Real-world violence and a larger cryptocurrency slump are unwinding one of the largest speculative frenzies of the past year, and this is affecting everything from cartoon apes to artful doodles.
Non-fungible tokens, a term used to describe digital commodities, became popular last year as celebrity endorsements and social media hype helped boost the prices of many animal collections, including Bored Ape Yacht Club, Cool Cats, and Pudgy Penguins. In 2021, the NFT market is expected to be worth over $41 billion, making it comparable in value to the worldwide art market.
A substantial chunk of the market has begun to erode at a quick pace, leaving beginner investors with large losses and generating concerns regarding NFTs' long-term prospects.
According to data from the website NonFungible, the average selling price of an NFT has decreased by more than 48% since its November high of over $2,500.
A month after hitting a record high of $248 million per day on OpenSea's largest NFT marketplace, daily trade volumes had fallen by 80% to about $50 million in March.
There are now roughly 194,000 accounts that purchase and trade NFTs every week, according to NonFungible. Last November, the total number of accounts reached a record high of 380,000.
"There was a broad sense that there was saturation in certain sectors of the market, particularly in ape-themed profile images," Nadya Ivanova, chief operating officer at L'Atelier, a trend-forecasting branch of French bank BNP Paribas, said in an interview with the New York Times.
A 19-year-old investor in a Telegram message group where more than 1,000 individuals discuss NFTs said, "I fear that many will be damaged and scorched by this market and may never again touch NFTs." Several members joked that they would be surviving on rice, oatmeal, and grass for the remainder of the month.
The average price of a Bored Ape NFT, a collection that includes superstars like Gwyneth Paltrow and Snoop Dogg, has decreased by 44 percent since the conflict in Ukraine began, according to an analysis by OpenSea.
Bitwise's "blue-chip" NFT index has lost 25 percent of its value in the last month, bringing its year-to-date loss to 17.1 percent. More than 60% of the index was made up of the most popular and highly valued collections, Bored Apes and CryptoPunks.
One of the most important aspects of the blockchain is that it allows for the creation of a wide range of valuables, like digital art, trading cards, and gaming items that may be stored on the blockchain. NFTs represent unique ownership rights in these assets. It was last year that the market went into overdrive because of the increased popularity of NFTs that displayed so-called PFPs, or profile photographs.
Ether, the major cryptocurrency used to purchase NFTs, has plunged more than 40 percent from its all-time high in November. The market's downturn has paralleled this trend. A large number of decentralized finance and other ethereum-related ventures have lost value as well.
According to some observers, it's still too early to proclaim a top in the cryptocurrency market, which has been inundated with money from venture capitalists, including OpenSea and Dapper Labs, as well as from NFT creators Dapper Labs and Sorare.
As BNP Paribas' Ivanova pointed out, "the number of purchasers is still bigger than the number of sellers." "In other words, the "bubble" hasn't popped."
NFTs are seen by some significant collectors as a vital technology for a new vision of the web organized around cryptocurrencies, and they have no plans to slow down their acquisitions in the future.
"This crypto winter," according to NFT consultant and cryptocurrency artist Fanny Lakoubay, "is a welcome respite from the recent deluge of misinformation and scams plaguing the NFT industry. This is an area where there is still much to be done."
"Blue-chip" NFTs, on the other hand, appear to be separating from more common or speculative ventures that have little value beyond trading.
It's worth over $20,000 today, according to one Discord user, Lurmley, who stated they bought a Cool Cat last weekend when OpenSea's average price went from 17 ether at the end of January to less than 8 ether - worth over $20,000 today.
According to Sky Mavis' chief operating officer Aleksander Larsen, the value of rare Origin and Mystic digital monsters in the popular computer game Axie Infinity has "remained stable" despite a decrease in the entrance price for ordinary Axies from $300 to $25.
The Chernin Group, a private equity firm based in Los Angeles, has invested in Flamingo DAO, valuing the two-year-old organization at around $1 billion. Flamingo DAO is a collection of cryptocurrency enthusiasts that owns over 4,000 NFTs.
Flamingo's portfolio "hasn't shifted that much in terms of value" despite the sell-off, says Aaron Wright, a member who helped launch the Digital Assets Exchange (DAO). However, he claims that the group has been accelerating acquisitions rather than slowing them down.
High-end NFT markets are beginning to show signs of cracks. The owner of more than 100 CryptoPunks with an estimated worth of $20 million to $30 million abruptly chose to withdraw the lot from an auction at Sotheby's last month. Investing for the long run is known as hodling in cryptocurrency parlance, and the owner explained his decision in this interview.
"Do you think we're going to see a comeback in a month or two?" Investor Mark Chrystal of the Bored Capital Club, a group that makes investments in bored apes, believes so. "I don't think the NFT market is coming to an end, but possibly the beginning of the end is near."
For the past two years, nonfungible tokens have been in existence, but they've just really taken off in 2021. There are several advantages to owning an NFT, including the ability to participate in NFT communities and receive special privileges as a member.
Hundreds of new initiatives are being launched every week as the excitement grows. A number of them have turned out to be bogus, making the NFT environment a difficult one to navigate.