NFT Transaction Volume Plummets 90%: Has the NFT Bubble Burst?
NFTs did not escape May’s crypto market crashes. Was the correction healthy for NFT markets?
After several weeks of price crashes and doldrums, the cryptocurrency market at large is showing signs of recovery. However, the non-fungible token (NFT) sector of the market may be a different story.
Over the last 24 hours, several headlines have reported that the NFT market has more or less ‘officially crashed’: for example, Gizmodo reported that: “The current answer to the question ‘What is the value of an NFT’ appears to be ‘not much and dwindling fast.’”
And, indeed, there was a steep drop in non-fungible token transaction volume over the course of May. Data from NonFungible.com shows that the week-long period surrounding the NFT market peak at the beginning of May saw $170 million in transactions. However, as reported by Protos, that figure has collapsed to just $19.4 million in NFT sales, a decrease of roughly 90%.
This steep drop in NFT sales could represent the confirmation of what many non-fungible token skeptics have been saying for months: that the boom in NFT markets earlier this year was nothing more than a hype-driven bubble.
However, proponents of these unique digital objects have a different point of view: that the NFT landscape is shifting, and, like the crypto market before it, many times over, that the crash is a healthy correction on the pathway to a more robust non-fungible token industry.
Which is true? Perhaps both.
May’s Crypto Market Crashes May Have Had an Outsized Effect on NFTs
After all, cryptocurrency markets, in general, are famous for their volatility. Although Bitcoin is growing less volatile as its market cap continues to expand, its movements still have a large influence on coins with smaller caps. For example, when the price of BTC dropped roughly 30 per cent in May, some smaller-cap coins saw drops of 50-60 per cent, or even more.
And indeed, some analysts have connected the dots between the BTC drop and the decline in non-fungible token markets throughout the month of May: that as leverage was rinsed out of Bitcoin markets, much of the capital that had flowed into altcoin and NFT markets based on speculation and hype was similarly sent down the drain.
As a result, each of these markets was left bare, BTC with its diamond-handed die-hards, altcoins with their hopeful tech believers, and NFTs with a small, core group of serious collectors and artistic fans. In other words, the investors who stayed in each of these markets were a slimmer group of core believers in the technology and use cases that each of these crypto-asset sub-classes has.
NFTs may have been disproportionately affected by the cryptocurrency market crash last month because their use cases have not been as well-defined as the use cases of Bitcoin and altcoins. Andrew Miller, Head of Product Marketing at Oasis Labs, told Finance Magnates that: “Current use cases of NFTs are limited to assets such as digital art, where buyers speculate on the piece’s potential value when marking their purchase.”
“This speculation is largely predicated on a belief that they will have social and historical value,” Miller told Finance Magnates. And indeed, the NFTs that have fetched large dollar amounts as of late have been associated with images or works of art that have penetrated the zeitgeist in some way, for example, Zoe Roth, also known as the ‘disaster girl’, fetched nearly $500K for the ‘original’ copy of the meme in which her face is featured.
However, over time Miller expects that NFT use cases will continue to expand, and, as such, that investments in NFTs will be less based on speculation. “As the technology surrounding NFTs matures, we expect to see them represent assets that are more sophisticated and have higher intrinsic value,” he said.
Miller pointed specifically to an NFT project that his own company, Oasis Labs, recently initiated. “Take, for example, our recent partnership with Nebula Genomics & Akoin to mint an NFT that represented Harvard professor George Church’s sequenced genome data.”
“By backing NFTs with more valuable assets, we can unlock new economies where individuals, creators, and businesses can leverage financial vehicles to trade, monetize, and even collateralize off-chain assets on a diverse blockchain ecosystem.”
Published By : Finance Magnates