Should You Sell Your NFTs? Discover the cases for and against selling NFTS and get practical tips for earning more from your next marketplace listing.
Should you sell NFTs? That’s a question many ask after watching NFTs shoot up in floor price. Even if you don’t own any non-fungible tokens yet, perhaps you’re simply interested in learning more about the mindset of those who buy and sell NFTs.
To outsiders, NFTs looked like overpriced JPEGs, GIFs, and memes. Some NFT communities collectors even joke about this cliché and talk about the merits of investing in JPEGs versus crypto. They say things like:
“Should I buy or sell my JPEGs today?”
Over the past few months, I’ve bought over a dozen NFTs from various projects. Some are long-term holds or HODLS. I sold some at a profit and some at a loss. I also chatted with NFT investors who’ve sold for eye-watering profits and losses. I’m small fry, though.
I’m not a financial advisor, and NFTs are incredibly risky. I published this content for informational purposes only. Always do your own research.
NFT investor TheTrieuth started trading NFTs in July of 2021. They purchased Auzki #3628 for 2.74 Eth ($7,547.99) in early January 2022. The project subsequently mooned, and a collector contacted TheTrieth on Twitter, offering 100 Eth. TheTrieuth declined… at first. They subsequently sold it for 150 Eth ($413,802.00) on January 21st!
TheTrieuth is an outlier. But in this article, I’ll explain the cases for and against selling. I also provide some practical tips for selling NFTs. Let’s dive in!
The Case Against Selling NFTs
Spend any time on NFT Twitter, and you’ll come across a plethora of influencers arguing against selling NFTs. Some of them are simply pumping their bags, but should you sell? Below are the key arguments for holding an NFT versus selling.
You’ll Miss Out on Future Gains
Many NFTs have emerging utility and use cases. For example, some NFTs like CyberKongz and Lazy Lions are becoming a type of play-to-earn NFT. Hold one, and you can use it to play virtual games and earn rewards in the form of proprietary tokens and other NFTs. You can trade these back to Ethereum and then US dollars.
You’ll Lose Access To A Community
NFTs: come for the floor price; stay for the community! Buy an NFT, and you’ll gain access to exclusive Discord communities and channels non-holders can’t contribute to.
Access is great for connecting with other project holders. Members share info or alpha about future NFT drops and can sometimes mint these before the wider market. The CyberKongz Wall Street Alpha group, of which I’m a member, is famous for its alpha calls, but you need an NFT from this project to join.
As a verified NFT community member, you also don’t have to worry as much about scammers who proliferate free Discord communities like a virus.
It’s Too Early To Sell
OpenSea, the premier NFT marketplace, claims over one million users. While it’s undergone exponential growth, it’s also facing competition from new marketplaces like LooksRare. All that pales against Coinbase. It claims approximately 73 million users and is launching an NFT marketplace this year.
Read my article Best Coinbase NFTs: 11 To Watch Out For In 2022.
Celebrities are getting involved in NFTs too. Some like Paris Hilton and Reese Witherspoon have advocated for the space for a while now and are seen as NFT influencers. Other celebrities like Eminem and Jimmy Fallon bought Bored Ape Yacht Club NFTs. The floor price shot up after they aped in.
You’re Excited The Potential For NFTs
Many NFT projects are forming partnerships with traditional media and organizations and have big ambitions for building a recognizable brand.
For example, Boss Beauties was the first NFT project displayed at the New York Stock Exchange and will be the first NFT to appear at the UN. The project also recently signed a partnership with Marvel.
You Don’t Care About Floor Price
If you like an NFT project and are investing money you can afford to lose, why sell? In 2017, you could have picked up a CryptoPunks NFT for free, excluding gas fees.
Today, these NFTs are worth between six and seven figures. Even still, many holders are unlikely to sell because they want to own a piece of NFT history.
The Case For Selling NFTs
It’s fun buying NFTs, learning about projects, and watching their floor prices rise and fall. So, why sell?
