The NFT dream has suffered a severe non-fungible blow, yet it is still alive.
As cryptocurrency-rich speculators invested billions of dollars on the hazardous assets, driving up prices and profits, the market sparkled magnificently last year. Currently, six months into 2022, it is awful.
On the biggest NFT platform, OpenSea, monthly sales volume plummeted to $700 million in June from $2.6 billion in May and a long cry from the high of over $5 billion in January.
NonFungible.com, which records sales on the Ethereum and Ronin blockchains, reports that by late June the average NFT sale had dropped to $412 from $1,754 at the end of April.
According to Gauthier Zuppinger, co-founder of NonFungible.com, "the crypto bear market has undoubtedly had an influence on the NFT area."
He said, "We have seen so much hype and conjecture about this sort of asset. Now that individuals are aware they won't become millionaires overnight, we are seeing some type of reduction.
Together with cryptocurrencies, which are often used to pay for the assets, the NFT market has fallen at a time when central banks have raised rates to fight inflation and risk appetite has waned.
In the first half of the year, Bitcoin has lost almost 57 percent of its value, while Ether has lost 71 percent.
Death spiral or dip?
Critics claim that the fall proves it was foolish to invest in such assets, which are tradable blockchain-based records connected to digital media like photographs or videos, often original works of art.
The Malaysian businessman who paid $2.5 million for an NFT of Jack Dorsey's first tweet last year found it difficult to sell it again in April after only receiving offers of a few thousand dollars.
The downturn, according to Benoit Bosc, global director of product at cryptocurrency trading company GSR, is the ideal opportunity to create a corporate NFT collection—the digital version of the fine art that conventional banks show to wow customers.
GSR spent $500,000 last month acquiring NFTs from what Bosc refers to as "blue-chip" collections, or those with sizable internet fan groups.
Among his purchases are an NFT from the Bored Ape Yacht Club and a collection of 10,000 cartoon monkeys from the American firm Yuga Labs, which was supported by celebrities like Jimmy Fallon and Paris Hilton.
Bored Apes has garnered so much attention that Yuga Labs funded $285 million in April by selling tokens that they claim can be swapped for land in a virtual world based on the game that has not yet been released.
But according to market watcher CryptoSlam, the average selling price for a Bored Ape fell to around $110,000 in June, halving from its high of $238,000 in January.
Bosc installed three displays in his New York office to show off his NFTs, which include different pixelated figures and a Bored Ape he paid $125,000 for.
For us, it's also a branding exercise, according to Bosc. It is possible to build "respectability, authority, and influence" in the crypto community by owning a valuable NFT and using it as your social media profile photo, he claimed.
game over or continue?
However, since the period of low interest rates that encouraged investors to make hazardous bets is coming to an end, the future of NFTs is decidedly dubious.
According to some industry observers, NFTs' impact on the art market will decrease. NFTs are expected to revolutionize the gaming industry, for example by enabling gamers to own in-game assets like avatar skins, even if the much-hyped vision for a blockchain-based metaverse hasn't yet come to pass.
The next great thing in blockchain technology, according to Modesta Masoit, chief financial officer of blockchain tracker DappRadar, is gaming.
However, this perilous fusion of gambling and financial speculation can encounter problems. According to John Egan, CEO of technology research company L'Atelier, most players like games without NFTs or "play-to-earn" elements.
Although NFTs were largely exempt from the ground-breaking new crypto legislation adopted by the European Union last week, Spain is separately attempting to impose restrictions on the manner in which video games trade virtual assets for real money.
In the meanwhile, Axie Infinity, the largest NFT-based game, has seen the value of its in-game token drop to less than half a cent from a high of 36 cents last year.
According to Egan of L'Atelier, the NFT market is not likely to rebound in its present state.
In the end, he said, "exceptional sums of money are being paid for very restricted assets that don't actually provide any cash flow."
However, he said that the core idea behind developing distinctive digital assets is still "fundamentally vital" and would have "huge implications" for the financial industry in the future.
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