2022 was the year of the NFT reality check
In 2021, the fashion industry discovered NFTs. Within months, the craze took off, with brands big and small rushing into the exciting world of cryptocurrencies, metaverse, web3 and NFTs. But 2022 was a reality check for brands that went all in on NFTs.
Through 2022, a series of market crashes, public scandals and general waning interest decimated the market for NFTs. The crash of major cryptocurrency exchanges and coins such as Luna in August and, more explosively, FTX in November led to a sharp drop in NFT prices linked to these currencies. CBS reported in the days after the FTX crash that an NFT collection by the famous artist Damian Hirst had dropped 12% in price, as many other NFT collections fell in value.
The high-profile flameout of major crypto markets went a long way toward scaring the average consumer away from NFTs, as did the plethora of stories of people losing their life savings on bad NFT investments.
But even beyond the immediate fallout from the crash, NFT prices were generally down throughout the year. In October 2022, NFT sales fell by more than 90% in almost every metric – including volume and price – compared to the previous year. Trading volume on OpenSea, one of the largest markets for NFTs, fell from $3 billion in September 2021 to $350 million in September 2022.
This can be partly attributed to the fact that NFTs, as they have been used so far, have little practical value. While the technology has implications for uses ranging from authentication to pricing for real products, they have largely been used over the past two years as speculative assets, or items to be bought and sold on their own as done by brands such as Givenchy, Gucci and Burberry. Although lucrative in the beginning, the limits of NFTs as an asset may have been reached.
Instead, brands in 2023 are likely to look for other, more practical ways to use NFTs. There is already evidence that brands are starting to think this way: Many, including Rebecca Minkoff and Karl Lagerfeld, use NFTs as tokens that provide access to pre-release sales or in-person events. Sneaker brands such as New Balance and Nike use them as tools to track and authenticate physical products.
Michelle Cordeiro Grant, founder of lingerie brand Lively and beverage brand Gorgie, and host of the “Web3 with MCG” podcast, said it’s this practical future of NFTs that she’s most excited about.
“The perception [of web3] has been that it’s just buying and selling these bro-ey NFTs. But there are many more opportunities here beyond that, Cordeiro Grant said. “Ultimately, NFTs can create transparency in how something is sold. It’s utopian, but we can one day trade physical goods and use NFTs to track prices. I’m excited for something more like Web2.5, where it is the merging of physical goods with blockchain technology.”
