively new asset class, it is challenging to estimate their exact worth. Investors considering NFTs may find it difficult to determine whether a particular asset or collectible is worth their money and whether they actually want or need it. This is in contrast to tangible items like the Mona Lisa and physical collectibles like NBA player cards, which have established values.

But as NFTs enter numerous industries and reach high valuations in less than a year, three key factors have emerged for determining their value.

1. Rarity

This element directly translates into how uncommon and "hard-to-get" a certain NFT is. A unique piece of art from a well-known digital artist or an NFT made by a well-known celebrity are both excellent examples of rarity. The impact that such an NFT would have in, say, a video game, is another indicator of rarity.

Due to the intrinsic worth of these NFTs—whose owner also possesses the blockchain proof of ownership—people are drawn to them. This creates a sense of difference and establishes an NFT's premium value.

The original CryptoKitties, Everydays - The First 5000 Days by Beeple, and other projects are good examples of the distinctive impact in the cryptocurrency business.

2. Utility

An NFT's practical use, whether in the physical or digital worlds, is what gives it its usefulness. For instance, certain NFTs are more than just collections because they may be employed as characters, spells, or virtual territories in games. This feature of NFTs gives them instant worth, which increases over time based on how well-liked the underlying project is. More players in a decentralized game will be prepared to shell out top cash for a special card as the player base of the game expands.

The Euro 2020 NFT Tickets, the Decentraland real estate, or collectible cards like Geralt of Rivia from The Witcher Universe Gwent Card Game are a few examples of these NFTs.

3. Tangibility

Because they are bound to physical objects, some NFTs have value in terms of tangibility and ownership immutability. To clarify ownership rights, anything can essentially be backed by an NFT, but it does not automatically make the thing special or in high demand. Such an item's intrinsic value will be determined by its usefulness, scarcity, and the level of user satisfaction it provides.

For instance, having an NFT ticket to a high-profile event is significantly more valuable than having an NFT attached to a bottle cap, both intrinsically and personally.

Such NFTs with real value are most appropriate for short-term trading on the market in terms of market viability. This is because such NFTs, like tickets, may have expiration dates. Other collectibles, such as limited edition sneakers with NFT tethers, can gain value over time as their supply decreases.

Final Thoughts

Although intrinsic value does adhere to a number of market norms, worth is mostly a product of personal perspective. The rules for NFTs are predicated on three key elements, each of which is dependent on the NFT's issuer. The short- and long-term resale value of an NFT essentially determines its value.

It is abundantly obvious from NFTs' adaptability as an asset class that they are capable of far more than only serving as collectibles or digital representations of physical objects. NFTs can be used in the real world for anything from voting rights and plane ticket verification to stamping items to deter theft.

‍

‍