The bear market of 2022 seems to be harsh on almost all industries. This year, the cryptocurrency market has experienced a sharp fall with Bitcoin reaching its lowest price in June 2022. According to the reports, Bitcoin is now %70 below its highest record of $69,000 in November 2021.
Other altcoins have also shown a decrease in value as their values are directly tied to bitcoin. Therefore, most of the crypto market has been facing a slump. However, things seem to be different in the NFT market. Although the bear market has influenced the NFT market, it could be said that the NFT market keeps acting more stable compared to the crypto market. Data suggests that nearly $8 billion worth of NFTs were traded in the first quarter of 2022, which proves that the market is running well with no collapse.
All the discussion above brings a question to the mind: Why are NFTs doing well in this bear market? In this article, we aim to take a closer look at the NFT market and study its fluctuations, if any, during the bear market in 2022.
What has the NFT market been through?
We need to look to the past to get an opinion about the possible future. The NFT market of today reminds everyone of the Initial Coin Offering (ICO) boom in 2017. Though it was like a gamble, the ICO introduced a novel way for blockchain start-ups to raise capital from retail investors. Soon there was a surprise that Bitcoin (BTC) and Ether (ETH) holders hand over their cryptos to get non-fungible tokens. It just seemed that everyone was making easy money. All to do was get an NFT from a new collection. The blockchain revolution started changing the world and many were there to welcome the changes.
The trend continued to act glamorously until late 2021 when the hype within markets was peaking. Almost all enthusiasts paid high prices to buy NFTs that they perceive as revolutionary. NFTs became the new frontier for a big chance, once again, to gain profits for the most risk-on investors and those swept up in the hype.
Many worried that the slump in the cryptocurrency market could directly influence the NFT market; however, due to their structure, the NFTs showed to resist the condition and hold their holders and the market.
Are NFTs in a bear market?
Unlike cryptocurrency, it is clear that NFTs are not as closely tied to the financial cycles of the stock market or the economy. Many experts in the NFT world believe that NFTs seem to be bullet-proof against market turbulences. However, NFTs are still experiencing a downturn of their own as in February 2022 NFTs were subject to a 40% decline in NFT sales to about $4.4 billion.
The last May, some popular NFT projects, such as Bored Ape Yacht Club and CryptoPunks, lost roughly 63% of their value in a short time span. That much of a fall could indicate a bear market for NFTs, too. But the sale rate shows an increase in June and July.
The slump in the digital market causes uncertainty over the fair value of a brand new asset and may lead to sharp swings in NFT prices. This uncertainty makes investors feel confused and in some cases behave relative to their emotions. In some cases, investors sell their precious assets and step aside.
Basically when the market crashes the NFT players that are only interested in making a quick buck leave the space. It’s actually an important phase of the cycle and it helps eliminate the transient players. The NFT market seems to face the situation now; nevertheless, it also suggests that the major investors are aware of the value of the market and keep their shares of the market at this time.
What should investors do with their NFTs during a bear market?
Major investors, or the whales, always consider a bear market as the best time to invest in the markets, like the NFT market. Experts also suggest that the low risk and prices associated with a bear market imply that there will be lower losses if the assets collapse.
Many people collect NFTs for their inherent artistic value, the same way one might accumulate fine art or other collectibles. Consumers often choose NFTs they like, from artists or companies they want to support, without too much concern about the long-term value.
Therefore, a bear market provides investors with the chance to find their favorite NFTs at a lower price than expected. Then, as the market turns, investors can make a decision to sell or keep their digital assets based on the profits or losses made or endure keeping the assets.
A few suggestions for NFT holders in this bear market
Surviving as a Creator
The first thing to do in a bear market is to be patient and avoid making rash moves, which you would never make in the first place. Stay focused on your long-term goals and make decisions that benefit your projects in the long run. Remember that strong communities with shared goals will help a project successful.
Establish an Active Community
As we already mentioned, establishing a community gives your NFTs a better chance of surviving the bear market. Both NFT holders and the development team can support, teach, and help each other grow. So, even if your NFTs drop in value, owners still have an incentive to hold because of the benefits of having a strong and supportive community.
Surviving as a Collector and Buyer
Fear of a bear market should not make creators as well as NFT purchasers drive out of the market. If you already own an NFT from a well-known project, such as Bored Apes Yacht Club, you should not want to focus on the short-term price of such assets. Instead, look at their long-term value proposition.
Keep in mind that a bear market can be a good buying opportunity, too. A quick look at the market reveals that most NFT projects have experienced a price reduction. So a bear market may be the best opportunity to buy and get involved in a higher price class NFT project, which is visiting a fall in its value.
In Conclusion
The bear market has caused a significant decrease in the value of almost all cryptocurrencies. It also seems to influence the NFT market. However, this should be seen as a positive development in the market as it marks the successful projects and their supportive communities. The ones that survive the crypto winter of 2022 will likely thrive and become permanent fixtures in the future of Web 3.0.
NFT investors also should keep in mind that a bear market could be a great chance to get to the digital assets they always looked for.
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