NFTs (Non Fungible Tokens) received so much hype in 2021 with artists, celebrities, influencers, and the sports industry venturing into the sector. They used NFTs as a way of engaging their fans. However, the NFT hype did not last for long as NFT sales dropped to one-year lows during the bear market of 2022.
So, is NFT hype over?
The NFT hype which ran from early 2021 to May 2022 was backed by a bullish cryptocurrency market and a positive investor sentiment. However, the failure of Bitcoin, the leading cryptocurrency by market cap, to maintain its all-time high price hurt the entire cryptocurrency industry.
In June 2022, the NFT market recorded its lowest performance of the year as the total daily sales dropped to about 19,000 with an approximate value of $13.8 million, a value that was last recorded in June 2021.
The NFT hype was high last year as witnessed by the NFT sales. Data from nonfungible.com shows that the highest number of daily NFT sales were recorded on May 1, 2022, with 118,577 NFTs worth $780.4 million sold in a day. The non fungible report shows the performance of NFTs in the first quarter of 2022.
The report has left many NFT investors with uncertainty about the future of NFTs and the NFT hype. The first quarter of 2022 has shown a very worrying trend in the NFT market, with NFT sales falling by 46%. The daily average NFT sales also dropped to 19,000 per week from a peak of 225,000 in September 2021, a 92% drop.
There has also been an almost 30% drop in NFT buyers and this can be attributed to two reasons. The first one is that the number of active NFT traders has reduced from close to a million accounts before the end of 2021 to around 491,000. This is according to a report from NBC. There is also an increased supply of NFTs, with Chainalysis reporting that every buyer has around five NFTs to buy. NFTs gain their value from scarcity, and the lack of this could have contributed to the fall of non fungible tokens. The law of demand and supply also applies to NFTs.
The NFT hype has also suffered a 50% increase in total losses after resell. A good example is the attempted sale of the first tweet by Jack Dorsey, one of the most hyped NFT. The NFT was bought for $2.9 million in March 2021 with an expectation to resale it for about $25 million. However, the highest bid he received was $6800, and his efforts to sell the NFT were frustrated.
Some of the factors that are negatively affecting the NFT hype include the falling Ethereum (ETH) prices, unrealistic gas prices, and lack of secondary market demand. This has seen the NFT market capitalization record a huge drop as well as the NFT trading volume.
What is the Future of NFTs?
From the above trends, you could ask yourself:
Is NFT market collapsing?
The NFT hype is slowing at a macro level. Currently, NFTs are at the end of one curve and about to start another one. The new start could make blockchain technology emerge as a new interesting thing.
It is expected that the blockchain will break from the ups and downs of cryptocurrency in the future. This means that people will have an opportunity to engage in the NFT industry using fiat currency. We may also see the invention of utility NFTs with more uses and merits for artists. People will also shift from the Ethereum blockchain and start to use more stable and economic blockchains that are friendly to the environment. A good example of such a blockchain network is Solana. It is cheaper to mint, sell, and buy NFTs on the Solana blockchain network.
However, a crash is expected to happen this year. However, this is not the first time NFT investors are asking themselves:
Is NFT dead?
What happens next in the NFT industry will give the best definition of NFTs and how they can help artists. Thus, we should welcome the end of the NFT hype hoping that what comes next will be more interesting.
Note that the backlash in the NFT hype comes at a time when the cryptocurrency industry is in its bearish trend. The world’s leading cryptocurrencies such as Bitcoin and Ethereum have also recorded a huge drop in prices from their all-time highs of September 2021. As the crypto industry breaks from this, the NFT hype may resume.