Is The NFT Market Headed For a Crash?
The decline in cryptocurrencies is part of a broader retreat from risky assets prompted by rising interest rates, inflation, and economic unpredictability resulting from Russia’s invasion of Ukraine. The price of Bitcoin has decreased by as much as 40 percent since the beginning of the year.
Since the beginning of 2022, crypto and worldwide equity markets have declined due to various obstacles, including inflation, rising interest rates, and the conflict in Ukraine.
On the other hand, the recent huge market volatility is exceptional and is clearly related to TerraUSD’s recent crash (UST). This once-popular stablecoin collapsed in a couple of days, dropping 95 percent of its market capitalization since the previous weekend.
See also: Will Terra/ Luna Recover From The Crash?
Did the market downturn impact NFTs?
The tangibility of NFTs has always been a source of intense dispute among tech enthusiasts. Coincident with the rise of cryptocurrencies such as Bitcoin and Ethereum, these so-called non-fungible tokens are frequently hailed as the next great thing to emerge from blockchain technology. Sadly, these expectations and dreams are coming to a pretty abrupt end since data indicate that the NFT market may soon be headed for a crash.
Due to the crypto market crisis, NFTs companies suffered a decline in sales volume. According to sources, the Bored Ape Yacht Club collections reached their “floor price,” making them the least expensive list of NFTs since their inception.
The BAYC collections have decreased by 25% during the previous week, and each piece of the Bored Ape Yacht Club collection is currently worth 88 ETH (Ethereum). In the past few weeks, BAYC NFTs have declined by over $500,000. CryptoPunks, another NFT collection, declined by 15% during the same period, with pieces selling for 52.5 Ethereum.
Several investors and Bitcoin professionals are already forecasting an NFT market crash following the latest crypto market fall. A few analysts have stated that NFTs would follow suit because they’re the next most speculative and leveraged asset class. The market is treating cryptocurrencies like any other risky, speculative investment.
According to the research, the majority of NFTs are owned by businesses that intend to resell them at a greater price. Some of the most popular NFTs have experienced significant price declines. The purchaser of a non-fungible token representing Jack Dorsey’s first tweet, who paid $2.9 million for it, is currently struggling to sell it, with the highest bid hovering around $21,000. A growing imbalance between supply and demand may also lead to a potential NFT market crash.
See also: INTRODUCTION TO DAOs
What Are Non-Fungible Tokens
An NFT is a Non-Fungible Token that serves as a certificate of authenticity or a deed to prove that you have the ownership right to show a digital asset on your wall or in your digital wallet. It may grant you ownership rights to the purchased copy but not necessarily the original digital work. In addition, unless otherwise stipulated in the contract, the author of the original asset retains production rights and copyright.
By digital asset, we refer to a wide variety of digital things, including digital artwork, photos, movies, GIFs, music, virtual real estate, videogames, postings, text, and even tweets, among many others. Yes, you heard correctly; even a tweet. In March, for example, Twitter CEO Jack Dorsey’s first tweet, “just setting up my twttr,” sold for $2.9 million as an NFT.
Typically, NFTs can be bought with cryptocurrencies or dollars, and the blockchain maintains a record of all transactions. Although anybody can view the NFT, only the purchaser has the official ownership status — a sort of digital boasting rights.
The NFT Buzz
Nfts first appeared in 2014. Kevin McCoy, the creator of the first NFT token, issued his “Quantum” token on May 3, 2014, far before the crypto art market boomed. Although 2021 became the year of the NFT, its inception did not occur in that year.
In an interview with Business Standard, Gaurav Somwanshi, blockchain entrepreneur and CEO of EmerTech Innovations, indicated that the value of an NFT derives from either utility or sentiments. Somwanshi noted that those whose value derives from sentimentality purchase these arts with the expectation of further trade, which inflates the price.
He remarked that the market is currently experiencing a sifting of NFTs, in which a lot of digital assets would lose value while others with utility or artistic value will remain stable.
Despite the news of a drop, some technology and video game companies remain enthusiastic about their future. Square Enix has sold up significant franchises to focus on NFT gaming. Also, Meta has stated that it will incorporate Ethereum, Polygon, Solana, and Flow into Instagram at no cost to customers.
What We Can Anticipate In The Coming Days
The new future of NFTs should see the industry break free from the extreme volatility of the main cryptocurrency market, allowing more individuals accustomed to fiat currency to participate.
There should be a rise in the utility of non-fungible tokens (NFTs) — ones with true purposes and creative quality — and a likely shift from Ethereum to more stable, environmental, and economic blockchains such as Solana, Wax, and Flow.
A crash is still anticipated, although it could occur sooner or later. After all, it is not the first time we’ve inquired whether the NFT Buzz is over. However, what happens next may determine what NFTs are and how they are utilized, particularly by artists and makers. The hype appears to be ending, which many in the NFT industry should welcome, as what comes next might be fascinating.
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