Last Updated on 2 weeks by Web3 Studio
Within every cryptocurrency and NFT, there are always ups and downs. The worst that can happen, and has a high possibility of happening is an NFT to going down to a bear market, however, this can sometimes prove to be an advantage in the long run if the right steps are taken. This article will go over ways to prepare for an NFT bear market.
What is a bear market?
A bear market is when there is an ongoing reduction in the price of an asset, whether it be an NFT or cryptocurrency. An NFT bear market is foreseen by keeping an eye on, and comparing the timeframes and prices. An NFT market usually changes a lot faster than other markets such as the crypto market, resulting in a faster decline or increase in prices.
Signs of a bear market
One of the main signs of an NFT bear market is looking at the trading volume. If an NFT has more trades of individuals selling their assets, prices are likely to reduce a lot as the demand falls. A worrying sign would be if there are many selling their NFT but not many buying, this would be a major sign of a bear market.
Another sign would be if there are other projects similar to the NFT. If the hype of the NFT is low, most likely the demand will also be low and therefore the possibility of a comeback after the bear market would be less likely.
An additional sign of a bear market could be linked to the cryptocurrency market. NFT prices are highly impacted by the prices of cryptocurrencies. The main reason behind this being that NFTs are usually bought using Ethereum. Considering this, if the price of Ethereum reduces, this will affect the price of the NFT market and the price of the NFT will also reduce.
Steps to take during or before a bear market
The most important thing to consider when trading is that one must have the patience to hold their assets. There are always bullish and bearish times in the NFT market, but one thing to keep in mind is to never sell at loss. If there is a bear market, most likely it will increase back with time. Maybe this could be the best time to take a small break and come back later.
It is also essential to not invest everything into one asset. A portfolio should consist of smallholdings in NFT that one would not mind losing. Keeping some Ethereum would also be wise so that it can be used to buy NFTs at a low price when in a bear market, but looking wisely if it would be worth investing in these NFTs. It is important to do proper research when deciding whether to invest in an NFT and when the right time would be to do so.
One should only invest an amount that they do not mind losing. As NFTs do not have a certain outcome, anything is possible in the long run, therefore one should consider the worst-case scenario of a rug pull and not invest more than they can afford to lose. Most people usually use any extra cash to invest.
Another thing to consider in the bear market is whether the NFT is worth investing in. it is important to look at the potential of the NFT in the long run, and to only invest if it has a promising future and is well known.
In addition to above, one should check the whole timeframe of NFTs and see how they have performed in the past. Usually, any projects that rise in price after a bear market are seen as having good potential in the long run, also known as blue-chip projects. It would be a wise decision to invest in these kinds of projects.
As NFTs are still quite new and not always predictable, it is hard to know what to expect and when there could be a bull market or a bear market. A bear market will definitely not be pleasant, but it is something that should always be considered so that we can prepare for the worst-case scenario. The steps shown above can be considered during or before a bear market to prevent any loss.
DISCLAIMER: This is NOT financial advice. Please do not take any of the above as financial advice, and conduct your own research.