Trading and investing in NFTs during a bear market is one of the hardest times to manage your emotions and psychology.
However, with the right strategy you can thrive.
Here are 3 tips to manage your mindset:
1. Risk Management
This is a fundamental rule trading in any asset market, and even more important during a bear market when you have a higher chance of loss given the reduction in liquidity.
Therefore, calculating your risk tolerance - an amount of ETH you’re comfortable with the possibility of losing is key before investing in any project.For example, one of your “rules” could be to never invest more than 5% of your available liquid into a mint.
Giving a higher % risk to highly anticipated, high-conviction drops (~4-5%) and a lower % to more “degen” type drops (~1-2%).
Running these calculations before any trade will help prevent you from over leveraging (investing too heavily) into any single project and manage your liquidity to continue being able to stay in the market while protecting your downside.
2. Remove Your Risk Fast
Most of the time we get emotional when we feel loss, and in the context of buying NFTs - when we lose our hard earned ETH.
The fastest way to get rekt is to have zero risk management (see #1 above).Playing the game “risk free” will allow you to stay in the game and remove most of the negative emotions that can influence your trades.Selling NFTs to reach “break even” within a new collection can be a great relief, especially as the market is yet to determine its value.
For example, if you mint 10 NFTs at 0.05e with a total cost basis of 0.5e and sell half (5) for 0.1e, you have just removed your risk by 100% and can hold your remaining 5 NFTs risk-free.
This of course is dependent on your liquidity position - the more liquid and lower “risk”, the less of a need to sell for break even as fast as possible.
Whether your remaining NFTs turn in multiple times more value or the market deems them less valuable and the price retraces below your mint price, it won’t affect you nearly as much because the “loss” is negligible.
3. Realize Your Gains
Taking it one step further from #2, it can be a healthy habit to turn your ETH profits into realized gains by cashing out a % into stable coins.This of course depends on your trading strategy:
A) If you’re a short-term trader that relies on trading NFTs for your everyday living, then it would be advantageous to cash out some of your ETH gains into stable coins.
B) On the other hand, if you’re a long-term investor of NFTs with less need to rely on your investments for short-term, day-to-day living, then this strategy might not be relevant.That being said, if you find yourself making negatively emotional trades/ investments or feeling tilted then cashing out even a small % of your liquid could be the reset you need mentally.
Sustaining yourself through a bear market is the key to success in a bull market.
Use these tips to help keep your mindset healthy and ready for when the tables turn.
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