Non-fungible tokens (NFTs) have been hot and heavy for a while. Where are you now? Continue reading.
From over 200,000 in September 2021 to just under 20,000 in May 2022, NFT sales have taken a significant hit, falling 92 percent globally. Although the room is familiar with instability, this time it seems more worrisome than usual.
NFTs are data-driven digital tokens that represent property stored on a blockchain. From music and art to movies and more, almost anything can be an NFT. This diversity likely fueled its growth. NFTs have grown in popularity over the past year, garnering millions of dollars and followers. In fact, they’ve even entered the mainstream with top brands and celebrities including TikTok and BTS adopting them. However, in recent months, the fame of NFTs has waned, making people think: is this the end for NFTs? let’s find out
The bad cocktail of really high interest rates and risky investments
Crypto is notorious for its volatility. Still, for a long time people felt safe to hedge their bets on it. Its great yields, popular list of backers (including Tesla CEO Elon Musk), and growing use cases (think: El Salvador declares it a legal currency) made it look very attractive. However, amid rising interest rates around the world and talk of an imminent recession, crypto investors are cautious. So much so that they are withdrawing the investments they have made in this space, and NFTs are no exception.
As a result of this prudent approach, these digital tokens lose their value. Many people bought NFTs as long-term investments. They hoped that in a few years these NFTs would appreciate in value and sell for much more than their original price. However, this dream seems to be slipping away from them.
People are losing interest in NFTs
Former Twitter CEO Jack Dorsey’s first NFT tweet sold for $2.9 million last year. That year, it failed to bid above $14,000 and lost up to 99 percent in value. And if that’s not a clear sign of waning interest, here’s something to chew on: Google searches for the term are down 80 percent since January of this year. For something so rooted in web technologies, this is quite a low point. People once spent millions of dollars on NFTs; now they’re trading hundreds (read: Snoop Dogg’s NFT that auctioned for over $25 million and got a bid of just $210). they “kinda fungible”.
Second, the market is witnessing a disproportionate number of buyers and sellers. There are currently 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, that idea is becoming more and more far-fetched.
Finally, there is the question of the benefit or lack of NFTs. That has always remained a gray area that hasn’t stopped people from buying them. But in recent months, this has become a focal point for how people spend their money in general. Some believe that the current market decline is somewhat a natural elimination, weeding out the bad or “useless” tokens.
Are NFTs a good thing after all?
The crypto space brought profitability but also welcomed scammers and hackers. From identity theft to fake bids and insider trading, NFTs have witnessed a variety of scams. Perhaps this outburst will help discourage such acts. Moreover, as mentioned earlier, it might even help eliminate the “bad” crypto projects. The ones that remain after this crash will be the truly sustainable ones worth long-term investment.
It’s not all darkness and doom
Although the market seems uncertain, it still attracts top companies. For example, in May 2022, Starbucks announced that it would launch an NFT loyalty program. CEO Howard Schultz stated, “We plan to create a series of NFT branded collections, ownership of which initiates membership in the community and provides access to exclusive experiences and perks.” Additionally, some NFT users feel that the space is being revived as it has become, and will continue to be, a great way to support your favorite artists.
Also, we have to keep in mind that the world of NFTs is still relatively new. So expect some turbulence. Perhaps we are just seeing a natural correction and not the abrupt end to NFTs. Only time can tell.
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