Thread by @T_H_NFT

1/ Hi there, got a different type of thread for you folks today. Personally, I see a bear market coming for NFTs quite soon. In this thread, I will go over some risk management techniques and good practices when trading NFTs.

A super long 🧵⬇️

#NFA #DYOR #Solana #NFTs

2/ So a bit of a personal story. I started trading NFTs for the last year and was doing quite well. I was making a ton of money and really thought I was invincible, until the NFT winter of last year hit. I lost about 95% of my portfolio and vowed to never trade NFTs again.

3/ Alas, the NFT space called my name and here I am again, but this time with a lot more experience. I’ll be honest, it was really tough losing that much money, and it could have easily been avoided had I implemented some of the strategies I am going to talk about in this thread.

4/ Regardless of if an NFT winter does happen, these are still good risk management strategies to follow and I urge anyone who has made a lot of money to protect themselves. NFTs are a very new and risky asset class, but the earning potential is a ton.

5/ In this thread, I am going to talk about some common risk management techniques that you can deploy, some specific trading strategies, and I will go over how to best get yourself ready for an NFT winter, if you do think it is coming.

6/ Let’s start with the most common strategy, diversify your portfolio. With NFTs this can be done in multiple ways. In a typical portfolio, you have your “blue chips”, these are NFTs like @mindfolkART @BoryokuDragonz @solBOOGLE etc. This is the foundation of your portfolio.

7/ These NFTs have held their prices extremely well, they generate some kind of value add to you whether that be WL spots, alpha, passive income, etc. These are NFTs in your portfolio that you probably won’t sell and give a ton of value to you.

8/ Next, we have long-term holds where you are either quite bullish on the team, a future catalyst, or you think they have room to grow. These projects include @balloonsville_2 @MatricaLabs @FamousFoxFed. These are projects that I think have a ton of potential and room to grow.

9/ Though I do not plan on selling these projects in most cases, they do not add a ton of value to my portfolio yet and so if I do need to open up some liquidity, I do sometimes decide to sell them. These projects do very well in bull markets, but in bear markets, sometimes not.

10/ Finally, you have your flipping NFTs/short term vision NFTs. These are NFTs that you decide to purchase, you think they have some potential, or you are just looking for a quick flip. These NFTs combined with your cash on hand is what I would consider your liquid.

11/ The above 3 categories are what I consider a good portfolio to have. Though the exact % will depend on your risk tolerance, a recommendation would be to have 50% blue chips, 25% long term holds, 25% liquid + short term flips.

12/ Now this is just an example, I have seen many variations of these and even people who just flip NFTs and stack SOL. This is not a rule but just an example of what a portfolio may look like. Now to some common risk management techniques.

13/ You can utilize this portfolio type to diversify your risk. Usually blue chip NFTs hold onto their price quite well and the value they provide can be immense. Though these NFTs might not 3x in price overnight, they do provide a solid foundation for any portfolio.

14/ I would consider blue chips, the least risky of the three types. Like I said before, depending on your risk tolerance, you can allocate different amounts to each category. Depending on the execution of the team long term holds and flips can go up and down in price quite a bit

15/ Especially during a bear market, these NFT types see a lot of movement, especially downwards. It could be dangerous to overlevarge yourself in these categories as well. My recommendation, if you do feel a bear market coming, would be to reduce allocation to these.

16/ Now since it is very hard to predict when exactly the bear market will come, if you do find yourself overleveraged in some of the riskier categories, it would be a good time to rethink some of your holdings. Maybe this could be a good time to consolidate into a few solid ones

17/ Another strategy that I am starting to deploy is creating a sort of NFT bank. Any time I make profit on a flip, I send 50% to another wallet. This acts as a bank and a safe for me so if an NFT bear market was to come, I could utilize this wallet to get some solid purchases.

18/ The above strategy also helps naturally take profit for you. I think it is really easy to purchase more NFTs with your bankroll, but it is sometimes hard to take some out of there. This way, you naturally “take profits” and also naturally protect yourself.

19/ The above techniques are good risk management techniques to deploy in any market, and regardless of if a bear market does come, it allows you to protect yourself in different market conditions.

20/ Now, if you do think a bear market is coming, I recommend taking these steps. I would start with reducing your risky asset classes. These include our flips and long term holds. You can either choose to consolidate them into less risky projects or increase your liquid cash.

21/ Either choice, this will help reduce your risk in case a bear market does come. Usually these NFTs that have not “proved” themselves or do not provide much value end up tanking the hardest. By consolidating or increasing cash, this reduces your risk immensely.

22/ Additionally, if you have made a ton of money, I would say it is never a bad idea to sell some of your holdings. Take a look at how much this money would help in your actual life, and if it is sizeable amount and can help, IT IS OKAY TO SELL AND WITHDRAW.

23/ Last year, before the bear market, had I even pulled out half of my portfolio, it would have really helped. It's easy to see an amount in your wallet, but sometimes, just using it to pay off loans, buy a nice computer, help your parents, can really go a long way.

24/ I personally think a bear market is coming, but regardless, using these techniques can really protect you. I had to learn the hard way, it stopped me from trading NFTs and interacting with the awesome community. If this thread can even help one person, I will be happy. Ty!