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 high of $4,600 last November. It’s unusual. Typically, the NFT market goes down when the crypto goes up as speculators throw their money into ether and which can climb several hundred percentage points amid market euphoria.
Citing a huge drop in the number of NFTs purchased, The Wall Street Journal reported last week that NFT sales were “steady” as Yahoo questioned whether a $140,000 sale of a CryptoPunk bought for $1 million dollars 6 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 more than a thousand likes read. “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 four-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 don’t like NFTs because most of them are bad for the planet and currently exist largely as status symbols for celebrities and the crypto rich. But just because you hate NFTs doesn’t mean they’re going away.
Yes, NFTs conflict. The same goes for everything else.
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 burns this “gas” fee, which means about four days of current market activity has been 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.