Most people purchase non-fungible tokens (NFTs) with the intention of hopefully selling them at a much higher price in the future. And some NFT holders don’t want to sell their prized possessions, but that doesn’t mean they can’t benefit from them at all.
It’s a well-known fact that investing in any market has a certain level of risk. Moreover, price appreciation of any asset isn’t guaranteed and there can be a significant opportunity cost associated with holding idle assets on a long-term basis. This is also true with NFTs because their fair value is largely undetermined due to their highly speculative nature.
NFTs are arguably the most abstract types of assets that have ever been created and traded. Recently, a “COVID Alien” NFT sold for over $10 million and it’s quite possible that other buyers may not want to pay anywhere near that amount for such an item. Many people find NFTs to be quite ridiculous so it can be challenging (if not impossible) to assign them an objective monetary value.
However, there are certain strategies investors can employ to begin earning steady returns from their NFT or DeFi assets.
Leverage your NFTs to participate in yield farming
Most experienced investors would know that the art and collectible markets are considerably more “liquidity-starved” compared to the traditional equity, gold markets, and other asset classes. And this liquidity crisis is even more common in the NFT space, which is in its infancy.
It can take a very long time to match serious buyers and honest sellers or lenders and borrowers. Without the right amount of liquidity, NFT holders might not be able to find the best deal and could end up selling their collectibles for extremely low prices if they need money right away for some reason.
Drops Crypto is a platform that allows NFT owners to generate capital by providing their NFTs as collateral. The platform aims to offer users with attractive options that allow them to effectively leverage their assets for loans and participate in yield farming opportunities.
It will allow users to create NFT vaults where funds borrowed against NFT and DeFi assets are sent straight to a yield farming strategy, enabling yield farming using NFTs.
You can also lower the opportunity cost of holding governance or liquidity tokens by putting them up as collateral to earn considerable yield. Additionally, you may utilize the NFTs as collateral to get trustless loans. Lending through Drops is powered by permissionless NFT lending pools. Users may also generate returns with their “idle” assets by providing stablecoins, governance tokens to fungible or NFT lending pools and earn competitive APYs.
Ever thought of renting out your NFTs?
Renting out your non-fungible tokens for a fee is a nascent but promising trend. Users want to borrow NFTs for a fraction of the cost of purchasing them outright. Maybe they want to flaunt it or maybe they want to know what it feels like to have a prized possession, even if it’s for a short while.
As an owner, you can earn some passive income by renting out your idle NFTs. Yiedl Finance allows its users to rent out their NFTs to generate rental income. The NFT owners can determine the rental price, the NFT price (which is subjective), and the maximum rental period. Someone who wants to borrow your NFT will have to put the NFT price down as collateral along with the rental fee for the desired lease duration.
The NFT owners have no reason to worry about theft or fraud because the borrower has put the value of NFT as collateral. When the borrower returns it on time, the collateral is released to them.
Earning with both hands
This method is more suitable for sophisticated investors with a good understanding of the crypto market, investor behavior, and NFTs. Here’s how it works: Put your NFT down as a collateral to borrow cryptocurrencies that your research tells has a massive upside potential. Then stake the cryptocurrency to earn some passive income (why keep it idle?) while waiting for its price to shoot up.
You’ll be generating staking rewards on one hand while benefiting from the potential price appreciation on the other hand. For the uninitiated, staking involves putting your cryptocurrencies to validate transactions and participate in other network activities.
Wrapping it up
The NFT ecosystem is still at a nascent stage. People would increasingly want to monetize the NFTs they bought for exorbitant amounts of money. But waiting for the prices to appreciate might be a futile exercise. Platforms like Drops Crypto, Yiedl Finance, and others are opening up new avenues to make money with NFTs and DeFi assets.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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