Look For The Silver Lining
No matter how bad a situation may appear, there is always some good that can come out of it. As you well know, a market dump does offer some great opportunities to accumulate quality projects at a discounted price. A good dump is often the best time to buy solid projects with a bright future, for the simple reason that everyone will be doing likewise. Investors want quality at a discounted price. They are not interested in getting some random coin or token just because it is a lot cheaper than it was last week.
They are looking to buy a bounce and what secures the bounce is the fact that everyone does likewise, ultimately pushing the price up almost instantly. This ideology was very evident in the recent price action of LUNA. Many felt as though they had missed out on a future quality project and so seized the discounted price immediately. What transpired was that LUNA rebounded so powerfully that it surpassed its previous all-time high.
Sometimes it takes a bit longer to play out but LUNA is a very good example of the dynamic I am trying to convey. What needs to be discerned now is whether this is a good time to pick up metaverse tokens such as SAND and MANA.
As I am writing both projects are down approximately 32% in the past seven days and down over 40% from ATH levels. That is not a bad discount, provided prices edge higher from here but what if they don't?
Will The Metaverse Follow DeFi?
If you remember, DeFi had a very bullish explosion in 2020 prior to entering into a bearish winter. Then once again in 2021, DeFi came back to life and DeFi projects began pumping again. Are metaverse projects going to follow a similar path, or are we in for a simple dip that will soon bounce and create new ATH levels? This is what investors are trying to establish. Needless to say, this can be very tricky and will perhaps deter some potential investors who would rather take advantage of "safer options" on sale in the dip.
Conservative Allocation
Perhaps it is a good time to conservatively allocate some capital in some top metaverse plays. In the event that markets edge lower, a modest allocation will not be that detrimental. However, if markets do edge higher soon, it will have been a great entry point. In my opinion, it is always wise to slowly build positions. This is not always the case as there are occasions when you can enter a new position quite powerfully.
Even if the market edges higher, there may still be a drop for metaverse projects, as the market may interpret a scenario of being overbought due to hype. Even when a sector is extremely bullish, the price can at times indicate otherwise. This is due to profit-taking by early adopters, as well as over-extended positions being reduced, as investors diversify.
This is why price can sometimes be a terrible metric because it is often not a true indication or reflection of the true state of the market. Warren Buffet enjoyed some success by exploiting this principle with his "value investing" approach. So yes, this article does not tell you what to do but rather the aspects you should be considering before making a new investment in this sector. Technical analysis should most definitely also be visited in order to gain a more comprehensive view.
Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
