3 important tips before investing in NFTs

• Serial entrepreneur Gary Vaynerchuk has turned his attention to crypto and NFTs.
• Vaynerchuk said last year’s bull market was full of short-term greed.
• He offered three pieces of advice for considering an NFT investment.

Gary Vaynerchuk, the internet’s boss of hustle and bustle, has turned his attention to crypto – specifically NFTs.

It may seem like a strange turn of events for Vaynerchuk, who last year predicted it 98% of NFT projects were destined to fail, characterizing the 2021 bull market as a gold rush driven by greed. But the serial entrepreneur still believes there is enormous potential in the nascent space.

In an interview with Insider, he shared exactly why he believes most NFT projects will fail, discussed how he spends 100 hours evaluating projects, and offered three pieces of advice to potential NFT investors.

Who is GaryVee?

Gary Vaynerchuk, better known online by his nickname GaryVee, is far from just another influencer. While he boasts impressive social media stats – including 14 million followers on TikTok and 10 million followers on Instagram – he is also the founder of Resy and has invested in companies such as Facebook, Twitter and Snapchat.

Now, Vaynerchuk has turned his attention to the world of NFTs, and in his usual enthusiastic fashion, has dived in headfirst.

Vaynerchuk owns over 5,000 NFTs, including several from prominent collections such as Cryptopunks, The Bored Ape Yacht Club, and World of Women. Never one to stand on the sidelines, Vaynerchuk has also created his very own NFT collection, VeeFriends. VeeFriends recently announced a $50 million Series A investment from Silicon Valley tycoons Andreeson-Horowitz, and earlier this year Vaynerchuk hosted VeeCon, a conference where access was limited to those holding a VeeFriend NFT.

Why does GaryVee say most NFT projects will fail?

Vaynerchuk’s prediction last year that the majority of NFT projects were likely to fail was somewhat controversial in the midst of the 2021 bull run – but now it appears he has been proved right.

According to nonfungible.com, the number of active NFT wallets has dropped 89% from a peak of 118,220 in November 2021 to 12,935 today. Reportedly, two-thirds of all NFT projects are underwater, and the crypto winter has spurred a 25% decline in NFT trading volume.

Vaynerchuk’s comments last year stemmed from his belief that the NFT market was growing too big too fast, and that investors looking to make a quick buck were chasing whatever project caught the market’s eye on any given day. He drew a parallel between overenthusiastic investors pouring money into Internet companies and inflating the dotcom bubble in the late 90s, and overenthusiastic investors pouring money into NFTs last year.

“Literally last summer — when I started creating the content — I’m thinking, ‘this is exactly what happened to Internet stocks in ’99.’ The macro thing was so big and smart people saw it, but they got ahead of themselves on timing, Vaynerchuk said.

He continued: “What happens in times like this, you get the best and the worst you get very thoughtful, real technologists, real consumer behaviorists, and then you get the degenerate gamblers.”

Considering the sudden deflation of the NFT market, Vaynerchuk characterized the conversations behind the scenes in the NFT community today as far more tame than they were during last year’s bull run.

“The 5% who understood what happened are having thoughtful, in-depth conversations in 2023-2030, and the 95% that we’re here for the gold rush, the conversations are quiet because they’ve left,” Vaynerchuk said.

What GaryVee looks for in an NFT project

Vaynerchuk says he spends 100 hours researching a project before deciding to invest, an amount of time he jokingly summarized to Insider.

“Reading, listening and watching videos, podcasts and written word. My reading comprehension stinks. So I think people can do it in 25 hours instead of 100,” Vaynerchuk said.

More seriously, Vaynerchuk said that the aspect he focuses on the most before making an investment is a project’s founder.

“I get this question a hundred times a day, and I always say the same thing: spend as much time as possible gathering information about the person leading the project,” Vaynerchuk said.

Vaynerchuk acknowledged that not everyone will be able to reach out to founders directly the way he can, but he said you don’t necessarily need to connect with a founder to form a comprehensive opinion. He said he looks to see how active a founder is on a project’s Discord, and whether there are videos, podcasts or articles about them.

“You can only watch interviews of Yam [Karkai, founder of World of Women],” Vaynerchuk said. “See if you think she’s smart. And then literally buy her NFT.”

He suggests reading up on NFT projects on Reddit — with which his company Vayner3 has partnered for an “ABCs of NFTs” playbook — Discord and Twitter.

But even if he likes a project and the founder behind it, his last step is to read any conflicting views about the project to get an even perspective.

“When I got bullish on Cryptopunks, I read all the dissenting POVs on Cryptopunks,” Vaynerchuk said. “So I would spend the last 10, 15 hours googling ‘why Cryptopunks is a fad, why Cryptopunks will go down,’ literally those searches on YouTube and Google.

GaryVee’s rules for NFT investing

Vaynerchuk has three general rules for investors considering diving into the NFT market.

First, he says you should only invest money you’re comfortable losing. Vaynerchuk said speculative assets sound good when things are going well — but when things are going bad, those assets can go to zero quickly.

On that note, he says to only invest in something you actually understand, or are willing to put 100 hours of your own research into, instead of chasing the hot project dujour.

Finally, he says to set your investment horizons for speculative investments at “five years, not five weeks.” If you’re trying to make a quick buck, it’s better to “buy stuff with the money you have and flip it on eBay” than it is to invest in an NFT, he said.

Vaynechuk reiterated his thoughts on the parallels between investing in NFTs and investing in tech companies during the dot-com bubble – stressing that the smart way to minimize risk is to bet on projects that already seem to be winning, even if that means to accept lower profits than you would enjoy as an early adopter.

“For things that are so speculative, I think you’re better off buying PayPal, eBay and Amazon in 2004 than you were in 2000. Of course you put some money on the table, but you were able to pick the winners that were more obvious,” Vaynerchuk said.