NFT Sales Tank After Crypto Crash
Non-fungible tokens have really been dragged down by the crypto crash, with sales hitting a one-year low in June.
NFTs give someone proprietary rights to a one-of-a-kind digital item, often a work of virtual art, even if that asset is imitated. A blockchain is a digital, decentralized ledger that records ownership.
As per the virtual currency research organization Chainalysis, sales of NFTs totaled just over $1 billion (£830 million) in June, its toughest month since the same period last year, when sales totaled $648 million. In January, sales peaked at $12.6 billion.
This drop is unmistakably linked to the widening downturn in the cryptocurrency industry, said Chainalysis analyst Ethan McMahon.
Restructuring within impacted markets is unavoidable in moments like these. In terms of NFTs, we might very well see a downtrend in aspects of the catalogs and different kinds of NFTs that gain prominence.
The crypto industry, which was worth around $3 trillion in November, is now valued at just under $1 trillion.
NFTs depend heavily on the blockchain – the decentralized ledger pioneered by Bitcoin to record proprietary rights of the virtual currency – to track who possesses them and enable them to be sold. Most are built on the Ether blockchain, which itself is powered by a carbon-intensive program known as proof of work.
At its high point, the NFT industry was luring record-breaking amounts, including $2.9 million for a token of Twitter co-founder Jack Dorsey’s initial Twitter post. A digital collage by graphic artist Beeple managed to sell for $69 million; the primary token for the computer game Axie Infinity was worth $9.75 billion, and Coca-Cola generated more than $575,000 by having sold digital products such as a customized coat to be worn in the cyber world.
NFT sales reached a high point in January, as per Chainalysis data. An effort made to sell on the Dorsey token in April was dismissed after bids reached $14,000.
According to DappRadar, an organization that records NFTs and blockchain-based games, demand for so-called big-name NFT compilations has held up.
According to DappRadar’s research director, Pedro Herrera, the value of the least expensive token in the Bored Ape Yacht Club has dropped by only 1% in the last month, to $90,000. Blue-chip catalogs are far outperforming the overwhelming bulk of NFTs.
According to Chainalysis, NFT sales reached $40 billion last year and are expected to surpass $42 billion by 2022. Thus far, sale prices in January and February have accounted for over half of the sum for 2022.
The crypto market has been impacted by fluctuation in the broader stock markets, as well as concerns about inflationary pressures and rising interest rates, that have quelled the appetite for risky investments such as technology stocks and virtual currencies.
Furthermore, the implosion of Terra, a stablecoin whose worth was intended to be pinned to the US dollar, has also rattled confidence in digital currencies, as have problems at crypto-related financial firms such as the Celsius Network, a financial institution that has postponed transfers of funds.
The value of NFTs is very strongly tied to the value of the cryptocurrency blockchain they are based on. As such, crashes in the crypto space are naturally affecting NFT sales. Many major financial players believe that NFTs were nothing more than just a passing trend, and the slow decline in sales, as well as the poor resale value, are all starting to back that sentiment.
Whether or not some of the less popular NFT collections and singles can recoup some of their value is something that we have to wait and see; however, at the present moment, this does seem rather unlikely.
The Bottom Line
NFTs revolutionized the world last year as they seemed to come from nowhere and just exploded onto the scene. At the time, this seemed to be the next big thing like Bitcoin and Ether had been before; however, as time has gone on, people seem to find less value in NFTs now that the initial craze has died down.
It does seem that NFTs are dropping more and more in value as the days go on, and we should have conclusive evidence of their future within the next few months