Hodling vs Trading NFTs in 2022
Non-Fungible Tokens, or NFTs, are some of the hottest assets to ever exist, and for a few good reasons. With the invention of cryptocurrency, absolutely anyone with an internet connection can participate in the NFT industry — a blossoming field of art, data storage, property rights, community and technology.
In fact, anybody can become an NFT artist, join an NFT community, or join the millions of fans and brands that get together to buy, sell, and collect NFTs. It’s well known by now that NFT trading can be immensely lucrative, as some NFT creators often sell their art for tens of thousands to millions of dollars.
But as the world has continued to adopt NFTs, other technologies like Web3 and the Metaverse have also come along to further enhance the realm of digital possibilities. NFT domains, Metaverse real estate, real-world NFT applications, and clever NFT investment technologies have surfaced to make hodling NFTs quite enticing.
So when it comes down to what you ought to do with your NFTs, you may think, “Do I trade or hodl?” In this article we’ll explain how both strategies can be legit in 2022, and hopefully by the end of our discussion you can better make your decision!
NFT Buying Strategies
A quick thought on the step that comes before trading or hodling NFTs, buying them. Believe it or not, your purchasing strategy should and will play a role in what you are planning to later do with your NFT(s).
There can often be different perceptions and use cases for different types of NFTs. For example, buying a community-based NFT that has thousands of characters involved may be a great step towards selling that NFT in the future for profit. Whereas, purchasing an NFT lot in the Metaverse could prove to be a better long-term investment strategy. Just food for thought before we continue!
How to Effectively Trade NFTs
On the nose, trading an NFT sounds simple. First you buy NFT art that you want, then you put it up for sale or auction in an NFT marketplace (for a profit), and collect on the sweet gains once it sells. Easy one, two, three… right?
Well sort of. While that process is entirely possible, it’s not necessarily always that simple, especially for the unlucky NFT trader. So let’s focus on two ways you can minimize NFT trading risks. Building an NFT community, and marketing.
The number one thing you can do to increase your NFT sales volume is to either join or build an NFT community. In one of our past articles we talked about how you can build an NFT community, and in that article we noted that NFT groups are usually successful because they have strong and consistent branding, have limited or rare membership opportunities, are present on multiple streams of information (social media), uphold clear rules and cultural focus, and they all create mechanisms to excite fans.
Participating in or building your own NFT group affords you a greater opportunity to engage with fans and brands. NFT communities often have themes that allow better reach for target audiences as participants are likely to buy NFT art of a specific style. Plus,
When you can deliver these things, you’ll have created a strong reputation around the NFTs you’re selling, and marketing will become even easier.
Marketing your NFTs is a constant process, and should be done whether or not you are building a NFT community to amplify your sales. However, the two go hand in hand.
Conventional marketing skills in 2022 means constant communication between you and your target audience. Take steps to create a social media presence specifically for your NFTs, build a website dedicated to your NFTs or NFT community, make promotional teasers for your NFTs that you want to sell, and communicate your trading growth through a weekly/monthly newsletter. All of these steps generate genuine interest in what you’re doing and the things you sell. Plus, your fanbase will reward you with new unforseen relationships and opportunities. Content is king! And marketing gets your content out into the world.
The Spoils of Trading NFTs the Right Way
One common opportunity that becomes available when you’ve accumulated a strong NFT community is a collaboration. Collaborations in the NFT industry are well-received and are always exciting since a good collaboration effort will boost the profiles of any NFT creators and traders involved, and will add value to your NFTs.
And if you wish to create and sell NFTs by yourself, another helpful tip is to include a royalties smart contract protocol in the trading process. This allows the original NFT creator to be paid along with the next one, ten, one-thousand people who sell the NFT next. But NTF royalties are even cooler than that as royalty protocols can also allow for any predetermined number of second-hand sellers to also collect a royalty percentage when the NFT is sold.
This means your fans would be more incentivised to buy and sell NFT art because they can earn a percentage of each sale that the NFT will undergo. It’s like a collaboration between you and your fans.
