You are more than likely experiencing the worst NFT bear market you’ve ever been a part of. There is a decent chance you have lost more money in the last week than you’ve ever lost in your life. Being invested in the NFT market isn’t the same thing as being in the crypto or stock market. When you invest in crypto the price goes up or down and you lose that amount of money. NFT’s are different. You can lose money much more aggressively. Over the past week both NFT prices and the currency NFT’s are priced in tanked. This means your 50% loss in the NFT price might actually be closer to 90% losses in fiat currency. You know, the currency that pays your bills and allows you to actually survive. It might seem like we’ve been through hell, but trust me, things can get way worse. The number one most important thing you can do right now is prepare for a worst case scenario. It doesn’t matter how bad things seem, they can always get way worse. Let’s walk through why you need to ensure your financial survival immediately, and the steps you can take right now.
This market is different than the bear market from 2018. Way different. In 2017 the crypto market ran outrageously hot. It’s really the run that made crypto mainstream and put Bitcoin on the map. When people started discovering they could double their money overnight they poured their life savings into the space. We simply ran too hot. After Bitcoin went parabolic to $20k, the market crashed all the way back down to earth, getting as low at $3,000. The economic environment was still strong. Interest rates were lowering, unemployment was at record lows, and GDP was steadily climbing. Almost every asset on the planet was pumping. This 2022 bear market is very very different. Not only have we been running way too hot, but on top of that we are facing a macroeconomic environment the likes of which we haven’t seen since World War 2. Inflation is sky rocketing. Interest rates are being hiked. GDP is shrinking. A potentially catastrophic war is playing out in Europe. This is all starting to become a reality while the rubber band of the market has been stretched all the way in one direction.
“THERE’S BLOOD LINING ALL FINANCIAL STREETS”
Well the rubber band finally snapped this week. Almost every asset you can possibly have money in has cratered. The Nasdaq is down 25% from its highs in December. All crypto has been incinerated. Stable coins aren’t looking so stable. NFT’s are getting stomped on. There’s bloods lining all financial streets. We weren’t just running way too hot, we were running hot and now the entire house around us is on fire. A lot of people have lost tremendous amounts of money. The good news is if you have your health, a chip, and a chair you’re still in it. The bad news is you can always lose those things too. That’s why you need to make sure you’re prepared for worst case scenarios. Whether you’re rich, poor, have a family, are single, young, or old, you need to have a plan in place just in case things get way worse. And that starts with an emergency fund.
A non negotiable for anyone in the financial markets is this- you need to have 6 months in emergency savings. No ifs ands or buts. 6 months savings will ensure even if the market goes to 0 and you lose your job you will be able to survive another day. A week ago I realized I only had 4 months savings. Despite the fact I was down massive in my NFT’s I still sold some for losses to make sure I get to that 6 months of savings mark. This is so critically important especially if you play with risk on assets like NFT’s and crypto. And this isn’t 6 months of savings you’re putting into ETH or even stable coins. This is 6 months of savings in fiat (puke) in a savings account. I know .5% interest seems like pennies after flipping NFT’s for thousands over night, but it’s the most risk off place you can have your money in times like this. Nowhere else is your money safe. And I know the Bitcoin books tell you putting your money into savings is conceding defeat to the evil banks and government, but you put yourself and your family in danger by having all your money in risky digital assets. That’s just a fact. And nothing is more important than the health of yourself and your family.
6 months savings is the bare minimum you can do. From here there are other ways to de-risk. If you are lucky enough to have a job that offers a 401k program you are doing your future self an incredible favor by contributing to this still. The money you save from taxes by doing this is something you probably won’t notice at first, but you’ll thank yourself years down the line. From there I’m also making sure I’m maintaining a stock portfolio of less risky assets as well. I’m talking low cost S&P and Nasdaq index funds. Historically speaking these are guaranteed to go higher long term. It’s one of the safest places you can put your money. With the market down 25% from a few months ago, starting to dollar cost average in here is not a bad idea at all.
Which brings us to the question you’ve probably been asking all week. When is it the right time to get back into the market? My answer is this- once you’ve prepared for all worst case scenarios as described above, then you can consider getting back into wildly risky asset classes like crypto and NFT’s. I for sure wouldn’t just go all in here. As described before, the macroeconomic environment is historically bad. The odds of us just recovering after a week of a downturn is incredibly low. The pot odds tell me there is a significant chance we keep going lower or sideways. Bear markets like the one we appear to be entering typically last for YEARS. This bear run has only been going on for a couple weeks. Again, the odds tell me we have a while to go here, so just going all in now praying this is the bottom is probably not a good call. Slowly starting to average back in by picking and choosing small spots to make high conviction plays is probably the most amount of risk you want to take on right now. A couple other factors you probably want to think about to is your age and how many people you’re supporting. If you’re young, you can afford a little more risk since your time horizon is longer. If you’re old, you probably want to play it safe since you’re going to retire soon.
The most important thing you can do right now is make sure you survive another day. By taking the steps I described above, you will not only ensure your survivability, but you’ll also probably sleep a lot better at night. Let me know if there are other ways you’re preparing for a bear market. Reach out to me on Twitter, always happy to chat in comments or DM’s.
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