How To Crush It In NFT Bear Markets
The NFT market is depressing right now. At least, it is for flippers. Flipping NFTs is easy when the market is roaring. All you have to do is buy an NFT, put it up for sale with your target profit baked in, and wait for the market to come to your price. Bear markets are different and they require a different strategy to make money. Here’s how you can crush it in the NFT bear market.
Recurring Revenue For Long-Term Holds
The NFT investing model in 2021 was to buy low and sell high. The more of your portfolio you could turnover, the more money you made. A lot of people made a ton of money using the buy-and-flip model, but it’s inherently unsustainable. Eventually someone is going to buy at the top and won’t be able to flip for a profit. We call that person a bag holder.
A lot of us are bag holders right now. Our wallets are full of pretty pictures with no utility. They just sit there. Mocking us. Locking up our liquidity. Making us question our decisions in life.
Some of these projects might come back to their former glory, but for now we need a strategy that allows us to take advantage of the low NFT prices in the market and that means we need to generate some income. To beat the NFT bear market, we can borrow a strategy from the stock market — dividend reinvestment.
Focus on Recurring Revenue
There’s some amazing NFT art out there. They make great profile pics and show that you’re a member of a community. Unfortunately, you can’t eat community membership nor can you use it to buy more NFTs.
You can, however, use SOL, ETH, WRLD, or dozens of other coins and many NFT projects will pay out on a daily or weekly basis.
NFTs that offer recurring income aren’t without risk. A lot of them risk passing the Howey Test which makes them subject to regulations that they’re probably not following. I’ll present the different ways you can earn recurring income with NFTs along with the risks associated with them. I leave it to you to determine what risks you’ll accept. As always, remember to do your own research. I’m just a crypto degen with a keyboard — not a financial advisor.
Gambling NFTs
NFTs that give you a stake in an online casino seem to be popular — especially on the Solana blockchain. These projects promise to build a gaming website where people can gamble on coin flips, dice, or whatever. The casino profits are then paid out to their NFT holders. It sounds good…on the surface.
Gambling NFTs can be doubly problematic. First, they’re very likely to pass the Howey test and be considered securities by the US Securities and Exchange Commission (SEC). Second, they’re unlikely to be properly licensed which is another problem in itself. Even projects that are trying to get properly licensed can run into legal issues. Take Sands Vegas Casino Club, for example. They’re a project trying to start up a legitimate casino project and they’re still running into legal issues. I have one of their OG Gambler NFTs and it was recently delisted from OpenSea. The project isn’t dead, but it’ll be hard for me to trade that NFT until they’re able to get their legal problems in the US straightened out. It’s a very risky space to play in but it can have huge rewards.
GameFi
GameFi is one of my favorite ways to earn money with NFTs. The NFT gives you the ability to earn money while playing your game of choice. Some examples are ICE Poker, Gala Games, and Axie Infinity. Some of the games even give you the option to earn passively by loaning your NFTs out to others for a portion of their earnings. These projects are less likely to pass the Howey test since you have to actually do something — play the game — to make money. I have several ICE Poker wearables and, despite the sharp drop in the price of $ICE, they still make me ~$20/day by delegating them to good players.
Staking
Staking is another popular mechanic to earn with your NFTs. Take CryptoKongz as an example. Each NFT can earn 10 $BANANA a day. Those coins can then be used to breed the next generation of CryptoKongz (and do a few other things). The utility of $BANANA gives it value. One $BANANA is valued at $5.75 as of this writing.
A lot of projects are using the staking model now. It generates income and keeps the project’s NFTs off the secondary market which can raise the floor by reducing supply. Just make sure you understand where the rewards are coming from. Some projects pay out based on royalties. I’m not the biggest fan of that model — especially in a bear market. Bear markets mean less trades and lower prices. Neither are what you want if you’re getting a share of royalties.
