While 2021 heralded the dawn of NFTs, 2022 appears to have brought in the dusk. According to DappRadar, the trade volume of NFTs was a staggering $24.9 billion in 2021, up from $95 million in 2020.
Chainanalysis recently revealed that NFT collectors sent over $37 billion to NFT marketplaces as of May 1, 2022. The future of NFTs boomed in 2021 as celebrities, sports personalities, and investors discovered the power of NFTs as an investment tool and fan paraphernalia. But the enthusiasm surrounding NFTs and crypto seems to be waning as the crypto crisis worsens with more sellers than buyers.
So, what is an NFT?
Non-fungible tokens (NFTs) are cryptographic tokens made using blockchain technology and cannot be replicated. The Oxford dictionary defines “fungible” as something that is interchangeable. NFTs are non-fungible tokens as they have unique identification codes and metadata which make them impossible to duplicate or interchange. An NFT is a digital asset that can be an artwork, an audio or video file, or in-game items. They also come with a certificate of ownership for virtual and/or physical assets recorded on the blockchain.
NFTs are usually bought and sold on specialized online marketplaces, where a majority of them are based on the Ethereum blockchain. Different marketplaces attract different collectors, and the types of NFT marketplaces include mass, curated, invite-only crypto art, and sports NFT marketplaces, amongst others.
NFTs value skyrocketed last year as most brands jumped on the opportunity to create collectibles. In early March 2021, Beeple’s NFT collection sold for around $69 million, setting a precedent for high-value tokens. To answer the question, what is an NFT, currently it is a financial asset that gets value from the community. A collector’s item adds value only when it is rare and hard to procure.
The Bored Ape Yacht Club
If there is one club that is still riding the NFT wave, it is the Bored Ape Yacht Club. It has continually managed to climb to the top of NFT sales volume lists. The bored Ape Yacht Club (BAYC) is an exclusive community for holders of the ape and mutant themed NFT collections on Ethereum’s blockchain. The collection was initially launched in 2021 with 10,000 generative cartoon apes.
The Bored Ape Yacht Club collection could very well single-handedly re-usher in the dawn of NFTs. While sales have been slow, in the last week itself, the BAYC added 114 new owners, pushing its total owners to 6,591. BAYC owners can also rent their holdings on the newly launched marketplace called Boredjobs. BAYC rose in popularity last year as many A-list celebrities changed their display pictures on social media to apes, giving the NFT a significant spot in the limelight.
Cancelling the Dawn of NFTs
Those in the crypto space waver between predicting doom for the NFTs and hoping for a miracle. According to data accessed by Dune, on the world’s biggest NFT marketplace, OpenSea, sales volumes have fallen 75% since May, and the future of NFTs does not look very promising.
In May 2022, as the crypto collapse worsened, Morgan Stanley’s advisors warned investors to be careful as digital assets could be vulnerable to the changing marketplace.
The NFT Price Floor showed that even BAYC has not been spared as the blue-chip NFT collection has fallen nearly 33% as of May 2022. Pedro Herrera, head of research at DappRadar told Bloomberg that the NFT market had fallen off the cliff in June. He admitted that “while the market is way more mature, it is fair to say that in recent weeks, investors were looking for safer places to put their money amid the Terra collapse and the rumors surrounding potential liquidations.”
Sales of NFTs have plunged below the $1 billion mark as of June 2022. It recorded its worst performance of the year in June as the total number of daily sales fell to roughly 19,000 with an estimated value of $13.8 million. Some of the main factors affecting the NFT marketplace are also the valuation of cryptocurrencies like Ethereum and Bitcoin, lack of a secondary market, and high inflation that has bled into every transaction.
