With the rapid development of blockchain technologies, we see plenty of blockchain-based projects coming up one after another. Particularly, many of these projects are likely to issue their own tokens or create NFTs for the purpose of seeking funds and attracting more users. To some extent, the majority of users are also probably crypto investors. They are looking for investment opportunities in crypto markets just like other traditional markets.
However, the nature of cryptocurrencies like tokens and NFTs is quite different from traditional equity. In the following paragraphs, we will briefly outline the characteristics of tokens, NFTs, and traditional equity, so that it helps investors identify the differences among these investment tools. Moreover, with the basic background knowledge, investors are likely to make better decisions and reduce potential mistakes.
Important things you have to know before investing in tokens
A token is a kind of cryptocurrency generated by the smart contract and then deployed on the particular blockchain. Some kinds of tokens have a fixed maximum total supply or so-called hard cap. On the other hand, some kinds of tokens are inflationary tokens which means the number of tokens is continuously growing over time.
In addition, remember to check as much relevant information as you can. In particular, studying the roadmap and tokenomics of these blockchain projects is highly recommended. The roadmap is a timeline-based plan showing how the project will be developed over time, while the tokenomics indicates how these tokens will be distributed to different parties such as teams, advisors, community, ecosystems, and so on.
Important things you have to know before investing in NFTs
NFTs stand for Non-Fungible Tokens that follow ERC721, ERC1155 or ERC721R standards. Each NFT could be different from one another if it belongs to ERC721 and ERC721R. For ERC1155 tokens, the contents of the particular NFTs could be the same, but they still have different token IDs.
From the investment point of view, NFTs are not just digital collectibles, but more like virtual goods. It is important to know the background of these NFT projects including the founder, community, use cases, total amounts of NFTs, on-chain data, etc. in order to make your own decision on whether to enter the NFT markets.
Moreover, keep in mind that the liquidity of NFTs could be very bad. If no buyers, no deals. There is no guarantee that NFT holders could sell them in secondary marketplaces like Opensea, Raible, Magic Eden, and so forth. Thus, if you are about to buy NFTs lack of popularity, it could be difficult to sell them at a satisfactory price.
How does this apply to investment clubs?
Unlike traditional investments, there are quite a few investment clubs in cryptocurrency that help beginners and ordinary investors to enter projects at lower prices. In the traditional market, it is usually quite difficult and expensive to get into investment clubs
