Introduction
NFTs have already begun disrupting some of the most prominent market segments in art and collectibles and show no sign of stopping. Investors curious about this nascent technology can read our beginner Guide: Everything You Need to Know About NFTs.
In this article, we’ll be going through tips and tricks on flipping NFTs and how you can leverage onchain analytics to make more informed decisions.
What Is Flipping?
Flipping is not unique to NFTs; people have been flipping collectibles for as long as they have existed. Whether it's baseball cards or real estate, the basic premise remains the same: buy an asset and sell it at a higher price. NFT flipping involves investors purchasing or minting NFTs and selling them on the secondary market, hopefully for a profit. The term 'flipping' typically implies a short timeframe, and this is generally true in the NFT space.
Why Flip NFTs?
The overwhelming majority of individuals who flip NFTs do so in the pursuit of profit. Flipping NFTs is a financial practice, and investors should treat it as such. It can provide a great and swift vehicle for bolstering portfolios and creating a capital springboard for less risky investments.
NFT flipping remains popular even in the current NFT market conditions. And this continued interest has pushed innovation forwards and attracted more talent. Before reading advice on flipping, investors should acquaint themselves with NFT marketplaces and critical factors to look for in an NFT: Top NFT Marketplaces and Investing in NFTs.
Minting vs. Secondary Markets
NFT flippers can be the first to own an NFT (minting) or purchase it off the secondary market.
FT flippers can either be the first to own an NFT by minting it or by purchasing it on the secondary market. Minting involves investors who are able to connecting their wallets to the project’s website and generating an NFT after paying the mint and gas fees. Typically NFT projects have whitelists with limited number of spots that interested individuals are able try to get on. The criteria for earning a spot varies from collection to collection but often involve engaging with the team and community.
Marketplaces are where investors can purchase NFTs from others. The most well-known NFT marketplace is OpenSea, which supports multiple blockchains and hosts a vast variety of NFTs. Beyond OpenSea, there are other marketplaces focusing on specific blockchains, such as Magic Eden for Bitcoin and Solana NFTs.
While opportunities exist in both arenas, flipping on the secondary markets is likely the most accessible option for most people. Getting on whitelists and minting NFTs can be extremely difficult and not something that can be replicated often. However, the upside potential of minting is certainly higher than buying on the secondary markets.
How to Spot Promising NFT Projects?
Social Media
Twitter remains the one of the best places to find market alpha. The platform hosts a thriving NFT community, releases developments first, and is an excellent place to find NFT collections early.
Discord is another excellent resource. Investors can join servers belonging to projects they like. But the best use of Discord is to join NFT-focused servers where participants can immerse themselves in the space and talk to like-minded individuals.
NFT Platforms
Investors interested in purchasing from the secondary market can search for collections on NFT marketplaces like OpenSea, Magic Eden, Blur, and Tensor. Investors interested in minting can leverage calendars to ensure they are first in line when it is time to mint.
Onchain Analysis
Onchain analysis allows you to observe and analyze trades, transfers, and transactions, helping you understand what’s really happening in the crypto world instead of having to rely on hearsay on social media. It gives you deep insight into what each market participant is doing at any point in time and let’s you stay ahead of the game. Here are two key data points to monitor:
Hot New Projects
Nansen's NFT Paradise features a Mint Master tab that shows real-time minting data for NFT collections allowing investors to swoop in and join mints of projects that show substantial momentum.
While Mint Master gives you a overview of the most popular new mints, focusing on the what Smart Money is minting helps reduce noise and lets you focus on collections that the top traders are accumulating.
What Smart Money is Buying/Selling
Another useful tool under the Smart Money tab of NFT paradise is the Smart Money Presence widget. This provides an overview of the NFT collections with the largest changes in Smart Money holders and the number of NFTs from each collection that they hold.
How to Analyze an NFT Project with Onchain Data
Data reigns supreme, and Nansen provides a great tool for analyzing data for prospective NFT flippers. You can start analyzing any NFT collection within seconds by searching on Nansen. The following section will examine Pudgy Penguins collection utilizing Nansen’s tools.
