How to Survive a Bear Market
As you have probably already heard, we are in the middle of a bear market across stocks, cryptocurrency and NFTs.
There has been a huge drop in trading volume for NFTs since the start of this year which is continuing to decline. This article will explain strategies you can use in order to better position yourself for this and limit damages.
As always these are just my thoughts and not financial advice.
What is a bear market?
In simple terms, a bear market is when supply is greater than demand, confidence is low and prices are falling across the board. We can see just from looking at the chart below that OpenSea daily volume has been gradually getting lower over the last few months. There is currently a lot of fear within markets due to outside circumstances such as cost of living and inflation, with other factors such as the crash of Luna directly affecting crypto markets.
Why should I be concerned?
Now activity is much lower than previously, there is much less money moving around within the space meaning demand is falling for both buy and selling actions. This can create panic, causing people to lower floor prices and panic sell sometimes completely destroying the secondary market for certain collections.
We haven’t seen this much pain within the NFT market in the last 12 months and things could get worse from here which is why it is important to limit your risk.
Sell mid/low tier projects & stay away from risky assets
We have seen a lot of projects come and go from this space over the last 6 months with many barely surviving. Now is a good time to sell off lower / mid-tier projects as there is the issue that they may not have enough capital to continue to work through their roadmap. As a lot of the floor prices for these projects are currently down it may be tempting to hold on. This is a risky strategy in this market, however, as we don’t yet know where the bottom will be for these projects as we are likely to see more pain. Taking liquidity out of these projects will allow you to be more flexible in your strategy and make you more prepared for the next bull run.
As well as this now is not the time to be aping into risky plays and lots of new projects. Make sure to take the time to research any new projects you are considering buying and only use a small percentage of your liquidity when buying these. If you remember the start of the year, a person could probably throw a dart at a board of upcoming projects and would make a profit 90% of the time. This is no longer the case with many projects struggling to even mint out.
Buying blue-chip & established projects
Now ETH is down and floor prices are lower than usual, it makes sense to buy established projects for a discount. For a long time, a lot of the top collections have been out of reach for normal people due to their prices mostly being into the hundreds of thousands of dollars. A lot of the top collections are becoming more affordable with eth prices being lower than we were previously used to and floor prices dwindling down.
During this market, a lot of people are not willing to spend the money they once would on these collections, due to not seeing quick gains. Buying into more established projects will likely give you a stronger position if you have belief in the team and project. This is a long-term option so don’t expect to be making quick gains and bear in mind that the floor prices of these collections could fluctuate a lot in the coming months. A reason to value the more established projects within the space is that these collections have a bigger backing and have been around longer.
A few of my favourite more established projects for this are:
- CloneX
- Doodles
- Moonbirds
- CryptoPunks
Make WETH offers
Liquidity is generally low in a bear market, so others might be trying to get liquidity out of the market and so will be more willing to accept wrapped Ethereum offers. The number of bids being accepted has gone way up as of recent. It has become easier to get cheaper deals than floor price in this market, especially on higher-tier projects. If you are offering on items around the floor, chances are you can put an offer 5–10% lower than the floor price and get an NFT on discount. As well as this you can look to get traits that are more valuable within a collection with WETH offers although this can be riskier.
Build during the bear
This can refer to many things, whether it be finding Web3 jobs, networking, building a brand or NFT collection. Now a lot of people have left the NFT space the competition is smaller when it comes to getting Web3 jobs, making NFT collections or building a brand. Learn new skills during this time when the market is quieter. This will hold you in good stead for the future of Web3 and NFTs. Working within Web3 will also give you extra funds through this market and allow you to grow your connections within the space.
If you are looking for Web3 roles, here are some skills which are desirable and the jobs you can secure from having these skills:
- Writing — Content writing, Journalist, Copywriter
- Research — Data Analyst, Social Reach Researcher
- Marketing — Social Media Manager, Branding
- Designer — UX / UI Designer, Content Creator
- Software Development — Smart Contract Developer, Web Developer, NFT Tool Developer
Move money into stablecoins/fiat
If you are wanting to mitigate risk throughout this market then moving your cryptocurrency holdings into stablecoins or fiat can have its benefits. If you were to do this and cryptocurrency continues to fall, you would be able to DCA back into it when it is lower. This would allow you to accumulate more cryptocurrency than you previously had if buying in at a lower price. This can also prevent you from making emotional decisions when holding money in ETH in terms of new mints and secondary plays allowing you to be more relaxed through the bear.
There are many different tactics when it comes to moving money into stablecoins, some of which you can find in this article which shows different portfolio methods depending on the risk you are willing to take.
Final Words
There are many different approaches you can take when it comes to handling the bear market which is entirely dependent on your risk appetite and overall outlook on the market. There is no “one size fits all” when it comes to your strategy and so you should do your own research when developing a plan.
As the market continues to change, you should be looking to change your strategy depending on the current market sentiment.
Remember if you are really struggling after taking a hit from the bear market, it is perfectly fine to seek out emotional support. Speak to friends and family about the subject and put your mental health first. Some may find solace in taking a step back from the markets for a while and participating in other activities, whether it is rediscovering your love for old hobbies or just taking the time to go outside and experience nature, do what will make you happy.
0xZinga for NFT Investor
