Non-fungible tokens (NFTs) were hot and heavy for a while. Where are they now? Read on.
From over 200,000 in September 2021 to just about 20,000 in May 2022—NFT sales have taken a significant hit, falling by 92 percent worldwide. Though the space is familiar with instability, this time, it appears to be more worrying than usual.
NFTs are data-driven digital tokens representing ownership stored on a blockchain. From music and art to films and more, nearly anything can be an NFT. This diversity is probably what propelled its growth. NFTs rose in popularity last year, garnering millions of dollars and followers. In fact, they even entered the mainstream with top brands and celebrities, including TikTok and BTS, adopting them. For the past few months, however, NFTs’ fame has been declining, urging people to think: is this the end for NFTs? Let’s find out.
The bad cocktail of really high interest rates and risky assets
Crypto has been notorious for its volatility. Still, for the longest time, people felt safe hedging their bets on it. Its great returns, a popular roster of supporters (including the likes of Tesla CEO Elon Musk) and increasing use-cases (think: El Salvador declaring it a legal currency) made it seem very attractive. However, now, with rising interest rates across the world and talks of an upcoming recession, crypto investors are wary. So much so that they are pulling out the investments they made in the field, and NFTs are not exempt.
As a result of this cautious approach, these digital tokens are losing their value. Many people bought NFTs as long-term investments. They hoped that, in a few years, these NFTs would increase in value and would sell for much more than their original price. However, that dream seems to be slipping away from them.
People are losing interest NFTs
Former Twitter CEO Jack Dorsey’s first tweet NFT sold for US$2.9 million last year. This year, it couldn’t get past a US$14,000 bid, falling 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 quite the plummet. People once spent millions of dollars on NFTs; now, they are dealing in hundreds (read: Snoop Dogg’s NFT, auctioned at over US$25 million, receiving a mere US$210 bid.) And to add insult to injury, Tesla CEO Elon Musk mocked the popular Bored Ape Yacht Club NFTs, calling them “kinda fungible”.
Secondly, 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 rake in millions of dollars. But as buyers thin out, this idea is becoming more and more far-fetched.
Finally, there’s the question of NFTs’ utility or lack thereof. That has always remained a gray area that didn’t deter people from buying them. But over the past few months, that is becoming central to how people spend their money in general. Some believe that the current market decline is, in one way, a natural elimination, weeding out the bad, or “useless”, tokens.
Are NFTs going down a good thing 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 host of swindles. Perhaps this burst will help discourage such acts. Additionally, as mentioned before, it might even help eliminate the “bad” crypto projects. The ones that will remain standing after this crash will be the truly sustainable ones that will be worthy of long-term investments.
It’s not all gloom and doom
Though the market appears to be uncertain, it is still attracting top businesses. For instance, Starbucks announced in May 2022 that it will be launching an NFT loyalty program. CEO Howard Schultz expounded, “We plan to create a series of branded NFT collections, the ownership of which initiates community membership, and allows for access to exclusive experiences and perks.” Additionally, some NFT users feel that the space will be revived as it became a great way to support one’s favorite artists and will continue to be so.
Furthermore, we must remember that the world of NFTs 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.
- NFTs, Metaverse & Web 3.0: Is It Worth Investing in These Buzzwords?
- What Are the Costs Involved in Trading NFTs?
- The Dark Side of NFT
Header Image by Unsplash