How To Survive an NFT bear Market 2022
The recent crash in Crypto has sent waves of panic and frustration to investors all across the web3 world. With NFTs, popular chains like Ethereum and Solana have experienced major dips, resulting in many floor prices tanking and many liquidating their NFTs for cheap.
After topping at $4800 on the 11th of November, Ethereum dipped to $2400 and maintained volatility, topping at the mid $3000s.
However, with the recent crash, Ethereum sunk as low as $1800 before fighting to stay just over the $2000 mark. For Solana, after a high of $258 in November 2021, the coin is now trading around the $50 mark.
However, in the NFT space, the situation is not so bleak, especially for long-term holders. For flippers looking to make a profit within a short period, the state of the crypto market may present uncertainty.
In this post, we cover how to survive a bear market such as this.
Don’t Panic
As much as NFTs depend on the crypto ecosystem, they are somewhat independent, and price volatilities may not matter that much. With NFTs, anyone can buy with crypto or with fiat currency through a debit or credit card.
This means even when the crypto market is down, buyers will still be looking to buy into projects they believe in. As a long-term holder, it’s best not to panic. Even if floor prices decline, that’s expected and normal in a bear market.
If you believe in a project and there’s evidence of progress in the roadmap to provide long-term value, it’s best to hold out and wait for the market to rebound.
Bear markets are not eternal and keep in mind volatility is the norm in this space.
Cash Out Your Profits
The crypto market is volatile by nature and a bear market can last for weeks, months, and even years. Depending on the state of your finances, it might be time to make a decision.
NFTs are mainly a speculative market, so avoid getting emotionally attached to the art in your wallet. If you bought during the highs, don’t be afraid to cash out by taking out your profits. There will always be more worthwhile projects to invest in the future.
For new projects yet to get established, cash out early to avoid the undercutting that is going to ensure once prices start dipping across the board. For established projects, you may want to hold out, especially if the team is living up to their roadmap and delivering.
Cut Your Losses
In extreme circumstances, your best option would be to cut your losses and cash out. Depending on your financial circumstances, waiting it out may not be possible. If the project’s floor price experiences a steep decline, cash out while you still can.
Some projects may not recover from a bear market. Use this chance to assess the project’s potential value and, if not convincing enough, cut losses by taking something with you.
Invest in Stable Coins
If you happen to take profits or cash out your losses, converting your coins to stable coins should be your next move to protect your gains or prevent your assets from devaluation.
Holding ETH, Sol or any other cryptocurrency can lead to losses if the dipping continues. Convert your proceeds to stablecoins such as USDT, DAI, and USDC to lock in your gains or prevent further losses.
Stablecoins are coins whose values are pegged or tied to a value of a currency, usually USD. Be careful not to invest in questionable stablecoins like Terra which plummeted in value by almost 100% in the recent crash. Terra(Luna) was not backed by any solid assets like other stablecoins which are backed by Ethereum, Bitcoin, and fiat reserves.
We recommend only trading with reputable coins. In this case, Tether (USDT), which has the most liquidity among stablecoins, with a market cap of just over $75 billion.
In summary, the best stable coins to protect the value of your assets include:
● Tether (USDT)
● Dai (DAI)
● Binance USD (BUSD)
● USD Coin (USDC)
● TrueUSD (TUSD)
Reassess Your Portfolio
Take advantage of the bear market by reassessing your portfolio to weed out projects that don’t seem to offer value over the long term.
Go through your portfolio and assess the roadmaps, updates from the project founders, and the floor price.
Weed out the poorly - performing projects and replace them with projects you’ve been keeping an eye on. If a project you want experiences a dip in floor price, this might be the time to get in.
Choose NFT projects Selectively
In a bear market, avoid spending based on hype alone. Look at the potential value you stand to get from the project and whether it’s worth investing in.
Create a checklist and use it to gauge whether new projects meet your criteria. Any that falls short should be discarded or put on a watch list where you can track sales volume.
In summary, the criteria in your checklist should include:
● Project engagement in social media
● Roadmap
● Team qualifications
● Total Supply
● Sales volume
Takeaway
The cryptocurrency market is volatile by nature, so always make investment decisions with this in mind. Don’t put your eggs in one basket by only investing in NFTs as they are highly speculative.
Spread your investments across the big coins like Bitcoin and Ethereum, stablecoins, and lastly, keep enough fiat currency to keep you going. Always make informed decisions and, most important of all, never invest more than you’re willing to lose.
