How Do You Get Cash From An NFT?

Josiah Nang-Bayi, MD
7 Min Read

Non-fungible tokens (NFTs) have become a hot commodity in the digital world. From art and music to sports highlights and tweets, all kinds of unique digital items are being turned into verifiable digital assets called NFTs.

But once you own an NFT, how exactly can you go about getting cold hard cash from them? This in-depth guide will outline the main ways to liquidate NFTs for profit.

We’ll cover selling on marketplaces, private sales, auctions, fractionalization, lending, staking, and more. By understanding the options available, you can capitalize on your NFT holdings. Let’s explore how to extract real cash value from NFT ownership.

Sell on an NFT Marketplace

The most straightforward way to sell an NFT is through a major NFT marketplace like OpenSea, Rarible, or LooksRare. These function similar to an auction house or stock market for NFTs.

To sell, you list your NFT on the platform and set parameters like the sale price and expiration date. Buyers can then purchase it directly during the listing period. The transaction happens on-chain, transferring ownership to the buyer and sale proceeds to you. 

Marketplaces have become popular because they handle all the backend complexity and give you easy liquidity. The downside is the platform fees, which range from 2-5%. You also may not find buyers willing to pay your full desired price.

Sell Through a Private Sale

For more control, you can sell an NFT directly to a buyer through a peer-to-peer private sale. This involves you handling the transfer of money and the NFT.

You’ll need to establish price and payment terms with the buyer upfront. Many sellers ask buyers to transfer traditional cash payments first before they initiate the NFT transfer from their wallet to the buyer’s.

This avoids the risk of not receiving payment but does require more coordination and trust. Escrow services can add a layer of protection for larger sales.

The main benefit of private sales is avoiding marketplace fees. The exposure downside can be mitigated by advertising within your NFT communities. This works best for rarer items when you already have an interested buyer.

Auction Your NFT

If you want to drum up more demand and maximize sale price, auctioning your NFT can be ideal.

Leading platforms like OpenSea allow you to schedule auctions that run for a set time. Bidders then compete to offer the highest price before the auction expires. If bidding meets your reserve price, the highest bidder wins and completes the purchase.

Auctions are great for time-sensitive sales, rare items, and when you want to build hype. Make sure to promote the auctions across social media to attract plenty of bidders.

You do need to set reasonable reserve pricing based on demand. With the right auction strategy, you can elicit competitive bids and pricing.

Fractionalize for Shared Ownership

Fractionalization platforms like PartyBid  allow you to split your high-value NFT into fractional shares called “particles”. This lets multiple investors collectively own and share in profits from an NFT.

Each particle acts like a stock share in the NFT. You get cash upfront by selling the particles. Buyers can trade them speculatively or redeem them later to claim partial ownership.

One major benefit of fractionalization is unlocking liquidity from big-ticket NFTs by spreading ownership. It also gives more investors access to valuable NFTs previously out of reach.

Downsides include added platform fees and less control over your former NFT. But overall fractionalization introduces creative new capital strategies.

Earn Yield by Lending

NFT lending platforms like NFTfi enable you to deposit your NFTs as collateral to borrow cash or stablecoins. This taps your NFT’s value to get liquid funds without selling, similar to a home equity loan.

As long as your loan stays collateralized, you keep ownership of the NFT. The lender receives yield generated from the loan.

The cash you borrow can then be spent freely while your NFT remains intact. When ready, repay the loan plus interest to have collateral returned.

Lending is lower risk than selling while bringing large NFT values into productive use. Just be cautious of volatile collateral values causing liquidation risk.

Earn Passive Income via Staking 

Staking takes lending a step further by allowing you to earn yield on your NFTs.

Lending platforms like NFTfi enable staking rewards when you deposit NFTs as collateral. This gives you recurring yield on your holdings.

Other NFT projects integrate native staking functions to incentivize holding. Stakers may earn governance rights, exclusive rewards, or a share of revenues. 

Downsides include temporary loss of access and speculative staking rewards. But like lending, staking creates productive returns from NFTs you wish to keep long-term.

Flip Popular NFTs

The strategy of buying low and quickly selling high is commonly called “flipping” in NFT circles. This speculative approach banks on the price spiking soon after minting or release.

Succeeding requires identifying promising projects early, researching floor prices, snagging scarce releases, monitoring trends, and timing profitable sales.

For example, buying a rare CryptoPunk at 0.5 ETH and selling it for 5 ETH just days later represents a profitable flip. This takes knowledge and luck, but the returns can be massive if you get the timing and valuation right.

Conclusion

There are many innovative ways to turn your NFT holdings into tangible cash – from marketplaces to fractionalization and beyond. Each approach has its own benefits, risks and strategies.

The key is finding liquidation methods that match your investment priorities, whether that is maximizing profits, retaining ownership, or establishing passive income.

Now that you understand the possibilities, you can develop plans to start extracting value from your NFT portfolio. Just remember to evaluate all options against your personal financial goals. Happy converting those NFTs into spendable cash!

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Josiah Nang-Bayi, MD is a medical doctor by profession, an author, a financial literacy and digital assets enthusiast, an entrepreneur and a growing philanthropist.
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