News hardware After the Bitcoin crisis, NFTs are also in freefall
The winter of cryptos does not only affect virtual currencies. Since the fall of Bitcoin, everything related to the cryptocurrency sector has been caught up in a downward spiral. Non-fungible tokens (NFT) are no exception to the rule…
- The NFT phenomenon is slowly waning
- June and July, catastrophic months for the NFT sector
- Only the biggest NFT collections resist
The NFT phenomenon is slowly waning
It was in August 2021 that the speculative bubble around NFTs began. Precisely, in July 2021, the sales volume fell from 360 million euros to 3.8 billion in just one month. The surge in these trading volumes led to unprecedented excitement around NFTs in the following months. The massive influx of new customers has driven up the price of all kinds of collections.
Unique avatar JPEGs in the form of NFTs have been a major contributor to this excessive lust. Once the train started, several hundred NFT collections were born each week. In addition to the community aspect, these collections were mainly the object of pecuniary motivation on the part of creators and collectors. After a few marketing operations, some NFT collections managed to accumulate hundreds of thousands of followers in a few weeks. The number of limited copies (generally less than 10,000) and the hope of obtaining a rare NFT largely motivated investors to switch from one collection to another.
This frenzy worked in favor of the market since the cumulative sum of trade never fell below the 2 billion threshold, until June…
June and July, catastrophic months for the NFT sector
While NFTs seemed unscathed by the cryptocurrency decline in the first five months of 2022, however, they were unable to withstand Bitcoin’s drop in June. By the way, from €28,000 to €18,000, the price of the first cryptocurrency seems to have taken all of NFTs down with it.
According to The Block, the volume increased to 3.20 billion euros in May, fell to reach 864 million euros. Exchanges have therefore been divided by three in just one month. And things are not going well…
The month of July is even more alarming with the sum of trading volumes increased to 663 million, a decrease of 200 million euros compared to the statistics for the month of July.
The majority of these sales were made on OpenSea. Designated as the most intuitive sales and purchase platform in the NFT sector, the company nevertheless had to lay off 20% of its workforce, in particular because of the decline in market interest.
Companies in the sector are not the only ones to suffer from the situation. Investors have also seen the value of their investment drop drastically. Nevertheless, some collections are not destined to disappear any time soon.
Only the biggest NFT collections resist
Despite this massive decline, a few NFT collections seem to be holding up against the market drop.
Among them we find:
- Bored Ape Yacht Club
- The CryptoPunks
According to NonFungible, these “spared” collections would represent 30% of the entire volume of exchanges in recent months. These three collections belong to the Yuga Labs studio, so we note that the market is partially monopolized by a single entity that seems to understand the workings. With the arrival of its Otherdeed metaverse, Yuga Labs still has strings to its bow to attract new investors to its collections.
While this sector has been showing weakness lately, it has also demonstrated that it can become highly speculative at the snap of a finger. As a result, for the other collections, the game is surely over until a possible next speculative bubble around NFTs. It is important to note, that apart from NFTs, new innovations usually face its ultra-volatile movements led by financial investments.
As the vision is no longer blurred by this speculative din, it is interesting to see how NFTs will be able to develop in sectors other than digital art. Several companies have also taken up the challenge of developing the use of NFTs after the media noise, with the aim of building sounder bases around the technology and finding real use in it.
What is an NFT?
An NFT is the abbreviation of Non Fungible Token or non-fungible token in French. NFTs are cryptographic tokens issued on a blockchain.
By exploiting this technology at the genesis of cryptocurrencies, NFTs inscribe inviolable properties in this virtual register. As a result, NFTs are true attestations of digital ownership.
Is an NFT necessarily an image?
A distinction must be made between an NFT and the object associated with it. Indeed, the non-fungible token is above all a virtual property certificate and not the digital file as such. An NFT is usually associated with a photo or video, but it can also take the form of text, music or any other digital format.
What is an NFT used for?
NFTs are generally used to assert property rights online. Thus, the owner of a token of a virtual work can collect royalties, ensure respect for the intellectual property of his digital object, etc.
This feature has notably enabled the NFT to shine in art by creating value and rarity in digital images available on the web. Also, beyond art, this technology offers multiple uses in several sectors such as in video games, the traceability of a product, etc.
How is the value of an NFT defined?
These tokens are non-fungible, i.e. they have a unique value unlike cryptos, which are fungible (1 bitcoin = 1 bitcoin).
The price of an NFT is therefore arbitrarily set by the owner of the token. This price is usually in cryptocurrency, most of the time in Ether (ETH).
How to buy and sell NFTs?
NFTs are generally bought or resold on trading platforms such as Opensea or Foundation.
What is an NFT mint?
The “Mint” or strike in French, is the initial sale process of a token. To permanently become part of the blockchain ledger, these new tokens must be mint. By this action, the user comes to complete a transaction with his fees to see his token appear first hand on the blockchain.