Sunday saw the lowest volume of NFT sales on OpenSea, the biggest market for such products, since December. According to Dune Analytics, only $52 million has been sold. Compare that to April, where volume fell below $100 million on just a few occasions.
Reluctant buyers led to precipitous drops in NFT prices.had a starting price of around $400,000 (145 ether) towards the end of April, but by Monday that price had been halved to $200,000 (91 ether). Similar declines were seen in other . The entry price for Pixelated Moon Birds fell from a high of around $110,000 to $44,000 on Monday, while the entry price for Reece Witherspoon-backed World of Women is $10,000, down from 34 $000 in mid-April.
To compound the chaos, NFTs are pouring in alongside bitcoin and ether. Bitcoin fell below $30,000 for the first time since 2020, and Ether sits at $2,300, well below its November high of $4,600.not doing very well.
Citing a huge drop in the number of NFTs purchased, The Wall Street Journal reported last week that NFT sales were “steady,” while Yahoo questioned whether a $140,000 sale of a CryptoPunk bought for $1 million dollars six months ago signaled “the death of the NFT”. This sparked a different kind of euphoria: punters calling for the imminent demise of NFTs.
“The NFT market is collapsing” a tweet with over a thousand read likes. “It turns out that the digital rocks and digital monkeys weren’t a good store of value.”
There is something in these proclamations. NFTs are a 4-year-old technology that people have only paid attention to for about a year. Backed almost entirely by crypto investors, their long-term sustainability is worth questioning. “Volatility is particularly pronounced in NFTs because the market is less mature and therefore more sensitive to changes in user sentiment,” notes Ethan McMahon, economist at blockchain data analytics firm Chainalysis.
Still, there is an element of confirmation bias here. People cite a decline in the number of NFTs purchased as evidence of the collapse, unaware that money has moved to a small set of expensive NFTs rather than dispersed among thousands of cheaper NFTs: In April, traders in bought, for example, one. Ape for $400,000 rather than 100 different NFTs for $4,000 each.
Selective examples of NFTs bought for a huge sum months ago and sold for a fraction of that now are equally useless. NFTs are volatile, meaning money moves quickly from one trend to another. Granted, Jack Dorsey’s first tweet sold for $2.9 million a year ago and. Does this mean the NFT time is up? In the same week, traders spent $76 million buying pixelated owls at the Moonbirds public sale, so probably not.
People don’t like NFTs because most of them are bad for the planet and currently exist largely in form. But just because you hate them doesn’t mean they’re leaving.
This does not mean that the NFT market is healthy at the moment. NFTs conflict. But everything else too.
The poor state of the market seems linked to the policy of the Federal Reserve, its largest in two decades. If the NFT market was up, this would be pretty much the only thing that was up. The Nasdaq stock index has fallen 20% over the past month. Compared to this day last month, Alphabet and Amazon are down 11% and 28%, respectively. It’s not just tech companies, as most consumer-facing companies are feeling the pressure. Disney has fallen 18% in the last 30 days; WWE reported record quarterly profits but is still red month over month. Nike and Adidas fell 11% and Gucci owner Kering fell 15%.
Bored Ape Yacht Club’s aforementioned 50% price drop puts it in the company of Neflix. misfortunes aggravated bythe streaming giant’s share price has halved in the past 30 days.
What goes up must come down. The NFT market grew by around 2,500% in 2021, according to DappRadar, with $25 billion spent compared to around $94 million in 2020. Hardly anyone would deny that speculation has created an NFT bubble, although many are disagree on the swelling of this bubble. .
But so can many companies, whose valuations soared after March 2020. Amazon’s stock last July hit $3,777, double its pre-COVID price. Apple, Netflix and Meta have all seen their stock prices double in the past two years, and Tesla’s high was 14 times its pandemic low.
The numbers go up. The numbers go down.
NFTs aren’t dead yet
The fortunes of NFTs are in many ways summed up by, an upcoming metaverse developed by Bored Ape Yacht Club creators Yuga Labs. Yuga Labs on April 30 dropped NFT title deeds for Otherside, with . It’s hard to say that NFTs are dead as the biggest trading day ever happened in the last two weeks.
But the launch exposed some of the weaknesses in the crypto – weaknesses that are contributing to the market slowdown. Thanks to Ethereum’s inefficiencies, merchants have spent around $200 million in transaction fees, including thousands of dollars in failed transactions. Ether’s deflationary protocol burned through this “gas” fee, which means about four days of current market activity was destroyed.
Yet the coming metaverse is in many ways the evolution of NFTs. NFTs are, but Yuga Labs hopes to turn its Bored Ape brand into a mainstream AAA game. It’s not the only one, as dozens of NFT creators are hoping to sail from OpenSea to your living room. Whether a few can succeed or not will say more about the long-term viability of NFTs than a collapse caused by a spike in interest rates that has impacted most other indices.
Don’t count the digital monkeys yet.