While the NFT market has been on a bull run over the past year, we all knew that eventually, the day would come when the market would need to correct itself. Based on the current numbers coming out related to NFT holdings and sales, the market cap may be reducing. As of March 20th, 2022 the volume of NFT sales has dropped by 73.12% over the last 30 days. However, it appears to have begun rising again. Visit this page on our website to monitor activity in the market: https://nftgo.io/overview
Should an NFT market reduction be a source of concern for those looking to enjoy the benefits of this new digital asset class?
Not necessarily - if you have the right strategy. While reductions often lead to panic in markets, those with clear heads and a steady investment strategy know how to take advantage of the situation.
For those looking to buy NFTs, this could be a great time, especially if you're looking at long-term holds. Prices are likely to drop in the short term as the market corrects, but they'll likely rebound as the market matures and settles into a more stable trajectory.
So what happened?
1. Interest Burnout
Plain and simple, the NFT market exploded so quickly that the initial buzz of novelty has begun to wear off. There's only so much hype that a new market can sustain before people start to get bored and move on to the next shiny object - especially as NFTs continue to fight with cryptocurrency as the main driver of Web3 assets.
2. Barriers to Entry
While there are plenty of affordable NFT collections on the market and accessible to new investors, some of the more popular collections - like those from CryptoPunks and Bored Ape Yacht Club - sell in the millions.
This has given NFTs an almost "impossible to afford" reputation that may be keeping many away from the market.
3. Inflation (...and fears of more.)
The NFT market is just that - a market. This means that it's still beholden to the same constrictions that commodity markets face during times of high inflation. As prices for other goods and services skyrocket to all-time highs, that spare change that could have gone to invest in an NFT suddenly dries up. Does this mean that inflation will kill off NFTs just as they are getting started? Unlikely, it is a correlation worth watching as the Federal Reserve is set to raise interest rates over the year to tamp down price increases.
4. Correction
It's also worth noting that the NFT market is still in its infancy. As such, it's ripe for corrections as the market tries to find its footing. This is normal and healthy for any new marketplace and often indicates a growing and evolving market. As the NFT market slows and takes a breath, it allows space for new and emerging creators and sellers to jump in on the reduced prices and spur a new buying frenzy.
5. Geopolitics (War in Ukraine)
While still in the early weeks, it's clear that the Russian invasion of Ukraine has upended markets (and the globe) in unprecedented ways. Similarly to inflation, the uncertainty in Eastern Europe has thrown markets into a rollercoaster ride of wild drops and even higher surges - which has only trickled down into other markets.
However, it is interesting to note that cryptocurrency and NFTs are playing a unique role in this war. The prices of Bitcoin and other crypto-assets have actually risen and fallen dramatically since the early days of the invasion, as more and more individuals pour cryptocurrency into donations for the beleaguered Ukrainian people. NFT projects aimed at supporting Ukraine have also popped up - helping give a boost to the struggling market in an unexpected and unfortunate way.
What Should We Do?
As an NFT investor - navigating a slowdown can feel stressful. Whether you were hoping to sell NFTs at a premium on the secondary market or looking to invest in your favorite collection, these times can be feast or famine. Here are some tips to help you get through this wave:
1. Keep Calm and Carry On
This might seem like common sense, but it can be easy to get wrapped up in the frenzy during times of market volatility. Remember that corrections and slowdowns are a natural part of any marketplace and often indicative of a growing and evolving market.
2. Research Projects Carefully
With so many new NFTs being minted every day, it can be hard to keep track of them all. When investing in an NFT, be sure to do your due diligence and research the project thoroughly. This includes looking into the team behind the project, the community for the NFT, and the market demand for the NFT.
3. Diversify Your Portfolio
As with any investment, it's essential to diversify your portfolio to mitigate risk. This means investing in a variety of NFTs from different projects and collections. By spreading your investment across multiple NFTs, you'll be less likely to experience losses if one particular NFT fails to take off.
4. Follow the Trends
Keep an eye on the trends in the NFT market to stay ahead of the curve. This includes tracking the prices of different tokens, following new projects, and monitoring social media for news and updates.
5. When In Doubt…HODL
This is time-honored advice for cryptocurrency investors, and it still rings true for NFTs. HODLing (holding on for dear life) during times of market volatility can be a risky proposition, but it can also pay off big time if the market rebounds. In short, remember that market corrections are normal and healthy for any new marketplace. Be sure to research projects carefully, diversify your portfolio, and follow the trends to make the most of this slowdown.
Buy The Dip With Blue-chip Projects
Are you looking for some ideas on where to buy on the low? Here are some blue-chip collections to check out while prices are still relatively low:
These are just a few of the best collections that you can get in on right now. Remember to do your own research before investing in any project, and be sure to HODL for the long haul!
If you want to learn more about potential NFT collections worth investing in, check out all of the features here at NFTGo, such as whale tracking and leaderboard, which could keep you one step ahead of the curve with all the latest news and updates in the world of NFTs!
*DISCLAIMER: All information is provided merely for informational purposes. NFTGo does not provide any investment advice.