Is the NFT bubble finally bursting?
Non-fungible tokens (NFT) were hot and heavy for a while. Where are they now? Read on.
From over 200,000 in September 2021 to roughly 20,000 in May 2022 – NFT sales have taken a significant hit, falling by 92 percent worldwide. Although the square is known for its instability, this time it seems to be more worrying than usual.
NFTs are data-driven digital tokens that represent ownership stored on a blockchain. From music and art to movies and more, almost anything can be an NFT. This diversity is probably what drove the growth. NFTs surged in popularity last year, gaining millions of dollars and followers. In fact, they even entered the mainstream with top brands and celebrities, including TikTok and BTS, adopting them. In recent months, however, NFT’s fame has been waning, prompting people to think: is this the end of NFTs? Let’s find out.
The bad cocktail of really high interest rates and risky assets
Crypto has been notorious for its volatility. Yet, for the longest time people felt safe in hedging their bets on it. Its big returns, a popular list of backers (including the likes of Tesla CEO Elon Musk) and growing use cases (think: El Salvador declaring it a legal tender) made it seem very attractive. But now, with rising interest rates around the world and talk of an impending recession, crypto investors are wary. So much so that they are pulling out the investments they’ve made in the field, and NFTs are no exception.
As a result of this cautious approach, these digital tokens lose their value. Many bought NFTs as long-term investments. They hoped that in a few years these NFTs would increase in value and sell for much more than their original price. However, that dream seems to be slipping away from them.
People are losing interest in NFTs
Former Twitter CEO Jack Dorsey’s first tweet NFT sold for $2.9 million last year. This year it couldn’t get past a bid of USD 14,000, which dropped up to 99 percent in value. And if this isn’t a clear sign of declining interest, here’s something to chew on: Google searches for the term have dropped by 80 percent since January this year. For something so rooted in web technologies, this is a huge downfall. People once spent millions of dollars on NFTs; now they’re trading in the hundreds (read: Snoop Dogg’s NFT, Auctioned for Over $25M, Receives Only $210 in Bids.) And to add insult to injury, Tesla CEO Elon Musk mocked the popular Bored Ape Yacht Club NFT- one, and called them “quite interchangeable”.
Second, the market is witnessing a disproportionate number of buyers and sellers. Currently, there are too many sellers and not enough buyers. NFTs allowed artists to own their art, sell it independently, and raise millions of dollars. But as buyers thin out, this idea becomes more and more far-fetched.
Finally, there is the question of NFT’s usefulness or lack thereof. There has always been a gray area that didn’t deter people from buying them. But in recent months it has become central to how people spend their money in general. Some believe that the current market decline is in one sense a natural elimination, weeding out the bad, or “useless” symbols.
Are NFTs going down after all?
The crypto space brought profitability, but it also welcomed scammers and hackers. From impersonation to fake bidding and insider trading, NFTs have witnessed a number of scams. Perhaps this outbreak will help discourage such actions. In addition, as mentioned before, it can even help to eliminate the “bad” crypto projects. Those who will remain standing after this crash will be the truly sustainable ones who will be worthy of long-term investment.
It’s not all gloom and doom
Although the market appears to be uncertain, it still attracts top companies. For example, Starbucks announced in May 2022 that it will launch an NFT loyalty program. CEO Howard Schultz stated, “We plan to create a series of branded NFT collections, ownership of which initiates community membership, providing access to exclusive experiences and benefits.” Additionally, some NFT users feel that the space will be revived as it became and will continue to be a great way to support their favorite artists.
Furthermore, we must remember that the NFT world is still relatively new. So some turbulence is to be expected. Perhaps what we are seeing is just a natural correction and not the abrupt end of NFTs. Only time will tell.
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Top image by Unsplash
