After record sales that were as dazzling as they were surprising, the NFT market collapsed by more than 90%. A crisis that can lead to more interesting and mature perspectives in the future.
His name is Pak and he is probably unknown to you. However, in December 2021, this digital artist has earned $91.8 million for his collection The Merge, unrelated to the last Updating of the Ethereum (ETH) protocol. This stratospheric figure is the tip of what has been called the NFT bubble.
After a period of euphoria during which some collections benefited from publicity worthy of Hollywood blockbusters, the soufflé has subsided. Between apparently very high prices, numerous scams, and the general decline of the crypto market, the NFT market did not withstand the bubble deflation. We’re talking about a 92% drop in just a few months.
Beyond the numbers, it is the global market that is being completely overhauled. The objective now is: to witness a clearing, to clear the market and bring it NFT in the mature age with other features.
Records before the fall
2021: the explosion
NFTs were born in 2017 with CryptoKitties and CryptoPunks. These collections are then confidential and known only to the Internet world. We already know that NFTs are unique digital works, authenticated and secured by blockchain technology. But what we don’t know yet is that this market will become highly speculative less than four years later.
At the end of a 2020 marked by numerous shutdowns, markets, both classic and crypto, have started to climb towards records. Among the crypto markets, one is making a lot of noise: that of NFTs. These digital works have been snapped up at exorbitant prices, with CryptoPunks going for hundreds of thousands or even millions of dollars. of madness nft reached its peak with the appearance of new collections, such as NBA Top Shots by Dapper Labs and especially Bored Apes Yacht Club (BAYC) by Yuga Labs.
These masked monkey heads fetched very high prices, with a record $3.41 million (819 ethers) for BAYC #8817. Rappers also joined in on the fun by proudly showing off their NFTs on social media. The peak was reached when Eminem and Snoop Dogg shoot a clip with their BAYC!
This madness lasted about a year. From March 2022, the market slowed, before falling as early as May 2022. This date is no coincidence. It corresponds to the moment when the Terra ecosystem (LUNA) has collapsed. Since then, the NFT (and crypto) market has not recovered.
It is not a small drop, but a vertical free fall. According to Chainalysis, an American company specializing in blockchain data analysis, the average price of an NFT fell from $3,894 in May 2022 to $293 in July 2022. That’s a 92% drop in two months! And it hasn’t worked since.
All collections are affected. The first ones were the most confidential and the creators simply failed to sell their NFT. But the more popular ones, like BAYC, have also been affected. Although the latter remain the Grail of the market, it is now very rare to see a sale exceed $300,000.
The explanation for this fall is twofold. The first relates to the NFT market itself. Indeed, we had clearly entered a speculative bubble. Like any bubble, deflation can be painful and has been. The second explanation is the decline of the crypto market. Bitcoin has also lost almost 70% of its value since its spring 2022 highs. The same goes for ether, the crypto used to buy and sell most NFTs. As a result, the price falls mechanically if the asset used as a medium of exchange also falls. Since then, the NFT market has been at half mast. And this is good news for his future.
End of speculation and fraud
Needless to say, some people were shocked to see monkey heads being traded for millions of dollars. Not to mention the CryptoPunks and CryptoKitties kittens. All this has a name: speculation.
The NFT market has been one of the most speculative from mid-2021 to mid-2022. Almost anyone can release their collection and win a small first prize. Without going all the way to a million, many people have raised at least a few hundred dollars for NFT. One of the reasons was the opportunity for the buyer to resell even more expensively.
This speculation has allowed many scams to develop. Indeed, with good communication, it was so easy to sell NFTs that some creators were smart. They tied the NFT to one smart contract that provides for the impossibility of selling or redistributing a large portion of the resale amount to the originator. Of course, without informing the buyer beforehand. Greed was so great that buyers blindly trusted everyone.
With crypto prices falling and the NFT market, ultra speculation is over and scams are gone. This is logical, since now it is almost impossible to earn from resale. This cleaning made it possible to preserve the good projects and above all to talk about other much more interesting features of NFTs.
At the time of writing, BAYCs are trading from around 80 ethers. Its cousins, the mutant monkeys, from about 15 ethers. Although one can argue against their aggressive marketing and their real utility, these collectibles remain safe values, like CryptoPunks and CryptoKitties.
Above all, we note that the future prospects of NFTs are good and beyond digital art. Indeed, NFT is above all a unique, non-counterfeit and counterfeit-proof token. Thus, luxury brands have started linking some of their products with NFTs, to ensure their authenticity. It’s the same system as the ticket office, which was notably used during an Ed Sheeran concert.
Music artists can collect their rights in NFT and can allow their fans themselves to buy albums in the form of NFT. Fans then have access to bonuses, reserved exclusively for NFT holders. then yes NFTs can be used for much more just speculation and this is just the beginning of this revolutionary technology.