After the boom, why did the NFT market plunge?

Interest in NFT dropped to an all-time low, at 14 out of 100 points.

NFTs (non-fungible assets) have grown exponentially in the past year, gaining popularity, attracting interest from celebrities to big businesses. However, it seems that the attraction of NFT has reached its peak when this “trend” is going down very fast.

NFTs are transparently assessed for legitimacy and ownership. In 2021, NFT becomes a phenomenon in the technology world with works selling from a few hundred thousand dollars to tens of millions of dollars. Many celebrities like Paris Hilton, Gwyneth Paltrow or Serena Williams also own NFTs. The total value of NFT transactions last year reached 17.6 billion USD, up 21,350% from 82.5 million USD in 2020.

However, the NFT sector is showing signs of cooling down, as the number of NFTs traded in the first quarter of the year fell by nearly 50% compared to the previous quarter.

According to a report from crypto market tracker CryptoSlam in May, only $31 million was traded in the first 15 days of this month, the lowest of the year. In previous months, the total trading volume was always in the hundreds of millions of USD.

In addition, according to data from StockApps.com, interest in NFT dropped to an all-time low, at 14/100 points. This contrasts with the heat of the NFT earlier this year, which peaked at 100 points in the last week of January.

Another proof that NFT is “cooling down” when the volume of NFT transactions on OpenSea – the world’s largest NFT trading platform on August 28 was nearly 5 million USD, 99% lower than the record level of 406 million USD on May 1.

In addition, the number of participants trading on the platform has also plummeted, showing that the value and interest in NFT collections has plummeted in recent months.

Reduced volume and traders impact the NFT floor price – the minimum amount an investor is willing to pay for a product. For example, the floor price of the famous NFT Bored Ape Yacht Club decreased by 53%, from 153.7 Ethereum on May 1 to 72.5 Ethereum on August 28. Similarly, the floor price of CryptoPunks is also down nearly 20% from its July high of 83.72 Ethereum.

NFT currently runs mainly on the Ethereum blockchain and uses this cryptocurrency for transactions. This means that the NFT price will drop if the Ethereum market plummets. Ethereum’s price volatility is one of the reasons behind the NFT’s drop.

Last November, the price of this digital currency peaked at $4,950. But this year, the token has dropped below $1,000 and is currently at $1,400. The drop in the price of Ethereum made the market no longer as exciting as before, from which the trading slowed down.

StockApps expert Edith Reads said: “NFTs have been the top discussion topic among investors over the past few months. However, it seems that interest in this trend has decreased significantly. The cryptocurrency crisis could be a reason, as many people lost money along with the market crash. It is also possible that the novelty of the NFT is lost. However, NFT still has potential and can develop again in the future.”

In the market, the first tweet of Twitter founder Jack Dorsey was bought for $ 2.9 million, but now only bid no more than $ 20,000. Some of the million USD NFTs in the CryptoPunk collection are also discounted dozens of times.

Some experts believe that the NFT is a “bubble” about to burst because the volatility of the virtual asset is so strong that confidence is no longer maintained. According to them, most of the NFT is currently unclear about copyright. In January, OpenSea admitted that up to 80% of NFTs on the platform are unauthorized copies of other NFTs or famous real-life artwork. The NFT LookRare exchange also shared that up to 95% of the works on this platform were found to be fake.

Opportunities for long-term investors?

Despite the waning interest, the NFT market maintained its traction amid the geopolitical crisis. To sustain the military effort, for example, Ukraine is actively collecting funds through NFTs. The country issues its own NFT. In addition, a charity platform called “Angels of Ukraine” and a collection of NFTs that support this country were introduced by Ukrainian blockchain developers.

In terms of the number of searches for the term “NFT”, China tops the list. Hong Kong (China) ranked 2nd and Singapore ranked 3rd. Nigeria and Taiwan (China) held 4th and 5th place respectively.

Americans, Canadians, New Zealanders and Cypriots still find the news about the NFT interesting. In addition, interest in irreplaceable assets also comes from Pakistanis, Nigerians and South Africans.

According to a StockApps.com expert, NFTs still have value and can be a necessary form of investment. In the field of art, artists even believe that NFT is the new way of making money.

The current situation is an opportunity for long-term investors. The market is likely to become more stable in the future as more industries adopt NFT and people better understand how NFT works.