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  1. Home
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Welcome to the World of NFTs, I'll Be Your Translator Today

Here are my top 10 interpretations of the language of non-fungible tokens (a.k.a. my must-read primer if you're going to do anything with NFTs).
By TIMOTHY COLLINS
Aug 24, 2021 | 03:32 PM EDT
Stocks quotes in this article: GME, AMC, MSFT, DE, CMG, MCD

Perhaps, by now, you're sick of hearing about NFTs.
 
For a lot of stock traders I know, the immediate response is: Why would I put money into something that I can right click and save?
 
It's a fair question. It's also one I discussed earlier with the notion of " digital country clubs." Beyond that, I liken it to GameStop  ( GME)  and AMC Entertainment ( AMC) . Why did those skyrocket? Greed certainly played a role, but people wanted to feel like they were a part of something bigger than themselves. The trades, those stocks, provided a sense of community, belonging, and pride. And, yes, greed played a role. It almost always does.
 
Once we get beyond that question, the next one is always, "I don't understand it."
 
So, that's a statement, not a question, but it's an objection none-the-less. It's not only, I don't understand why (which is really just repeating the immediate response mentioned above), but I don't understand how.
 
You see, for most of us, stocks are our primary language. Learning to trade NFTs or simply understand what we're hearing, means learning a second language. The longer you've been in the stock market, the harder that may be, so I'm here to help with a bit of a primer today. Let's call it a translation from NFT trading language to the stock market equivalent. This way, if you do venture down the path of NFT investing, then maybe you won't be quite as lost from the start. Again, these are my interpretations and they are not all encompassing, but here are 10 "translations" to help you possibly understand the world of NFT trading a bit better.
 
  1. Gas = Commissions and Fees. The fees you are paying to buy or sell, especially on the Ethereum blockchain, is akin to calling a broker in the '80s or '90s and dropping $50 to buy 100 shares of Microsoft (MSFT) .
  2. Airdrop = One-time special dividend. This is when an NFT project lets you mint an NFT or "magically" deposits a new NFT in your wallet. This is like receiving a one-time $5.00 dividend from Deere (DE) . There's often a run in the NFT until it goes ex-drop (ex-dividend), then it will drop.
  3. Mint = Initial Public Offering. A mint is when a project creates and distributes new NFTs similar to a public offering of a stock for the first time.
  4. Floor = Current minimum "ask." The floor is lowest price an NFT can be bought immediately.
  5. Sweep the Floor (Project owners) = Stock buyback. When a project buys all of its NFTs at the current floor price. The term sweep refers to buying all the NFTs listed at the current floor price, which can range from one to 100+.
  6. Sweep the Floor (Buyers) = FOMO. When buyers sweep the floor, it is usually because of momentum or project news. This is also similar to option flow.
  7. Burn = Merger. This is a phrase that can mean a few different things, but here I'm using it with the idea of burning (destroying) two NFTs to create and receive a new NFT. This is similar to two companies merging to form a new company. Some aspects of both companies will likely remain, but some will be removed.
  8. Breeding = Spinoff. Some NFT projects will allow you to "breed" two or more NFTs to create a new one. You still retain the original, but now have an additional NFT that will trade on its own. This is like getting shares of Chipotle Mexican Grill (CMG)  from McDonald's (MCD)  many years ago.
  9. Play-to-Earn = Dividend. A play-to-earn NFT game will reward you with in-game coins, cryptocurrency, or NFTs, all of which have the potential to be traded/sold for fiat. The game is going nothing more than returning a portion of its earnings to game players in a similar manner to how companies return cash to investors via dividends. It's not exactly the same, as game players have to work for it, but it's the closest comparison.
  10. Ape In = All in. Aping in is similar to buying aggressively or buying in size. It reminds me of someone "pounding the table," declaring a strong buy, or saying they are going all in on a stock.
If you hear any terms that you don't understand, drop me a line and I'll do my business to translate it to stock speak for you!
 

(MSFT is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells this stock? Learn more now.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Collins had no position in any security mentioned.

TAGS: Investing | Options | Stocks | Cryptocurrency

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