The Non-Fungible Token (NFT) market has been a goldmine for lots of investors since the year 2014 till date. From an $ 82 million exchange in 2020 , NFT trading increased by 21,000%, which is to more than $ 17 billion in 2021. At a Compound Annual Growth Rate (CAGR) of 35% from 2022 to 2027, the market is anticipated to increase in size from $ 3 billion in 2022 to $ 13.6 billion by 2027.
A non-fungible token (NFT) is a type of financial contract made up of digital data which is classified in a distributed ledger known as a blockchain and has a market value based on the digital file it belongs to.
The blockchain records the ownership of an NFT which can be transferred by the owner, allowing NFTs to be sold and exchanged. Anyone can make NFTs, and they don’t necessarily need to know how to code.
However, in addition to the availability of distribution channels, the market heavily relies on aberration, distinctiveness, and the perception of owners and consumers. As of recent, there has been a drastic drop in the market.
NFT Market Enters Panic Mode
The recent bear market in the cryptocurrency market has taken a heavy toll on many of the most expensive NFT collections. The entry price for some collections has decreased by more than 17% as a result, having a significant impact on its “floor prices.”
‘Floor price’ is the least amount you could pay to buy an NFT. It’s a well-liked statistic for figuring out how much NFT collections are worth. In a similar vein, it’s just like buying another digital product, which the price could drop or rise unexpectedly.
The Non-Fungible Token market did hit above 1.5 million in a single month in 2021 , between October and November, which was a significant milestone. More than 11 million works of art were sold in that same year.
Non-fungible tokens (NFTs), which include tokens like BAYC, MAYC, and Axie Infinity, helped the cryptocurrency market surpass the threshold set in January. In the final few days of may, BAYC NFT concluded sales of goods worth almost $200 million. A 41% decline in sales in hardly a quarter. As a result, the Non-Fungible Token Market went into a tailspin.
NFT Market is Crashing Alongside Bitcoin and Ethereum
Today, several blockchain networks support NFTs and smart contracts. Currently, the ones with the highest trade volume are the Ethereum network, the Cardano network, the Solana network, the Elrond network, and the Terra network.
The market value of Bitcoin, the largest cryptocurrency in the world, has dropped by almost 50% during the past six months. The second-largest cryptocurrency, Ethereum, is also down in the same situation with a more than 55% decrease.
A similar marketing pattern is being observed in the NFT spaces.
NFT sales have declined to an average daily volume of approximately 19,000. A 92% drop from a peak of about 225,000 in September.
Therefore, as sales continue to reduce, NFT buyers are beginning to cease from the NFT marketplaces. However, since weekly averages have been approximately $687 million so far this year, Gauthier Zuppinger, co-founder of Nonfungible.com, told CNBC that he doesn’t expect a further increase in NFT transactions.
In the fourth quarter of 2021, the weekly average was about $620 million. According to NFTGo data, the floor price of the Bored Ape Yacht Club (BAYC) NFT collection now struggles to survive the most recent crash.
Also, the least expensive apes are currently selling for roughly $92,450 at a floor price of 73.43 ETH, with ETH trading at about $ 1,260. That’s about a 78.5% decrease from the peak.
Meanwhile, there has been a 67% decrease in the average cost of an NFT from $589 in April to $192 in June. Additionally, the floor price for Moonbirds, one of the year’s highlight collections, has fallen to 14.88 ETH, a 17.33% decrease.
As a result, the number of transactions in the NFT market has fallen sharply from 62 lakh to 27 lakh.
Why is NFT Crashing?
The NFT market has always been a great deal for investors until recently. Let’s examine the potential reasons for this devastating hit.
The Crypto Bear Market
NFTs are directly minted on the most prominent cryptocurrencies, particularly the Ethereum Network. Since reaching highs of $4800 in November 2021, Ethereum has fallen below the $1000 threshold.
The NFTs are suffering greatly as a result of the extreme volatility currently engulfing the whole cryptocurrency market. There has been a decrease by half in most NFTs floor prices, due to this crypto meltdown effect
In the meantime, Otherdeed has lost 12% of its value. Likewise, there has been decreasing in the floor pricing of several high-profile NFTs such as Bored Ape Yacht Club, to 82 ETH, which is around $ 102,000. The Mutant Ape Yacht Club costs have also decreased by 22 percent to $ 20,000.
The general outlook of investors has also made them reduce their overall NFT / crypto trading resulting from the recent Luna crypto crash.
