Is the NFT Market on its Way Out?

According to the Wall Street Journal, this market may be coming to an end due to the loss of interest from crypto investors. Several auctions have shown how some formerly valuable NFTs are being sold for absurd amounts of money. The number of active wallets linked to these assets has dropped significantly.Many people had predicted that this would happen. According to a study published by The Wall Street Journal on Tuesday, the bubble surrounding the market for non-fungible tokens (NFTs) may be bursting. NFT  sales are down this week to an average of 19,000 per day, according to data from NonFungible.

NFTs are similar to cryptocurrencies in that they are digital assets created using blockchain technology.

They protect the token’s intellectual property and assure its uniqueness and irreplaceability. NFT tokens, like cryptocurrencies, are digital tokens produced with the help of blockchain technology. In order to create an NFT, you need to mint it on a blockchain. The main difference between the two is that NFTs are not interchangeable like cryptocurrencies. They can represent anything from artworks and tweets to in-game items and virtual land.

On the other hand, as highly speculative assets, they have been badly impacted by the Federal Reserve raising interest rates. Furthermore, as previously reported by security firm Chainalysis, NFTs are being used for money laundering and other criminal activities. The stringent regulatory procedures in the United States and Europe, as well as the attention these assets are receiving, have also had a negative effect on the market.

The study’s authors wrote: “It seems that the NFT mania has cooled down for now, with daily sales falling to around $ 10 million from a peak of $ 100 million in early April.” The Fed plans to continue raising interest rates throughout the year, Chairman Jerome Powell and other officials have hinted. So the easy money policy implemented by the US central bank and the ECB is coming to an end. As a result, investors are moving towards other less speculative and safer types of investments such as scarce commodities and metals, notes the WSJ. Chainalysis discovered that assets were being artificially pumped up in price. Typically, the same sellers who attend the market are also the buyers, but with a different profile. An attempt is made to deceive the market on the value of its assets and their actual liquidity this way.

In the first Twitter Inc. tweet, the WSJ provides a good example of the NFT market’s collapse. In March of 2017, Jack Dorsey, the co-founder and former CEO of the social network, sold it to Sina Estavi, founder and CEO of blockchain firm Bridge Oracle for $2.9 million. When Estavi attempted to sell the same tweet a month later for $8 million, he found no buyers. Other examples include an NFT linked to a digital artwork by Mike Winklemann, better known as Beeple. The work was sold for $69 million in March, but by April 6th had lost nearly two-thirds of its value, falling to $23.6 million.

The study’s authors say that the market for NFTs has likely been overestimated, with some assets selling for “absurd prices.” Estavi, on the other hand, said that this does not imply that the NFT market is failing. He felt it was a “natural fluctuation” and that this market is at its early stages of development, implying it’s difficult to guess what will happen in the future.

The “Doggy #4292” NFT, designed by Snoop Dogg and released in early April, resembles an astronaut and was purchased for $32,000 worth of ETH. It has now been put on the market for $25.5 million but no offer has been made greater than 0.0743 ETH ($210). Even NFT interest is declining. According to Google Trends data, the number of internet searches for the term has decreased by about 80% since January. Another factor that is affecting the market is the oversupply of NFTs. There are five NFT assets per buyer, according to statistics from Chainalysis. At the end of April, 9.2 million NFTs were sold to 1.8 million buyers, the firm said.

Advertisement

Despite these dismal figures, and the fact that the NFT market has underperformed, Coinbase remains optimistic. A beta version of the site launched by the US exchange allows users to buy and sell NFTs by linking their wallets. The website with 4 million registered users does not charge transaction fees or charges for creating NFTs through it.