Hold on to your pixelated hardhats, for the NFT market is starting to crumble.
What’s the proof? Elon Musk, our Lord, saviour, and staunch advocate of “free expression” — read: the right to say whatever you want about people online – right-clicked and saved a Bored Apes montage picture, made it his profile image, then tweeted, “I dunno… seems rather fungible.”
It’s far from the perfect press for an industry predicated on non-fungibility.
To step back for a moment, this isn’t proof. Musk is simply a spoiled brat. His tweet is just one of many he’s made about the market’s swing between bullish and pessimistic sentiment. However, when Musk talks (via Twitter), the majority of the crypto/blockchain market pays attention. After all, market participants frequently perceive him as a disruptor, a maverick, and a revolutionary.
However, the tweet comes at a horrible time for the NFT market, which is still trying to wake up from its dormancy.
The proof of the present collapse is made bare thanks to data from Non Fungible’s Q1 2022 report, an NFT Market data and analysis company that records decentralised asset transactions in real-time on the Ethereum blockchain. As the market approaches Q2, the data are bleak, especially when compared to the end of 2021.
Some notable data points from the report include;
- a 46% drop in the number of NFT sales. (The data looks even worse compared to the peak market in 2021; NFT sales have dropped to a daily average of about 19,000 per week, a 92% decline from a peak of about 225,000 in September.)
- a 30% drop in buyers.
- the number of active wallets dropped from 380,000 in November to just under 150,000 active wallets per week (the daily number currently sits around 20–30K).
- and a nearly 50% increase in total loss during resell.
With all the talk of diamond hands and ‘hodling,’ many people have assessed the landscape and decided that leaving with some money is better than leaving with none — even if the losses are difficult to stomach. This pattern does not bode good for the future. Demand must outnumber supply to keep prices rising and attract new purchasers into the market. If holders pull out and the buying pool shrinks, the few will be left holding the bag – but with no one to sell to. (Does this appear to be a Ponzi scheme? Only me?)
There have also been a number of high-profile sales that have fallen short of expectations, affecting public image of the assets. The NFT of Jack Dorsey’s first tweet was put back on the market last month, with the owner, Sina Estavi, expecting to get $48 million for it. He currently has an advantage… $28,136. At auction, Doggie #4292, an NFT curated by Snoop Dogg, was expected to cost 8,888.8888 ETH, or roughly $24,066,844. The current high bid is… $595.65.
For one thing, despite lower volume, the average price of an NFT climbed, according to the research. This could indicate that the NFTs still in circulation, such as the Bored Apes, are considered actually precious. It’s also possible that this decrease is only a large-scale slowdown that was unavoidable after the market’s tremendous highs in 2021, and that the market will soon rocket again. Another explanation is that the drop is acting as a market cleanser, weeding out individuals who were only in it for the short term benefit and weeding out the terrible ventures that were nothing more than a hoax. Cryptocurrencies have gone through multiple similar phases, with the bulk of those who believe in the coin’s potential sticking with it.
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