Bathtub Effect
The bathtub effect is a concern for cryptocurrency analysts. They define it as a procedure wherein the sale of a sizable NFT project has an indirect effect on the costs of other NFT initiatives.
This is a result of attempting to liquidate these NFT positions to raise currency to buy additional NFT collections. This has also led to the plunging NFT market.
Declining Interest Of NFT Investors
The dwindling interest of investors in NFTs is a major factor contributing to the fall in the NFT market. According to Google Trends data, the term “non-fungible token” reached a value of 26 in the last days of May. This was a 74% drop from the peak interest overtime of 100 reached in January 2022.
Also, it stated that the ‘buy and sell NFT terms’ has experienced a huge decline, with a sharp dip of 80% and 83% respectively.
All of this points to the deteriorating investors’ interest in the NFT sector, who are likely seeking more enjoyable ways to spend and invest their money.
Another idea holds that, because the market for purchasing and selling NFTs was very tiny, once a person burns himself or gets burned by another seller, a resale will become more complicated.
Should I Still Buy NFTs?
The rising demand for digital artworks is the primary backbone behind the evolution of the non-fungible token (NFT) market globally.
An NFT’s Floor price may rise or fall, it is based on the market and the price of the cryptocurrency it was minted on. As of recent, the NFT market now appears to be recovering.
The fact that NFTs were exchanged for close to $ 8 billion in the first quarter of 2022 provided proof that the market had not crumbled. As of May 1, 2022, crypto wallets had remitted over $37 billion to NFT marketplaces. That almost equaled the $40 billion sent in total from the previous year.
Also, Ethereum’s algorithm has recently been upgraded to Ethereum 2.0. Experts are now speculating on the likelihood that Ethereum’s price will skyrocket, providing investors with a financial incentive to put money into it. By doing this, Ethereum will transition from proof of work to proof of stake, making it a rational long-term investment.
The greatest time to buy NFTs, according to Cryptoticker is during a bear market because many NFTs have shown to exceed expectations after the bear market. According to recent data, the total organic NFT trading volume across blockchain networks and marketplaces is around $3.8 billion. It is very similar to the $3.87 billion DappRadar’s report in February and is a 45% increase over the $2.63 billion reports for March.
Additionally, a lot of creators are accepting non-curated platforms for the sale of their digital assets. Non-curated platforms procure free access to creators, unlike the curated ones.
NFT curated platforms such as SuperRare and Nifty gateway are with strict application requirements and prolonged wait times for expert decisions. This is the aim of different organizations to expand their growth in the NFT space.
A US-based cryptocurrency exchange platform, Coinbase Global Inc, has also put forward its NFT marketplace. This kind of development will help to skyrocket the NFT market space.
NFT has attracted international companies like Adidas, Coca-Cola, Nike, Louis Vuitton, Samsung, and Pepsi. Regardless of the market’s downturn, international brand alliances give this potential market trend the buzz it needs to succeed.
However, there haven’t been any substantial falls despite the decline of the crypto market. In April 2022, the NFT markets had a significant rebound, making NFT buyers and sellers keep reasonable levels.
NFT forecasts seem to so consider the APE of becoming one of the best cryptocurrencies of 2022 despite its brief price dip. APE’s market debut price was $ 20.02 on May 1st, 2022 while the token hit a low of $ 5.25 for the entire month before ending at $ 6.76. Between APE’s opening and closing prices in May, there was an overall decline of 66 percent.
Interestingly, Meta is also increasing the profitability of investing in NFTs as it is presently testing Instagram’s new feature to enable NFTs to be displayed on the site.
A select number of Instagram users and content creators who are already familiar with the operation of non-fungible tokens will initially be the target audience for the integration of NFTs. This new feature within one of the most popular social networks will likely have a hugely significant effect on the NFT market success.
Final Thoughts
Many people collect NFTs for their inherent artistic value, the same way one might accumulate fine art or other collectibles. Generally, NFTs consist of references to digital files including images, films, and audio.
Mostly, consumers choose NFTs from artists or businesses they appreciate without giving the long-term value much thought.
Also, while the NFT market still suffers from the crypto meltdown, data from the full month has proven that organic NFT trading volume grew 45% in April compared to March. Also, CryptoPunks has come out relatively unscathed, with the price for the cheapest Punks falling only 2.67%. This proves the chance of the market coming way back up.
