The Rudiments of Fair Price Estimation for NFTs & How Liquify Can Help!
You might have heard about the famous Nyan Cat being sold as an NFT, Fortune selling limited-edition cover as an NFT, and artists such as Grimes and Beeple making millions selling NFTs. For starters, NFTs or Non-Fungible Tokens are a unique digital asset. NFTs can be used for anything ranging from an image, video, or audio. You might wonder if it’s an asset-related image or video or audio then how it is unique? Well, let’s explore then!
NFTs work on Blockchain technology. Blockchain technology is growing multifold and NFTs form a huge part of it. The majority of NFTs are on the Ethereum Blockchain. Each of these NFTs will have a digital signature that cannot be replicated and makes it more valuable. You might think if it’s a digital asset how can it be owned by one? The artist who created an NFT can sell copies of it but there will only be one original and that can be owned. To explain it in layman terms, you can own the Monalisa and there might be many replicas but you will have “The Monalisa”.
It is the value spent on an asset that forms the basis for digitally distinguishing copies from the original. This is where we need to think about the price estimation for NFTs. People buy NFTs for various reasons. For some, it is a collectible, for others, it is to support their artists, while few consider it an investment to trade later. But for all these, how to go about it is the biggest question.
Blockchain analytics can help us in evaluating the value of NFTs, but the NFTs price estimation, to start with, is much more complicated. NFTs can sell from a few dollars to a few million dollars, depending on the specific content of the NFT. As per a report, an average NFT sells for under $200, and minting and selling them can actually result in a loss. So, what is NFT price estimation?
NFT Price Estimation:
NFTs are not like any other digital assets. It is a unique asset and so is the valuation of NFTs. There is no standard valuation model to follow for NFT price estimation. There is no standard Price to Earnings Ratio to evaluate the NFTs. This posts a difficult situation for us to estimate the price of NFTs in a reliable format.
The value of NFTs can be estimated based on a few components like Utility, Ownership history, Appreciation value, Liquidity, and Rarity. For each NFT, the weightage of the component changes and it depends on the type of the NFT. Let us probe into each of these components to understand NFT price estimation in detail.
One of the most important factors of valuation is utility. Some of the operational NFTs have more weightage for utility compared to anything else. The more you use an NFT, the greater its value grows. Due to their interoperability, these NFTs can be used in many gameplays and have immense value. The utility might not hold the same with regard to digital arts. For digital art or video of gif the utility differs from that of the gameplay NFT.
Past ownership is one of the crucial components for NFTs which are used as collectibles or assets. A past owner of an asset, particularly a digital asset, adds both hype and brand value to the asset. Apart from the hype it also adds authenticity to the asset. Knowing the ownership history plays a major role for NFTs as you need to understand if the NFT you are buying is authentic or not. Blockchain analytics helps us in understanding the key information of a token’s or the user’s transaction and we can determine the value of the NFT based on that.
You need to see the historical values of the NFT and understand the trend. If the NFT is not showing any appreciation in terms of value, then the value of that particular NFT will be affected accordingly.
NFT Value tracker plays a huge role in this. Keeping track of the price with the help of an NFT value tracker that helps in understanding and estimating the price of an NFT. An NFT Tracker leverages Blockchain analytics to help in understanding various data points about an NFT.
For crypto enthusiasts, it is absolutely essential to study the trend in blockchain and NFTs and estimate the value.
The liquidity of assets is one of the huge concerns when it comes to NFTs. NFTs are illiquid assets. NFTs can’t be quickly sold and converted into cash as it depends on many other factors. The liquidity of an NFT depends on factors such as utility, ownership history, brand value, and appreciation value. These factors actually give visibility to NFTs to consumers. Only if the consumer knows about NFTs and has a huge demand for the brand value, then it can be sold easily. If an NFT belongs to a niche category of consumers, then the potential of buying that NFT will be less. This in turn reduces the liquidity of the asset. If an asset attracts a small but ardent group of people who relentlessly seek the asset, then the liquidity will be high for that particular asset.
Rarity & Characteristics:
As people are buying NFTs as a collectible, it is inevitable for them to know the rarity and uniqueness of a particular NFT. For example, a signature NFT of a famous sports star holds a great value, and the value of that NFT increases with the value of the sports star. Another point to add is the cultural value an NFT holds. A Pokemon card of significant importance or an NFT commemorating a landmark moment in sports holds paramount cultural value that reflects its worth. As a result, the purchasing power of potential buyers becomes apparent.
Why is NFT estimation important?
NFTs rely hugely on speculation among the buyers. Added to that, is the curiosity from buyers’ ends, which drives the prices meteorically. Thus, it is essential to understand and estimate a fair price for NFTs.
The above components help us in evaluating and estimating the value of NFTs. With underlying Blockchain technology that is booming and growing exponentially, NFTs have the possibility to become the next big thing. Therefore, fair price estimation is expected to have good impacts on NFT trading. Speculation and peer marketing shouldn’t be the only way to drive the price of NFTs. The NFT Market is highly volatile and not regulated as of now. So, it is essential to have a methodology to estimate the price of NFTs.
Using the above components to estimate the value of NFTs we can help in standardizing the NFT market places.
But what if we say we have a solution to the fair price estimation of NFTs? An estimate is crucial if you’re planning to buy or sell a digital asset. So, why not do it the bitsCrunch way? Yes, The Liquify model helps to have better estimation for the NFTs. What about it? Let’s check!
How does Liquify simplify this process?
It is more of an art than a science to value digital assets. As a digital asset, NFTs can serve a variety of functions in the context of valuation. Insufficient liquidity presents challenges when analyzing an asset’s fair market value.
The current scenario is flawed because NFT assets are being valued too high and their price is not justified. Unfortunately, these prices don’t reflect their actual value.
The Liquify model identifies undervalued and inflated digital assets based on enhanced AI technology. How do they do it?
- A systematic analysis and estimation of the digital assets
- An AI enabled approach as a problem solver leaving no chance for errors
- Real-time NFT value estimation
- Created robust estimation models for Cryptopunks and Axie Infinity
To increase engagement and NFT liquidity, companies should design a systematic reinforcement that promotes healthy trading. However, it should start with the real and accurate price of an NFT, to keep up the liquidity. Liquify from bitsCrunch is a game-changer that is able to harness the features of NFTs and open up new scenarios and business models. So, did we just sort your problem on fair price estimation for NFTs? Want to know more about the NFT Ecosystem Guardians? Head on!
bitsCrunch is the Guardian of the NFT ecosystem. We are one of the top 4 AI companies in Munich, Germany that excels in Blockchain technology. We believe that blending a proven technology like Artificial Intelligence with Blockchain technology can do wonders and make the ecosystem much more safer and reliable ! Our mission is to create impactful insights from intricate data sources, by harnessing predictive analytical systems which are empowering organizations with actionable intelligence.
- AI-Enhanced Safety Feature (SCOUR), An AI agent that acts as a watchdog to flag the spoofing transactions that manipulates both volume and price of the assets in the NFT ecosystem.
- Digital Asset Forgery Detection System (Crunch Davinci), An AI model that flags forgeries, copycats and bootleg digital art contents thereby protecting the artists and their creations.
- Fair Price value estimation for an Asset(Liquify), A fair value estimation & analytics for Digital Assets (NFTs) using AI to empower the community to embrace and value their assets in real-time.