The NFT bubble is not bursting, but a leak may have occurred.
A year after a single non-fungible token sold for $69.3 million in crypto at Christie’s auction house, with the buyer paying to be listed on blockchain as the owner of a digital file that anyone can see online for free, this weird and wild market shows signs of slowing down.
Sales on OpenSea, the largest NFT marketplace, reached nearly $5 billion in January, a huge jump from $8 million a year earlier, but fell to about $2.5 billion last month.
About 635,000 people bought an NFT last month, for an average of $427, according to market follower CryptoSlam, up from about 948,000 for $659 in January.
Companies nevertheless continue to pile up in the fashionable “metaverse”, where digital assets such as virtual land and avatar clothing can be purchased for cryptocurrency as NFTs. JPMorgan and HSBC are among the companies that have opened virtual locations in NFT-based worlds this year, while YouTube and Instagram also have NFT plans.
“Obviously, the enthusiasm and interest that we had at some periods last year is gone,” said Pablo Rodriguez-Fraile, a Miami digital art collector. “I think we achieved something that was not sustainable.”
He added that sales had picked up again in recent weeks, however.
Modesta Masoit, director of finance and analysis at NFT research firm DappRadar, said the market did not decline overall, but rather consolidated after its rapid growth, adding that investor caution following Russia’s invasion of Ukraine in late February could push the sale. can print.
“Everyone was expecting a period of consolidation to come,” she added. “It’s not going away, it’s just consolidating.”
Total NFT sales so far have been about $11.8 billion in 2022, according to DappRadar, excluding $19.3 billion in sales from a platform suspected of being dominated by erratic trades, where a small number of accounts post articles. and trade it again for high prices.
Taurus to wear to monkey
NFTs can be exotic and dangerous beasts.
Prices can fall dramatically after an initial rise, in a highly volatile market where the value of an asset depends on its social status.
Nima Sagharchi, head of digital assets at auction house Bonhams, said that unlike the traditional art world, the NFT market can swing between bull and bear cycles in just a week.
An NFT representing a piece of computer-generated abstract images from a collection called Art Blocks would sell for about $15,000 on average at a peak in September 2021, but brought in just under $4,200 last month, according to CryptoSlam.
Meanwhile, Bored Ape Yacht Club NFTs — a set of 10,000 variations of a cartoon primate — still average about $300,000.
Buying a Bored Ape – as celebrities like Madonna and Paris Hilton have done – can be considered a cross between a members’ club and an investment plan. Buyers often advertise their membership by setting their NFT as their social media profile picture.
A cryptocurrency called ApeCoin was launched last month, initially given to holders of Bored Ape NFTs and to the founders of the project. Its market cap is already $3.4 billion, according to Coinbase data.
Raoul Pal, a former director of Goldman Sachs, wrote in a blog post that expectations for this token encouraged him to spend about $400,000 worth of cryptocurrency ether on a Bored Ape NFT.
“Social tokens are the BIG thing,” he wrote.