New Delhi: The NFT dream is not dead, but it has taken a huge irreparable beating. The market shone brilliantly last year as crypto-rich speculators spent billions of dollars on risky assets, driving up prices and profits. Now, six months into 2022, it looks ugly. Monthly sales volume on OpenC, the largest NFT marketplace, fell to $700 million in June, down from $2.6 billion in May and a far cry from January’s peak of nearly $5 billion. Average NFT sales fell from $1,754 at the end of April to $412 at the end of June, according to NonFungible.com, which tracks sales on the Ethereum and Ronin blockchains.
“The crypto bear market has certainly had an impact on the NFT space,” said Gauthier Jupinger, co-founder of NonFungible.com. “We’ve seen so much speculation, so much hype about this kind of property,” he said. “Now we see some sort of shortfall as people realize they won’t become millionaires in two days.”
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The NFT market has collapsed with cryptocurrency, which is commonly used for asset payments, at a time when central banks have raised rates to combat inflation, and risk appetite has waned. Bitcoin is down about 57% in the six months of the year, while ether is down 71%.
For critics, the crash confirms the absurdity of buying such assets, traditional blockchain-based records involving digital files such as images or videos, often artwork.
The Malaysian businessman, who bought NFTs from Jack Dorsey’s first tweet for $2.5 million last year, struggled to get bids for more than a few thousand dollars in an attempt to resell it in April.
But Benot Bosque, global head of product at crypto trading firm GSR, sees the recession as the right time to create corporate NFT collections – the crypto equivalent of fine art traditional banks – to impress clients.
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Last month, GSR spent $500,000 on NFTs, which Bosch calls “blue-chip” collections – those with a large online fan base.
His purchases include an NFT from Bored Ape Yacht Club, a set of 10,000 cartoon monkeys made by US-based company Era Labs and promoted by the likes of Paris Hilton and Jimmy Fallon.
Such is the hype about Bored Apps that Yuga Labs raised $285 million in April by selling tokens that it says can be exchanged for land in a Bored Apps-themed virtual world that hasn’t launched yet .
According to market tracker CryptoSlam, the average selling price of the Bored app fell to around $110,000 in June, halving since its January peak of $238,000.
In his New York office, Bosque installed three screens to display his NFTs, which contained various pixelated characters and a bored app he bought for $125,000.
“For us, it’s also a brand practice,” Bosque said. He added that owning a valuable NFT and using it as a profile picture on social media is a way to establish “respect, authority and influence” in the crypto sector.
However, the future of NFTs is clearly uncertain, as the era of low interest rates, which encouraged investors to make risky bets, has come to an end.
Some market watchers say that the impact of NFTs on the art market will be diminished.
Meanwhile, even though the much-anticipated vision for a blockchain-based metaverse has yet to materialize, enthusiasts expect NFTs to shake up the gaming industry, for example by allowing players to own in-game assets like avatar skins. By allowing.
“Everybody believes that games will be the next big thing in blockchain,” said Modesta Massoit, chief financial officer of blockchain tracker Dappradar.
However, this risky combination of gaming and financial speculation can lead to difficulties.
According to John Egan, CEO of technology research firm L’Atelier, most gamers prefer games that don’t include NFTs or “play-to-earn” components.
Although most NFTs were excluded in new crypto regulations agreed by the European Union last week, Spain is separately seeking a moratorium on the way video games sell virtual assets for real money.
Meanwhile, the largest NFT-based game, Axi Infinity, has seen its in-game token drop by less than half a cent, down from last year’s peak of 36 cents.
For L’Atelier’s Egan, the NFT market in its current form is unlikely to recover.
“Ultimately this is a situation where an extraordinary amount of money is being paid for an exceptionally limited asset that doesn’t really generate any cash flow,” he said.
But the underlying concept of creating unique digital assets is still “fundamentally important” and will have “massive applications” for the financial sector in the future, he said.