Most Popular NFTs Have Plunged Since 2021, But Here’s What Could Be Ahead – Bitcoin (BTC/USD), Ethereum (ETH/USD)

After wowing the entire crypto community for much of 2021, the non-fungible token (NFT) market has been in a slump since the start of 2022, as valuations for even the most popular NFT projects fell drastically from the previous year’s highs. .

The average price of an NFT sale has fallen from $3,894 in May 2022 to $293 in July 2022, a 92% drop in just two months.

Confirming this price trend, blockchain analytics platform Chainalysis research has stated that the number of active NFT buyers and sellers in July 2022 (49.6,000) has fallen below even January 2021 (59.9,000) levels, indicating a return to the period before boom.

Compared to the January 2022 highs (960.7,000), the situation seems bleak at best and alludes to the waning investor sentiment around these new age digital assets.

Drying up of the NFT market leading to a sharp drop in NFT values

Touted as a unique digital representation of popular art, memes, collectibles and even GIFs, NFTs such as CryptoPunks PUNK/USD #7804, Crossroads NFT, Hash masks MASK/USDand a few more notable examples changed hands for millions of dollars in 2021.

Even NFTs representing memes like “Disaster Girl,” “Doge,” and “Bad Luck Brian” sold for thousands of dollars, cementing NFTs as one of the hottest assets in the broader crypto space.

fueled by vocal interest from celebrities, marquee investors and even self-made crypto-billionaires, NFTs had even eclipsed the cryptocurrency market for the outlandish gains made in a matter of months.

However, with cryptocurrency prices decelerating since the last quarter of 2021, NFTs were also affected, which can be seen in the apparent reduction in market participants trading NFTs.

This lack of demand combined with the insane valuations that most NFTs commanded led to the collapse in prices. An example of this can be seen in YouTuber Logan Paul‘s Azuki’s Bumblebee NFT AZUKI/USD investment that was acquired for $623,000 in 2021.

Today, the same NFT is worth only $10 and is symbolic of the problem that many NFT investors are confronted with today.

NFT trading volumes fall back to pre-2021 levels

While NFTs have been around since 2014, it was in 2021 that total NFT sales reached a record $25 billion, representing a 26,200% jump from 2019 when the corresponding figure was just $94.9 million.

With June 2022 NFT sales at just over $1 billion according to Chainalysis, NFT investors can take solace in the fact that the NFT market is still above 2019 levels.

However, the decline in NFT sales and investor participation since May 2022 is something to watch, especially if a rally in cryptocurrency prices occurs.

A broader bullish momentum is what is needed to revive not only the NFT space, but also the entire crypto market.

That said, experts believe that NFTs are just going through a period of consolidation, with outlandish valuations being replaced by more utility-based pricing formulas.

In fact, with companies like Coca-Cola, Adidas, Samsung, eBay and many others jumping on the NFT bandwagon, the entire NFT market could see it mature from a speculative bubble into a consumer-focused commodity space.

As more nuanced consumers and investors enter the NFT fray, we may see a rejuvenation of sorts in the foreseeable future.

A period of consolidation or more pain ahead?

NFTs like Bored Ape Yacht Club BAYC/USD the collection, which consists of 10,000 uniquely embossed collectibles representing Ape-like characters, has still maintained a high floor price of >75 ETH even in the midst of the current rout in the NFT market.

This collection along with other popular NFTs like CryptoPunks PUNK/USD has shown some resilience, supporting the argument that NFTs are currently in a bear cycle just like any other asset class.

In addition, with companies such as Meta Platforms Inc META by doubling down on their investment in building the Metaverse, NFTs will continue to see increasing integration and eventually more utility.

Also read: Benzinga to give away $1000 in ApeCoin: Could you be the lucky winner?

Using the price behavior of popular cryptocurrencies such as Bitcoin BTC/USD and Ethereum ETH/USD to the NFT space, it can be assumed that the next boom cycle for NFTs is likely to drive these digital assets to a level higher than that seen in 2021.

However, whether there will be more price pressure in the near future depends on a number of factors, including the global economic outlook, the raging war in Ukraine and the duration of the current crypto winter.

For investors and NFT fans, this is arguably the toughest period and will test their dedication, patience and passion for what was 2021’s most productive asset class by a long margin.

Next: How Long Will the Crypto Bear Market Last? A look at past recessions

Photo: Courtesy of Marco Verch Professional P on Flickr