NFT: Is it time to say goodbye or is there hope for the market?

Dec 19, 2022
12:12
2 min reading

Choise.com team

NFT: Is it time to say goodbye or is there hope for the market?

Interest in NFT trading gained momentum in 2021 and its popularity persisted until 2022. The world was struck by the news that images and tweets were sold at a price of art objects. Some wanted to make money on it as soon as possible, while others considered it all to be absurd and predicted the quick collapse of the NFT market (like a typical financial bubble, which is going to burst). So what is the situation now and what fate lies ahead for NFT trading?

The beginning of the Falling

The first NFT was created in 2014 but new technologies in crypto and marketing appeal converted it into a mainstream product. A sharp increase occurred in December 2020 and continued until December 2021. A large number of celebrities and brands fueled the public interest. Social networks were flooded with posts about NFT trading, airdrops and participation in new projects.

The launch of Bored Ape Yacht Club NFTs happened exactly on the spread of technology in 2021. The very collection of 10,000 cartoon ape NFTs has already become a kind of symbol of the whole industry. Released in April 2021, each Bored Ape Yacht Club token cost about $192. A year later, at the peak of NFTs popularity in April 2022, the floor price for Bored Ape Yacht Club NFTs was $400 000.

When the crypto crash occurred, caused by hiking of inflation rates, the BAYC price fell to $150 000. Then it reached a minimum of $100,418 in the middle of October 2022. Now Bored Ape Yacht Club NFTs can be bought even at the price of $75,300, despite the fact that some items are still sold for $927,000 (such an example took place at the end of November 2022).

Continuation of the Falling

The widespread availability of the technology led to the fact that the market became oversupplied with products, almost devoid of value. NFT trading requires knowledge and expertise for successful investments, which not everyone has. People expected to get a quick profit by buying tokens cheaper and selling more expensive later. But according to the OpenSea platform, only 28,5% of oversold NFTs generated income.

One example of poor resales happened in May 2022. The CryptoPunk #273 owner lost up to 80% on the deal. He bought the token for $1.2 million and sold it for $132,660 (9 times less expensive than its original cost) seven months later.

The CryptoPunks NFT collection consists of 10,000 pixel images of people, released in June 2017. It peaked to $680 million in August 2021. But in 2022 CryptoPunks couldn't reach the previous volumes. Monthly sales earned only $124 million in January, and by October that figure dropped to $18.8 million (the lowest level since June 2021). As for unique buyers for CryptoPunks, their number decreased to 132 in November 2022 — falling as much as 89% from the peak of 1215 in August 2021.

A security breach of Axie Infinity has exacerbated the long-term decline by 99% in the NFT market. The number of stolen NFTs were worth several hundreds of millions of dollars. And most of the basic ones were sold for nothing. These issues caused a drop in NFT prices, after which they had not been recovered.

But it's too premature to predict the death of the market. Great excitement will naturally settle down after sometime, but the NFT technology itself will remain. New projects are about to come, providing fresh, interesting and even useful approaches. Besides, NFT managed to gain quite a high popularity in comparison with, for example, ICO. That's why the market is expected to rise from the ashes. And investors will be interested in NFT trading again (after carefully weighing the risks, of course).