How to Short NFTs in 4 Steps
The NFT landscape continues to evolve, and platforms like ours are finding solutions to capture potential speculative trading volume in the NFT market and solve the NFT liquidity problem. And even though the market has moved beyond the 2021 hype cycle, where NFT floor prices have cooled off a bit, users are now taking advantage of platforms leading the way in NFT financialization.
NFT financialization has brought about NFT lending, borrowing, rental, fractionalization, and more. As a part of this evolution, nftperp gives users the ability to long or short NFTs giving users a solution to hedge their downside risk or even place bets on blue chip NFTs they might be priced out on.
But before we get into how to short NFTs, let’s go over some quick basics.
Shorting a cryptocurrency involves selling a crypto asset at its current high price to repurchase it at a price less than what was sold. The trader anticipates that the crypto assets’ value will decrease in the short term and often uses derivatives like futures contracts to perform the short.
What does it mean to short NFTs?
Shorting NFTs (non-fungible tokens) is more nuanced, as NFTs are unique digital assets, but we can utilize a perps platform like nftperp to perform the short. And the benefit of using nftperp is that you don’t need to own the underlying NFT to buy contracts on it, allowing everyone to take long or short positions on an NFT of their choice.
In a broad sense, shorting NFTs is like betting that a particular piece of unique digital art or other NFT will decrease in popularity or demand, thereby losing value. If you believe that an NFT is overvalued, you might enter into a contract that allows you to profit if your prediction is correct.
Benefits of Shorting NFTs
- Profit from Overvaluation: If an investor believes that a particular NFT or a segment of the NFT market is overvalued, shorting provides a mechanism to profit from a correction in price. This can allow profit-making in bear markets or when particular NFTs lose popularity.
- Portfolio Diversification: Including short positions on NFTs can add a layer of diversification to an investment portfolio. If structured properly, these positions provide a hedge against potential losses in other investments, particularly if those investments are heavily tied to the overall success of the crypto or NFT market.
- Speculative Opportunities: For those with deep knowledge of the NFT market and an appetite for risk, shorting NFTs can provide exciting speculative opportunities. Accurately predicting trends and value changes in the fast-moving NFT world can lead to significant profits.
How to Short NFTs (4-Step Guide)
- Start on nftperp’s trading page and connect your Metamask in the top right-hand corner. Then ‘allow’ nftperp to connect to your wallet, and you will be ready to go.
- Now that your wallet is connected, you can select which NFT collection you want to trade. Select the button shown below and choose a collection from the available options.
- Now that you have chosen the collection you want to trade, it is time to determine whether you wish to go short or long, the amount of the NFT collection you would like to trade, and the leverage you would like to take.
Enter the values you wish and use the slider to determine your leverage. Press “Open Position,” and your trade will be opened!
- Now that your trade is opened, you will see details like the Mark Price, Index Price, 24h Volume, funding rates, and the assets market cap.
You can also find data on your current positions, trading history, and funding payments at the bottom.
Shorting NFTs presents an interesting opportunity for retail inventors excited to explore new and unique avenues in the NFT trading landscape. Instead of the traditional owning NFTs hoping to make it, nftperp allows investors to profit from both increases and decreases in an NFT’s floor price as long as they stay aligned with market trends. Another benefit is the chance to gain exposure to blue-chip NFTS like BAYC through perpetual contracts where previously, most retail investors might be priced out of the action. Could you be someone who trades their way into potentially owning one?