What a bear market can teach us about NFT projects
I might sound like a weirdo saying this but I'll say it anyways - I love a good bear market. When it comes to NFTs, nobody should be putting money into the market that they aren't prepared to lose. This also means that you also shouldn't have to sell a single NFT in a bear market.
I'll pause here because this is a point I've made quite a bit in the past but can't emphasize enough. NFTs are insanely risky, any penny you put into NFTs should be a penny you can live without forever. By only investing money you can lose, you have the advantage of being able to decide when you want to sell vs. needing to sell. If you ever find yourself in a position where you need to sell NFTs urgently, you put money into the market that you shouldn't have.
Okay, so with that out of the way, let's assume that you don't need to generate a penny of profit from your NFTs this year, or next year. This means you can enjoy a good bear market because I think bear markets are one of the best places to learn, invest more, and really move from gambling to investing. If you just invested in NFTs because you thought they would be in a forever bull market, sorry to burst your bubble 🤷♂️
What I really like about bear markets is they separate the real investments from the marketing fluff. A project has to really be thinking long-term to both survive and strive in a bear market. Given how early we are in the history of NFTs I think there is a lot we can learn from this bear market. Here are some things I'm paying attention to:
- Projects that are focusing on building vs. releasing - the best NFT projects are thinking long-term and they are using this bear market as a chance to hunker down and build. Projects that were just focused on making money for themselves are scrambling to release new collections and get as much money in the door as possible.
- Communication tone - while tons of NFT projects are continuing to be plenty communicative on Discord and Twitter, it's the tone that I'm paying attention to. Overly promotional or sensationalized communication scares me - I would much rather see cool, calm, collected communication with a dose of reality. I give projects major kudos when they admit things are hard rather than pretending that everything is awesome.
- Increase in unique owners - this is a metric I look at in all markets but is especially interesting in a bear market. Are projects seeing growth in the number of unique holders? If so that shows me that they're continuing to reach new audiences and let's be honest, it's hard to get people to buy in a bear market so that on its own is pretty impressive.
- Floor price stability - while I agree in most cases it's silly to focus on the floor, I don't think that means you should ignore the floor. Some projects have seen surprisingly stable floor prices in the bear market, while others have seen major drops. Yes, price it in fiat and everything is down, but seeing a stable floor price in ETH has some real value. I could write a whole article about this topic and probably will because it's a relatively nuanced one.
- Founding team cohesion - it's easy for founders to stick together when things are going well, but the real test of a founding team is how they react when things don't go well. Founders that stick together and really show some real synergy during a bear market are the ones that I think are likely going to stand the test of time.
We don't know where the NFT market will go from here, it go rocket back up, or sink lower. What I do know is, the lower it goes, the more opportunities to learn!