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Just as the stock market entered a bear market in mid-June, the crypto and NFT markets have also taken a downturn. In fact, the crypto market has been broadly declining for the past 18 months.
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Bitcoin reached a new 18-month low on June 15, 2022, and is now 70% below its record high of $69,000 in Nov. 2021, Reuters reported.
Since many altcoins are tied to the value of bitcoin, most of the crypto market is also facing a slump. On June 12, crypto lender Celsius Network paused all withdrawals, snaps, and transfers, per The Wall Street Journal. The company said in a blog post that, “We are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets.”
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Unlike cryptocurrency, NFTs are not as tied to the financial cycles of the stock market or the economy, NFT Evening suggests. In a March 8 article, NFT Evening writer Theo indicated that, “NFTs are… proving to be bullet-proof against market crashes.”
However, even though NFTs aren’t strictly tied to the crypto market, they are experiencing a downturn of their own. NFT Evening reported that February saw a 40% decline in NFT sales, down from $4.4 billion in January.
Many established NFT projects, including Bored Ape Yacht Club and CryptoPunks, lost roughly 63% of their value in a dangerously short time span in May, The Cryptonomist reported. That much of a dip indicates a bear market for NFTs.
Experts attribute the dip not just to the overall market downturn and the crypto bear market, but also NFT scams and cyber attacks that have grown in prevalence in 2022, Yahoo reported.
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Cryptoticker advised that a bear market is the best time to invest in NFTs, writing: “Many NFTs have proven to exceed expectations after the bear market.” Further, Cryptoticker writer Owotunse Adebayo suggested that, “The low risk and prices associated with a bear market implies that, should the asset collapse, losses will be low.”
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.
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If this describes your interest in NFTs, you may be able to find NFTs you like at a lower price than you’d expect in a bear market. Then, as the market turns, you can make a decision to sell (or not) based on the profits (or losses) you stand to make or endure.
However, even though NFTs may seem to be “on sale” in a bear market, they remain volatile assets. If you are looking at NFTs as an investment, it may be wise to refrain from spending more than you are willing to lose.
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