- Data illustrates that NFTs peaked on May 3rd, with total transactions topping out at $100 million in sales.
- NFTs have plummeted by 90% just a month after reaching their transactional peak.
- The technology surrounding NFTs proves to be more than just a fad, as movement from a rental economy towards property ownership is observed.
NFTs have seized a great deal of media attention in 2021. Due to their value often being misunderstood, NFTs have generated polarizing opinions in the market. These unusual contrasting opinions concerning NFT value arose from their rapid rise in popularity and exorbitant prices. A Protos.com report suggests that the NFT bubble might have popped, judging by the staggering 90% decline in transaction value.
Data Reveals That The Bubble Has Burst
Nonfungible.com data indicates that the NFT bubble might have reached its peak. A Protos report highlights that transactions made in the last week of May amounted to only $19.4 million. In contrast to this, on May 3rd, $102 million worth of NFTs were transacted, with a 7-day volume of $170 million. The market volume has since decreased by roughly 90% from its peak.
Restitution and empowerment of artists has been one rationalization for the surging demand in NFTs. Protos further underlined that new selling behavior seems to be shifting away from crypto-art and towards digital land ownership on platforms such as Sandbox and Decentraland. Additionally, Nonfungible.com charts illustrate that CryptoPunks is able to retain its value as it remains the highest-grossing market.
The report further argues their case that the bubble has burst by comparing active wallet numbers. At its peak, NFTs registered 12,000 for each category, down “to just 3,900,” entailing a loss of nearly 70%. Furthermore, data shows that secondary market NFTs are becoming more important than art, with collectibles and game NFTs churning out higher profits.
On the Flipside
- Record price sales of NFTs have spurred discussion of overinflation for NFTs, and heightened fears of a bubble.
- Vignesh Sundaresan, Beeple’s “Everydays” auction winner, whose artwork purchase came to $69 million, cautioned that NFTs are a “huge risk.”
- Bitcoin lost 50% of its previous all-time value high, which affected Ethereum’s price as well.
The price of Ethereum on May 3rd was $3,400
Technology Is Here to Stay
Bitcoin’s price transformation has equivalised with NFTs surge in popularity. Protos stated, “the NFT bubble lasted just four months — and it popped about this time in May.” However, data from Nonfungible.com shows two additional peaks in terms of the number of sales – specifically those of 16,953 in November 2020 and 11,009 in February 2021. Furthermore, the steep decline in Bitcoin’s price was also a determining factor in NFT sales.
Although NFT activity has declined, Finance Magnates argues that the market is shifting in a similar manner to the way the crypto market has transitioned since 2013. Litecoin’s founder, Charlie Lee, compares NFTs to similar manias of crypto, such as 2013’s Altcoin mania, and 2017’s ICO mania. Although NFTs prove valuable in a digital-based economy, as we transcend a Web 3.0 scenario, Rolling Stones argues that NFTs only appeared in 2021, and their value resides in their scarcity.
The world is turning virtual, and NFT’s ability to provide authentication further proves to be their strength as we become more dependent on digitization. Yat Siu, chairman of Animoca Brands, believes NFTs will “affect the way that we will work, live, and play.” Still, NFTs are a speculative mania; if you follow the same line of thinking, their technological value is yet to be fully tapped into.
Adoption Is a Painful Process
NFT’s ability to generate a quick return gave influencers such as Logan Paul, musicians like Grimes, and even actors such as Lindsey Lohan, a whiff of the financial opportunities. The Conversion argues that despite low interest in NFT transactions, it’s not a sign of a bubble, but rather a step in the “weeding out” process.
Similarly to the dot com bubble, NFTs, and even cryptocurrencies are approaching a related adoption process. Gartner’s ‘Hype Cycle’ illustrates that NFTs might have reached a “peak of inflated expectations” and require additional time to reach a “plateau of opportunity,” akin to that of Amazon. To that end, only time will tell whether people’s fears of an NFT bubble are justified, or if their technology will further disrupt digital ownership.