Seismic NFT Shakeout may not be a bad thing

If May came in as a lion and out as a lamb for the non-fungible token market (NFT), June went out as a lamb chop.

After a statistics-twisting peak on May 1 that almost closed the Ethereum blockchain, sales volume, prices and buyers have plummeted.

Read more: Bored Apes NFT Rampage Spikes $ 200 million transaction fees for 55,000 sales

One reason is probably the shock to the system crypt in early May, when the Terra / LUNA stablecoin ecosystem collapsed, wiping out $ 48 billion in value and triggering a wave of panic and insolvency in the crypto loan market.

But NFT sales figures have fallen throughout the year. And at least anecdotally, the “cool” factor has fallen as celebrities who once hyped them – especially the Bored Ape Yacht Club (BAYC) cartoon avatars sold for six and seven characters – have quietly changed their social media portraits.

“The Tonight Show” host Jimmy Fallon – who spoke Bored Apes with Paris Hilton in January, which led to Mashable declaring that the couple “pumping their NFTs is beyond cringe” – deleted his in late June while a large trade show, NFT NYC, was in town. Tennis superstar Serena Williams and actress Reese Witherspoon, who have become lifestyle friends, are among those who have done the same.

While NFTs have many potential uses – they are unique tokens that can contain all types of media, including documents, photos, video and music – the vast majority of the market has been limited to the NFT market for “collectibles”, which is actually useful for very little other than betting on your Twitter profile to be a part of the trendy Bored Ape Yacht Club, and speculation.

“Without a doubt, the NFT market has plummeted in June,” Pedro Herrera, head of research at crypto-tracking DappRadar, told Bloomberg at the end of the month. “It is fair to say that in recent weeks, investors have been looking for safer places to put their money in the midst of the Terra collapse and the rumors surrounding potential liquidations.”

During the first half of 2022, the number of NFT buyers fell by more than 46% since the beginning of the year, the average sales price is down around 70% and total sales are down 84% – the latter falling below $ 1 billion for the first time since June last year, according to NFT tracking site CryptoSlam.

To trap the herd?

There have been many statements in the last six months that the NFT bubble has appeared – The Wall Street Journal called it in early May, days before the Terra / LUNA collapse sent the crypto into cover.

See also: NFT Weekly: The Popping of the NFT Bubble has been declared again, but investment continues to come

But this time, the downturn in the crypto market – the vast majority of NFTs priced in ether – is not just steeper, investors are running scared. Several crypto borrowers who are in or near bankruptcy this month were hurt by losses incurred after the Terra / LUNA collapse, but even large lines of credit have been able to stem what Voyager Digital called a “race” of customers draws assets in its Chapter 11 filing on Wednesday (July 6).

Related: Voyager’s digital bankruptcy tips about Crypto’s Shaky Foundations

A bigger question, though, is whether it’s a bad thing.

If there’s a Beanie Baby moment in the NFT collector’s world, there’s still plenty of uses for NFTs – even collectibles – beyond the ridiculously prized BAYC and Crypto Punk images. Professional baseball, football and hockey organizations embraced all NFTs as the development of trading cards this year, and joined the NBA, which brought basketball into the NFT area early.

Read more: Topps launches new NFT collection for MLB

The “non-fungible” part means that no two NFTs are alike, and all transactions can be tracked on an immutable blockchain, making them useful for everything from event tickets to the transfer of financial instruments. It also means that they can have significant benefits in tracking digital rights of all kinds and bringing planned scarcity to types of media that can be easily reproduced, such as works of art and songs.

See also: Goldman’s interest in NFTs may accelerate the tokenization of real assets

Just like the broader cryptocurrency industry itself, NFT’s projects are on track to thin out the herd, much like the dot-com industry went through in 2001 – from where it came stronger and with solid, sustainable uses.

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