News broke this week of an NFT crash – with sales down 92% according to some data. The incredible rise of non-fungible tokens in the last year, spurred on by lockdowns no doubt, drove a fevered excitement for this new art, but it looks like the fun is over. Or is it? What’s the full story behind this recent news?
Let’s remember non-fungible tokens are digital files stored on a blockchain that create rarity. You can read more in our guide, What are NFTs? or have a go at creating an NFT for free in our tutorial. We have NFT tips for beginners to, to learn the basics.
Back to that headline news. The downturn as reported by crypto data site NonFungible shows a transaction volume decrease of 47% in Q1 of this year compared to the previous quarter. Sorry to bore you with figures, but this is ultimately a sign that reality is bearing down on a tech and market that has been heavy on hype and short of use for some time.
But the idea that NFTs are over is likely an overstated belief. For example, the Moonbirds NFT project added $500 million worth of trading volume, while the Solana blockchain saw a 91% month-on-month increase, recording nearly $300 million in NFT trading.
The recent launch of Yuga Labs’ new Otherdeeds NFT, a virtual land sale for a forthcoming video game, crashed the Ethereum blockchain as it was in such high demand, even though the floor price was $5,500 / £5,000. The pull of ‘blue chip’ NFT brands remains high and people are prepared to spend big to get a piece of what could come next.
Yet overall NFT trading is slowing at a macro level, and for many artists invested in the NFT space this can’t come soon enough – read our interview with VFX supervisor Bilali Mack who believes NFTs need a reset so new uses, experimentation and entrepreneurial ideas can bring better value and true democratisation to this digital tech.
For many NFTs are approaching a similar bubble-burst moment to the dot.com collapse in the late 90s. NFTs are at the end of one curve and the start of another, and this new boom could be the one that really sees the tech emerge as something interesting.
The new future of NFTs should see the tech break free of cryptocurrency ups and downs and enable more people used to using fiat currency to engage. We should see more utility in NFTs – ones that have genuine uses as well as artistic merit – (see how NFT tips guide to more) and likely a divergence from Ethereum to more stable, environmental and economic blockchains such as Solana, Wax and Flow. Take a look at our guide to NFT crypto to see how these all differ.
Some in the NFT space dispute the claims of a downturn. Tom Schmidt, a cryptocurrency investor, has downplayed the data found on nonfungible that sparked the current news. He points to more accurate on-chain data at Dune Analytics that shows NFT transactions have barely dropped since the new year highs in January.
come on, man pic.twitter.com/CTJFldAHNkMay 3, 2022
A crash is expected, however, it maybe here now or it could be a year away, and it’s not the first time we’ve asked are NFTs over? But what comes next could really define what NFTs are and how they are used, especially by artists and creators. The hype looks like it’s coming to an end, and many in the NFT space should welcome it, as what’s next could be genuinely interesting.
Disclaimer: The opinions expressed in the article are for general informational purposes only and are not intended to provide specific financial or investment advice or recommendations for any individual for any investment product. The article is only intended to provide general information and opinions about NFTs. The views reflected in this article are subject to change at any time without notice.