How to Approach NFTs in a Bear Market

It’s said that everyone’s a genius in a bull market, and nowhere has that been more apparent than with NFTs throughout much of 2021, through the start of 2022. NFT degens were aping into anything and everything, and that approach often worked, assuming you took profits (and yes, that’s a big assumption in NFT degen-world, I know).

What now, though, as we navigate the wreckage of (another) crypto apocalypse? Is it game over for NFTs? And if not, then how should we approach NFTs in a bear market?

Will NFTs Survive?

In a word: yes. A growing number of people are realizing that there is more to NFTs than monkey JPEGs (and anyway, there is nothing wrong with monkey JPEGs). NFT technology is central to web3 and metaverse development, and while trends and meta will fly by, and many NFT collections will crash and burn, the tech itself is here to stay and will be used in ways we haven’t imagined yet.

Also, this crash/post-crash period, here in 2022, feels different to post-crash 2018. Back then, it was retail that had got burned and the crypto space became quiet. Here in 2022, it’s large, over-leveraged organizations that got rekt. Of course, that means retail that was invested too, but it shows that the landscape is different. Overall, the crypto environment is a lot busier now, having expanded in all directions and sucked up talent.

The scene as a whole is very unlikely to become anything like the ghost town it was in 2018/19. And that may be especially true of NFTs, due to NFTs being the most vertical-crossing, attention-grabbing, and least outwardly finance-oriented section of crypto.

NFTs overlap with the worlds of art, design, gaming, music, fashion, sports, metaverse development and more, so if there is one space where you’ll find ongoing activity taking place, it’s here, in NFTs.

Which Existing NFT Projects are Worth Buying?

In general, famous collections are now buyable at prices low enough that they would have caused a stampede a couple of months ago, in some cases in ETH terms, but in all cases when converted into USD.

Did you ever want to own CryptoPunks, BAYC, or MoonBirds? There are no certainties in NFTs, and no guarantees about what the market will do next, but these are the closest you’ll get to a long-term safe play, and they’re all available at a discount.

In fact, CryptoPunks have already been moving, with the floor price jumping from around 48 ETH to 68.5 ETH, which is still far from its peak (last October) of almost 125 ETH. Switch to USD and the gulf is even larger, with a current floor of around 77K, while it hit over 450K last November. Is it now too late to pick up a bargain? Not if you believe these items have long-term upside and can revisit previous highs.

It should be noted, by the way, that just after the mini-run on Punks, Yuga Labs dropped an announcement that it would be working with Noah Davis, of Christie’s, to steward the CryptoPunks collection. This elicited cries of insider trading on NFT Twitter, but it’s entirely possible that buyers were simply taking advantage of low prices or reading a pump.

Either way, even if you’re not personally planning to splash out five figures on a Punk, these sales demonstrate that there are buyers picking through the debris and sniping with conviction.

In the next NFT tier, there are projects such as Azuki, Doodles, World of Women, Cool Cats, CloneX, Muri, DeadFellaz, and Creepz, all available cheaply in USD terms. I wouldn’t be certain that all of these will maintain their status in the long term, but it’s a reasonable bet that some of them can, and it would make sense to pick one or two that you believe in.

And if you want a part of Yuga but can’t afford the apes themselves, then prices on Otherside land are low. It’s the projects that build through the bear who can come out on top, and Yuga Labs is very well funded and arguably the biggest name in NFTs. Basically, they’re going to keep busy and, in Otherside, they have solid, metaverse-oriented plans.

What Should I Look For in New Projects?

A good approach now is to look for teams that have meaningful strategies, can manage their finances and are at work building. Groups making games and metaverse experiences, or focused on utility, should be of interest, along with projects associated with established names and active investors.

In relevant recent news, Immutable announced that it was launching Immutable Ventures, a $500 million venture focused on web3 gaming and NFT projects, in association with organizations including Animoca Brands and GameStop. Immutable is the firm responsible for Immutable X, a gaming-specialized layer-2 platform operating on top of Ethereum.

In addition to following VC money and major players, remember that the NFT world is fundamentally degen at its core, and still heavily oriented around art and design. Look out for meme momentum, and unexpected, transient meta, but take profits quickly.

Alternatively, for a more relaxing approach, follow art communities and artists you like, and chill through the bear market by collecting 1/1 items that really appeal to you.

What will be Different Next Bull Run?

One change is that we may not be so exclusively focused on Ethereum, which has, so far, dominated the NFT space while other blockchains were playing catch-up.

Solana has established itself most firmly as an NFT alternative, but was in need of a shake-out, having become too associated with rug-pulls, and over-saturated with generic DeFi-leaning projects in which core value is sometimes difficult to discern.

Cardano was, for a large part of the NFT bull phase, way behind Ethereum in terms of platforms and tools, but by 2022 had shiny, fast marketplaces, well-made collections minting and expanding, and the actual Doggfather himself on board.

Tezos is interesting because it has carved out a niche as the artistic, leftfield NFT space, and as a result saw expansive recent growth in NFT sales volumes.

Other blockchains with NFTs include Binance Smart Chain, Polygon, Avalanche, Elrond, and Flow.

A bearish period is a good opportunity to learn your way around new NFT ecosystems. Crypto is cheap right now, so you can load up on SOL, ADA, XTZ, or whichever others grab your attention, and see what’s on offer and how it all works. If you’re short of time, then perhaps just pick one alternative ecosystem to get familiar with.

How to survive this bear market besides just NFTs? Read Erik’s advice on this crypto winter.