Non-Fungible Weekly #13

Join us as we discuss the importance of using risk management when investing, the current NFT market landscape, and updates from the Bridgesplit team.

Bridgesplit Updates...

• We've started the initial phase of our capital markets product 🏛

• We've also created something our community has been wanting for quite awhile... 👀

• The newest beta is finished and we are finalizing our launch details 🚀

• If you are a collection looking to get launched on our app, let us know!

Risk Management

In the middle of a bull run when money seems to be falling from the sky many investors can't even pronounce the phrase 'risk management."

"Brisk sandwich meat? Fish Stanley mint? ahh . . forget it, to the moon!"

When things are going well, we tend to disregard the possibility that things could ever be otherwise. That floor prices and crypto value will only continue to go up, up, up. Sadly, this is not the case; markets have cycles and rhythms. Successful investors learn the necessity of risk management, especially when things are going well. Practicing good risk management strategies helps keep you from getting financially rekt and provides peace of mind that you have a plan for how to react to different situations if they arise. The following are ideas to think about when creating your risk management strategy.

Never invest more than you can afford to lose

This one is a classic. Probably the most straightforward but maybe the most difficult to enforce. This rule is even harder to follow if you have had success with a project or investment. We become tempted to throw everything we have into that investment in hopes of realizing an even greater return. It is easy to become dazzled with high APYs or success stories you see on Twitter. Basically, don't invest this week's grocery money or rent payment.

Take Profits

Another difficult one (maybe all of these are hard). When the NFT project you have invested in starts to moon, consider taking profits. We all have our favorite projects that we love and will never sell for various reasons. I'm not talking about those projects but ones you have invested in to make money. Set limits or percentages for yourself ahead of time that you follow no matter what. When it is 2x, I will sell, or when it is 3x, I will deposit on Bridgesplit and get passive income by providing liquidity. The reality is that the project will not continue to go up forever. You want to capture profits before the market turns on you.

Set Stop-Losses

The opposite to taking profits but maybe even more important is to set stop-losses for your investments. A stop-loss is a value once your investment has decreased to this point you sell. This prevents you from taking massive losses to the point where it is difficult to sell. This number is different for everyone, but a typical number is 2%. Mentally and emotionally, we don't want to sell for any loss, so we tend to hold on to failing investments too long, hoping they will turn around if an investment has lost 50% of its value; what's to stop it from losing 25-30% more. The main goal of the stop-loss is not to get caught holding the bag and selling at the bottom for a huge loss.

Diversify

Many things in life are out of our control, which is no different when it comes to investing. Don't invest everything into one project or chain. Projects and blockchains can fail for various reasons, usually happening quickly. Look at LUNA and Terra or NFT projects that have rugged. These are real risks that need to be considered. If you invest in NFTs, try to invest in multiple projects across a spectrum of types. Some NFTs are metaverse plays, some are utility based, while others are community-oriented. The idea is that if one project or area fails, then you are still OK; you haven't lost everything.

It is pretty clear that we are in a bear market where these rules become even more critical. Profits are smaller; people are pulling back and investing less, and cryptocurrencies, along with NFTs are seeing a decline in value. The good news is that these cycles have happened before and recovered. The goal is to minimize losses and live to invest another day.

NFT Market Updates

• As the value of SOL continues its bearish trend so do NFTs

• Most established collections have held or seen a small decline in value over the past week

• In the current global economic conditions, many investors view crypto and NFTs as too risky and are looking to derisk by selling

• Investors who take a long view of NFTs view the bear market as a crucial time to accumulate blue-chip projects on sale

Say What?

Word of the Week

DeFi (Decentralized Finance)

Technology that removes or minimizes third parties in financial transactions. An example of centralized finance is depositing or withdrawing money from a bank. The bank controls the money and is the central hub of trade. Decentralized Finance uses self-executing lines of code called smart contracts that set the terms of the agreement between a buyer and a seller—removing the central entity in the transaction.

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