27.6 C
New York

Is Shorting The NFT Market Possible?

Date:

When NFT Meets DeFi: Doors of Monetization Open for NFT Owners

When you’re thinking about investing in Non-Fungible Tokens (NFTs), you might have one question: Is shorting the NFT market possible? Shorting essentially means that you believe an NFT’s value will drop, so you sell it to someone else before the value drops and then purchase it back after the value has dropped, at which point you hope to profit from the difference between what you sold it for and what you bought it back for. For example, if you borrow 1 NFT from your friend at $1 and then sell it to someone else for $2, you make a $1 profit no matter what happens to the value of NFT in the future. Unfortunately, most people don’t think that the NFT market can be shorted because short sellers have no loans. But it turns out that this is not necessarily true… but does it even matter?  Yes, You Can Short NFTs Shorting (Selling First, Buying Back Later) is a common trading strategy employed in traditional and non-traditional markets. By shorting a Non-Fungible Token (NFT), you could, in theory, speculate on undervalued tokens and receive double your returns if you’re right.  However, there are significant risks involved with shorting: For one, many NFT tokens are illiquid; it’s hard to find buyers who want to buy out your position quickly and cheaply. Furthermore, if any individual or group of individuals owned enough volume of an illiquid token to manipulate its price against you, they could easily take more than 100% of your money.  Lastly, even when short-selling makes sense from a long-term investing perspective, market makers (those people/bots who set prices when nobody else wants to buy or sell) might still manipulate their books to minimize short sellers’ profits.  If It’s Risky, Why Do It? As we mentioned, selling short is definitely riskier than holding onto your investment for as long as possible. If you do it wrong and lose more money than you can handle, you’ll be in debt for a very long time—possibly even forever. So why would anyone take that gamble? Well, people who have sufficient funds to afford taking those risks will sometimes sell short on low-risk assets just to hedge their portfolio against major losses later down the line.  When it comes to buying NFTs, you need to know which market trends are happening in the market. A rising market will increase the NFT price, while a falling one will fall. But if you’re buying in a bearish trend, you’ll lose money. If you’re buying in a bearish scenario, you should sell at a lower price than expected. Whether you decide to sell or short an NFT is a smart move, be aware of its risks. Here is one tip to help you succeed in the NFT market. You should buy your trade at a price above your risk tolerance. Always remember that you should not invest more than your risk capacity. You must understand that the price of an individual NFT is determined by what someone else is willing to pay for it. It depends on the price of the buyers and the demand for the asset.  How To Do It In The Future? As the market for NFTs continues to grow, the NFT market is likely to remain vulnerable to wash trading and other issues related to the NFT industry. For example, some people are speculating about the potential impact of these cryptocurrencies on climate change. There is no way to prove that they are doing this. But you can still profit from the cryptocurrency industry in the future. But the key is to be able to judge the situation before buying. You should also know that gas fees can reduce your profit. In some cases, the gas fee for the Ethereum network has been a major problem for NFT creators. So, you should know how to avoid the problem of gas fees. You should also keep in mind that shorting the NFT market is not a good idea unless you’re confident in your trading abilities.  When Should You Do It And Not Do It? When you short an NFT, you’re betting on its value to decrease. For example, you might short an NFT because you think it’s inflated or believe a competitor will soon offer an improved version of it. If your assessment proves correct, you’ll profit from that decrease in value; if it doesn’t, however, your NFT could plummet, forcing you to scramble for money to keep up with your payments. This is why many people choose not too short NFTs whose values are expected to increase—those who lose their bet often end up owing more than they have in reserve.   If you’re looking to invest in the NFT market, it’s important to understand the risks involved. Experienced investors should only do this … Continued

The post Is Shorting The NFT Market Possible? appeared first on Cryptoknowmics-Crypto News and Media Platform.

Related articles

spot_img

Recent articles

spot_img