You Want To Take Profits
Like or it not, NFTs combine art, technology, and capitalism. Nothing is wrong with taking profits from an investment. Sure, you could make more money later… but you could also lose it all as NFTs are incredibly risky. If you want to reduce risk, take some profit.
You Need Investment Liquidity
Even NFTs you can mint or buy for free cost gas or Gwei. That usually equates to costs over $100 per NFT. Most new NFTs aren’t free either, so you can consume an investment budget quickly.
Sometimes, collectors sell NFTs to acquire more Eth or liquidity for buying other NFT projects. These sales also help buyers avoid investing more hard-earned FIAT or dollars into the volatile NFT market.
It’s For Tax
At the end of the tax year, you may want to sell some NFTs to cover or reduce a tax bill.
During November and December 2021, I reviewed my NFT purchases. I sold some that dropped in price to reduce my tax bill. I also sold several at a profit because I wanted to rebalance my portfolio and invest some money back into safer assets like an S&P 500 index fund.
If you’re planning on tax-loss harvesting, best speak to a financial advisor. Some software can also help you plan these types of NFT sales.
Read my guide to the best NFT tax software.
Tips for Selling NFTs
Assuming you’re ready to sell NFTs, apply these tips to get more value from your next sale.
Set Sales Targets
Set a price target for getting out of an NFT project and taking profits. It’s easy to watch in NFT shoot up in value and think you’re doing well only for the project to plunge in value several weeks or months later. Do you want to become exit liquidity?
Set a target for taking profits. Force yourself to sell if this price point materializes. For example, many NFT investors set a price target of one Eth for new projects. That NFT sale translates into a profit of several thousand dollars, usually more than enough to cover costs and generate a nice profit.
Determine Your Long-term NFT Goals
Some NFT purchases are quick flips or short-term investments. Others are medium-term holds to keep a software wallet for several weeks or months. A few are blue-chips to hold onto for years.
Consider how long you want to hold an NFT? If it’s a short-term hold, take profit quickly if the NFT rises in price. If it’s a medium-term hold, forget about the floor price for a few months or until the project delivers on its roadmap. If it’s a blue-chip NFT, move it to cold storage using a hardware wallet and forget about the floor price.
Average And Average Out
Rather than spending your NFT budget at once, buy one NFT on a given day or week and then wait before buying another. This gap protects you from price fluctuations in the NFT market and Ethereum.
Similarly, it is far better to sell NFTs gradually rather than offloading them at a steep discount. NFTs, unlike Bitcoin or traditional investments, aren’t that liquid. Even though the floor price may look attractive for an NFT, you still need to find a buyer.
Depending on the project in question, that can take hours, days, or even weeks. Despite what Twitter influencers say, rarer and pricier NFTs are harder to sell. Far better to sell NFTs when you don’t need the money or liquidity urgently.
Decide on Fixed Price Versus a Dutch Auction
If you’re selling an NFT on OpenSea, you can either set a fixed price or a time (dutch) auction.
Setting a fixed price is a good strategy is for selling NFT at some future price point when you aren’t in a rush. A dutch, or timed auction, means the price falls in value over time. When the deadline elapses, the NFT goes to the highest bidder.
If you’re setting a fixed price and change your mind, remember to cancel the sale. OpenSea made headlines for all the wrong reasons when Bored Ape Yacht Club members found their NFTs sold at a fixed price they set months ago.
Owners forgot about their fixed-price sales associated with their wallets. When they transferred their apes into the wallet in question, bots snapped up these cheaply priced NFTs. OpenSea claims it’s fixing this issue. It also compensated some of those affected.
Watch my video accompanying this article below.
The Final Word About Should You Sell Your NFTs
Selling NFTs can happen instantly. Or it may take a few days or weeks. Ideally, list your JPEG for sale when the price is right, and you’re not in a rush. Although it’s impossible to time the market, nothing is wrong with taking profits. If you’re up, you can always transfer a few NFTs into cold storage for a potential moonshot too.