But the fun doesn’t stop there. Interestingly enough, one of the best ways to market is by collecting NFTs. Collecting NFTs demonstrates that you have a deeper interest in your NFT group. It shows that you take the time to aggregate value in your NFT portfolio by selectively collecting NFTs. If you can harness a collection of sweet NFTs, other NFT enthusiasts will take notice naturally.
So get ready to capitalize on that attention, because you can easily make passive income from your hodled NFTs!
How to Hodl NFTs
Hodling NFTs can seem like an easy process. First you buy NFT art that you want, then you put it in a wallet, and then you, well, hodl it either until demand for it rises or because you like it. Easy one, two, three… right?
Again friends, the answer is, well sort of. While that process is entirely possible, it’s not necessarily always the most responsible. So let’s focus on two ways you can maximize your NFT hodling strategies. Yield farming and renting NFTs.
Yield Farming NFTs
Earning yield is the same thing as earning a return through lending out a security. A security is a financial instrument that represents an amount of financial value. Okay, so in plain English, NFT yield farming means you can create a digital agreement that allows you lend out your NFT(s) for a return that is worth a percentage of the total value of the NFT(s). The percentage can be earned monthly, weekly, or annually.
Many banks offer this sort of arrangement by which you “store” your money with a bank and they pay you interest (monthly/annually) to hold that money.
The yield farming process is possible through a combination of DeFi protocols, smart contracts, and of course your NFTs. But unlike with a bank, you remain the sole owner of the NFT throughout the entire process.
The secret sauce to yield farming is the ability to leverage upon multiple DeFi protocols, allowing them to essentially earn yield on the yield earned from another protocol. So in essence, you can hodl an NFT. Lend it out safely, and earn returns on it. And then you can earn returns depending on the success of your yielding endeavors. It’s a win, win, win.
Rent Your NFTs Out
Along the same lines as yield farming is the exciting opportunity to rent out your NFTs. If you have accumulated a dedicated community that has high interest in the NFTs you hodl, it may be a good idea to interact with them through renting out NFTs.
NFT enthusiasts might just chomp at the bit to host one of your sweet NFTs in their wallet even if for a short time period. “Why?” you might ask? Well they may want to show their followers that they have good taste in NFTs, or that they hold a certain status in the NFT community. For what it’s worth, one sweet piece of NFT art from a certain NFT artist has the power to change everyone’s perception around an entire collection.
Just like with yield farming, NFT renting can be safe and protected thanks to smart contracts. If you set up the proper, agreed upon parameters of the smart contract, you can rent out your NFTs for as long as you like, and for as much as you want. But do make sure to include collateral and rental costs in the smart contract for your sake.
When the renting period is finished, your NFT will be returned to you just as the renter’s collateral is returned to them.
The Spoils of Hodling NFTs the Right Way
Okay, so obviously the first spoil is all the passive income you can collect on. But the real rewards come from any marketing and advertising you do to benefit these hodled NFTs. Much like trading your NFTs, hodling NFTs can be a good way to build out an NFT community and advance the status of your NFTs.
Of course, there will always be a few NFTs that are near and dear to our hearts which we may never trade. But it’s always healthy to keep an open mind about upgrading your NFT portfolio. The more sought after your NFTs can be, the more worthwhile they can be to hodl.
Trading NFTs and hodling NFTs are two activities that any NFT enthusiast should take part in to maximize their NFT experience. Not only does consistent trading activity boost your hodled NFT collection’s value, it can be socially engaging and worthwhile from a community perspective.
The opposite is true too. Hodling your NFTs can earn you money and pump the value of your NFTs by creating demand. Thus trading them becomes easier when the time is right. And in both cases, a strong dose of marketing and NFT community building will help immensely.
One of the best ways to participate in the NFT industry is with Fayre. No matter if you decide to trade or hodl your NFTs, Fayre is working hard to be the best marketplace for NFT communities, NFT artists, and fans and brands as possible so you can buy, trade, or hodl to your heart’s content!