The NFT hype train runs out as speculators dry up
Poised to be the next big thing, non-fungible tokens, or NFTs, had a moment earlier this year.
But buzz around the once-hot commodity now appears to be waning.
An ET report citing data from nonfungible.com stated that a 77 percent drop has been seen in terms of dollars traded between Q2 and Q3 of 2022 with a global NFT volume of $1.7 billion in Q3 of 2022.
According to the report, the period also saw NFT investor profits take an 84 per cent hit on resale.
For the uninitiated, an NFT is a unique digital identifier that cannot be copied, replaced or subdivided, that is recorded on a blockchain and that is used to certify authenticity and ownership. The ownership of an NFT is recorded in the blockchain and can be transferred by the owner, so that NFTs can be sold and traded.
NFTs can be created by anyone, and require little or no coding skills to create – one of the main reasons behind the initial hype. The traditional art scene was also quick to jump on the bandwagon. Today, however, NFT sales at the auction houses are falling.
Read | Are NFTs the future of art?
Like all fads, NFTs went through the motions of popularity. “First when everyone gets excited; then the trough of disillusionment; then the slippery slope of enlightenment and finally the plateau of productivity,” said Avivah Litan, vice president and distinguished analyst at Gartner.
NFTs peaked in popularity as “crypto-wealthy speculators, looking for new ideas to invest, fell for NFTs.” But as Praphul Chandra, an NFT platform for brands and the creative economy said, the problem was that most NFTs were seen as an investment opportunity. Also, the crash in cryptocurrencies (in which NFTs are traded) seems to have accelerated the decline of NFTs.
While most analysts and investors predict that the end for NFTs is fast approaching, some believe that the future may not be so bleak.
Ashootosh Chand, partner, digital and emerging technologies at consultancy PwC has stated that people are looking at NFTs beyond the hype. “It’s not just about an overvalued coin, painting, cricket bat or celebrity autograph, but about everyday things. That’s where NFTs will see mass adoption.”
In the future, NFTs may also find application in how brands engage with their end customers, said Chandra of Koinearth.
On the other hand, Ashish Singhal, co-founder, CoinSwitch, a crypto platform, sees NFTs being used for “everyday things like warranty cards for home appliances” or to issue government documents like driver’s licenses or passports. Companies are also looking at more practical applications of NFTs.
“I believe in this technology and it will be a much bigger game than just a marketplace (for art or collectibles),” Singhal added.