Who Bought/Sold
Perhaps the most commonly asked question, 'Who Bought/Sold?' can be easily answered by leveraging onchain data. You can find the ‘Who Bought/Sold’ widget on the overview page of any NFT collection on Nansen.
Analyzing recent buyers and sellers of a particular collection provides a good sense of the current market sentiment towards it. For example, if prices are down but you see Smart Money, notable names or large holders continuing to accumulate, it signals their optimism about the future of the collection.
Ownership
The wallets that own pieces within a collection serve as another excellent indicator of the project’s success. The higher the quality of ownership, the more likely the project will be successful. Monitoring and setting alerts on the largest holders also help with reacting quickly to potential market shifts. If large holders start selling, it could be a good time to re-evaluate your own holdings.
To gain a clearer understanding of ownership quality, examining the number of Smart Money wallets owning NFTs from the collection is the best approach. These wallets belong to the top traders in the NFT space, who are often early to trends and able to secure sizable profits
Potentially Undervalued NFTs
The value of individual NFTs can vary widely based on the traits of each specific NFT compared to others in the same collection. This variability creates opportunities to purchase NFTs listed below their typical selling price for the traits they possess. One method for finding such NFTs involves analyzing the historical selling prices of individual traits and scouring marketplaces for NFTs priced below their 'fair value.' However, this approach is extremely time-consuming and requires deep knowledge of the trends within specific NFT collections.
A quicker method is to leverage Nansen’s NFT price estimates tool, which uses machine learning models to analyze every historical transaction within a specific collection. This tool estimates the potential fair market value of individual NFTs and highlights those listed significantly below this value.
Key Factors to Look Out For When Choosing a Project
Founding Team
Reputation plays a massive role in Web3. A large NFT collection will have a founding team typically consisting of artists, developers, and marketers. Ideally, the team is fully doxxed, and they have a visual record within the space. The long-term success of a project largely depends on the founding team, their intentions, and their capabilities. A great indicator is founding teams that have released previously successful collections. Join the group’s Discord and see if the team interacts with the community and how they interact with it. Always ask why are they releasing this collection.
Community
Why do projects build communities? Marketing. A successful and thriving community remains one of the greatest marketing tools in any market segment. Projects with an active community that help push the project are invaluable. Successful projects have a specific buzz in the community; everyone believes they are part of something and wholeheartedly wants the project to succeed.
Observe how criticism is handled. Tribalism remains rampant in crypto broadly, and the dogmatic silencing of critics does not bode well. If communication between the team and community is nonexistent and engagement is low, look for another project.
Utility
What does the NFT do? What does the NFT grant access to? The utility profile of an NFT can be an excellent place for flippers to gain an edge. Certain collections will have specific traits that entitle owners to special perks. Search the whitepaper and see what rights, privileges, or rewards holders the project grants to holders. Teams take utility increasingly seriously, reflecting investors’ desire for their NFTs to accrue value.
Art
Subjectivity reigns supreme in the NFT space. Attractive artwork will always command a premium. The quality of the art acts as a great litmus test for the overall dedication of the team to the project. Substandard art is a tell-tale sign of a cash-grab project.
Vision
How does the founding team envision this project meaningfully contributing to the space? NFT traders should look at the project’s whitepaper and roadmap. Has the team been consistent in meeting its roadmap targets? Are there both short and long-term goals clearly outlined? Are these aims attainable?
Checklist
- Transparent and competent founding team (investment in an NFT is an investment in the team running the project)
- Solid social media presence
- Clear and lucid roadmap
- Positive community engagement
- Attractive artwork
Conclusion
Flipping NFTs can potentially be lucrative for investors who take the time to understand the landscape and can move quickly within it. But data is everything. Investors searching on OpenSea for a project to flip are lambs to the slaughter. Information asymmetry dominates NFT flipping, and Nansen puts investors on the right side of the knowledge gap.