DAOs
Decentralized Autonomous Organizations are another popular feature of NFT projects and they can be profitable. The NFT gives you rights to earn money from a common enterprise. The SEC has specifically called out DAOs as securities under the Howey test, so be very careful with these NFTs. That said, some projects are coming up with creative ways around it.
Take Cursed Labs, for example. Cursed Labs has a multi-pronged approach to earnings. They have a consulting business and they run AirBnBs. Their NFT holders are entitled to a portion of those earnings, but they’re very careful to say that their NFT holders have no ownership in the business. Instead, they’re affiliates of the business. Is that distinction enough to keep them from passing the Howey test and being considered a security? I have no idea. I’m a degenerate NFT trader and not an attorney. I own a Cursed Labs NFT, but I also understand the risk and am okay if it goes to zero…not happy, but okay.
Leverage Your NFTs
Do you want to go full degen and risk everything? Then you might be a candidate for NFT lending. With NFT lending, you can get crypto for your NFTs without giving up ownership of them. You can then use those funds to invest in other projects — projects that can give you income. Choose wisely and watch your profits soar. Choose poorly and, well -
Sites like NFTfi.com and Drops.com will help you get liquidity, but beware — this is a high-risk play. If the floor of your NFT drops below a certain threshold, you face liquidation — meaning the site sells your NFT. Leverage can mean big gains, but more potential gains means more risk. This path is not for the faint of heart or the light of wallet.
That’s Great, But I Still Wanna Flip
Flipping is fun and far be it from me to deride a degenerate strategy. You can still flip NFTs for a profit in a bear market, but you have to be more discerning…and be willing to hold the bag if you’re wrong. Here’s how you can still make money flipping NFTs in a bear market.
Whitelist Grinding
I really hate this one, but it’s a proven way to make money in the NFT space. A whitelist usually guarantees you’ll be able to mint a hot project and sometimes at a discount. Whitelist grinding involves a lot of retweets on Twitter while tagging friends and lots of chit-chat in Discord. It also helps if your meme game is strong and/or you’re gifted enough to make great fan art.
It’s called a grind for a reason, though. It takes a long time to get noticed by mods and there’s no guarantee your efforts will be rewarded. Also — just because you’re guaranteed a mint doesn’t mean you’re guaranteed a profit. Few things give you feel-bads like grinding forever for a whitelist that turns out to be a dud of a project.
A less arduous route is to join collab giveaways in other Discords. Here’s where you can leverage other NFTs you have. Projects usually give their best opportunities to holders of their NFTs. I’ve won several whitelists this way. It’s way better than shilling on Twitter. Just look for the ‘Giveaway’ channel in your favorite Discord. Most projects have them.
Buy The Dip
Buying the Dip is a tried-and-true method borrowed from the stock market. The idea is that all projects go down in a bear market — even the really good ones. Use the dip to your advantage by buying good projects at a discount and wait for the markets to recover. When they do, cash out and take your profits. It couldn’t be easier…as long as the market recovers.
Buying the dip is a longer-term play. No one knows if or when the next bull run will come so make sure you don’t need liquidity anytime soon if you plan to buy the dip.
Conclusion
NFT investing is fun when the market is going up, but can be painful in a bear market. You can’t use the same investment strategy when markets start going down. Income generating projects can be more resilient than regular profile pics when the market turns against you. They give you a consistent stream of liquid that you can use to pick up other projects while prices are depressed. The goal is to make smart purchases when prices are low so you can put yourself in a strong position for the next bull run.
Disclosures
I own several projects mentioned in this article including Sands Vegas Casino Club, ICE Poker, and Cursed Labs. This article is meant to be entertainment only and is not financial advice. I am not an attorney or a financial advisor. Do your own research and consult with a financial advisor and/or legal counsel before acting on any information presented in this article.
If you want to continue the conversation, you can connect with me @CryptoDegenFML on Twitter or CryptoDegenFML here on Medium. If you liked this article, please clap for it (up to 50x) to let me know you enjoyed it. It’ll mean a lot to me. Thank you, fellow degens!
