Nonfungible tokens were all the rage last year as artists, athletes, celebrities and big retailers used the emerging technology to hawk digital versions of their wares. But recent data suggests the buzz around NFTs is starting to fade.
NFT sales fell 47% globally during the first three months of 2022 compared to the previous quarter, according to NonFungible, which tracks the NFT sector.
“The general public seems to be losing interest in NFTs, if the search volume on Google is to be believed,” the group said in a report.
An NFT gives someone proof of ownership of a digital object, or access to services, using a unique code on the blockchain that is linked to an image or video. Because they are unique, NFTs can be transferred or sold but not copied or divided into smaller parts. Some people buy an NFT in the hope its value will rise, while others buy them strictly for bragging rights or to participate in an emerging tech trend.
Through March, Customers this year spent $7.8 billion buying or selling NFTs, according to NonFungible. Researchers said that shows the NFT market isn’t collapsing so much as settling down from its meteoric rise in 2021.
“Volumes are down, but prices are up,” the report concluded. “In other words, the NFTs that remain in circulation are recognized as being truly valuable.”
The recent cryptocurrency crash is a major reason behind cooling interest in NFTs, said blockchain expert Merav Ozair, who teaches financial technology at Rutgers University. That’s because buyers often use bitcoin, ethereum or other digital currencies to purchase NFTs, and falling crypto prices reduce their purchasing power.
Bitcoin’s price, which peaked last November at around $68,000, is down 56% since the beginning of the year. Solana, ripple and ether prices have also slumped as investors move out of cryptocurrency, which is highly volatile, into more stable assets.
A flurry of thefts and scams on major NFT marketplaces may also be dampening enthusiasm for NFTs, according to some experts.
Amid the growing hoopla last year, some NFTs sold for millions of dollars, garnering national headlines with each transaction. Tech enthusiasts watched as a collection of NFTs from Bored Ape Yacht Club featuring flashy cartoon ape depictions sold for top dollar. The entry bid for a Bored Ape NFT was 52 ether in January 2022, the equivalent at the time of $210,000, according to CNET. Buyers included celebrities such as Jimmy Fallon, Steph Curry and Post Malone.
“Everyone was chasing the FOMO,” Ozair said.
No regrets
Many NFT owners bought their tokens last year and in 2020 hoping to see their value continue to surge, but “people now realize that’s not always the case,” Ozair said.
For some NFT owners, however, it was never about cashing in. Connor Murphy of Denver said he bought two NFTs in 2020 simply to support the artist who created them.
“My NFTs could go to $0 and I would not regret my purchases or see less value in them personally,” Murphy said. “That’s where many others make the mistake. They enter this space to try and make money, whereas I have entered this space to try and make a difference.”
