Chainalysis: NFTs Tend to Be Profitable for Early and Patient Buyers

Blockchain analytics firm Chainalysis believes non-fungible token (NFT) collectors most turn a profit if they embrace projects early or are patient. The company shared its insights into the NFT market through a report earlier today. Chainalysis based its publication on data from OpenSea, the largest NFT marketplace.

According to the report, NFT adopters have sent over $26.9 billion to ERC-721 and ERC-1155 contracts, the two types of Ethereum smart contracts associated with NFT marketplaces and collections, thus far in 2021. Chainalysis believes the increase in the total value sent and the average transaction size shows the NFT space has gained traction as an asset category.

While the success stories in the NFT space have attracted hordes of new adopters, the chances of succeeding vary. For instance, users that manage to join an NFT project’s whitelist have a chance of getting 75.7% in profits because project developers let them purchase NFTs at a discount as a reward for helping market their projects.

Chainalysis added that 78% of the sales by whitelisted buyers result in profit, with 51% of the collectors selling NFTs for double the amount they bought it.

While missing out on the whitelist of NFT projects might seem discouraging, Chainalysis believes purchasing an NFT and being patient might see collectors make a profit. According to Chainalysis, buying and selling NFTs in the secondary market often results in a 65.1% profit.

Chances of profiting from buying newly-minted NFTs are slim

The report detailed that buying a newly-minted NFT is a hard way to turn a profit. Reportedly, only 28.5% of NFTs bought during minting and sold later lead to profits. However, this figure does not account for people that bought NFTs at launch and held on to them. This is because it is difficult to set a price for NFTs that have never been put up for sale.

Explaining this phenomenon, Ethan McMahon, a Chainalysis economist, said,

In general, those who choose to sell their newly minted NFT do so more quickly than those who are purchasing an already sold NFT. Roughly 50% of first-time sales are completed within 2 days of the initial mint.

McMahon added that,

It takes about five days to reach this same mark for secondary sales after purchase. There are of course exceptions, and some sellers recognize a profit can be made off of a near instant resale and others sell after months of hodling.

Chainalysis added that buying newly-minted NFTs is not an attractive investment, especially for the average user. The company cited gas fees that the network cuts even if a collector does not get an NFT during an auction. Additionally, experienced users use bots to bag NFTs as soon as auctions begin, resulting in more failed transactions for average users.