Non-fungible tokens (NFTs) took the world by storm in March and April of this year with a deluge of daily headlines about record sales and big-name companies releasing their own one-of-a-kind digital art pieces dominating major media outlets. communication. .
Fast forward a few months and the narrative has shifted towards the bursting of the ‘NFT bubble’ and doom and pessimists warning that NFT investors are on the brink of losing all their money.
Rapid declining prices and activity in major NFT markets have led many to speculate on the death of the non-fungible token space despite the known cyclical nature of the cryptocurrency market that can come back to life in the blink of an eye. and close my eyes.
You knew this would come, right?
NFTs are dead
– Jonathan Mann (@songadaymann) June 4, 2021
Active users leave ship
Active users are the lifeblood of the NFT markets, but the hectic nature of the cryptocurrency markets in the last two months, including the May 19 sell-off, in which the value of $ 1.2 trillion was wiped out of cryptocurrency market capitalization, has caused a precipitous drop in users. activity.
As seen in the graph above, active wallets in the NFT markets peaked near the end of March and have since fallen by more than 40% due to declining values combined with high transaction fees on the Ethereum network. (ETH) kept traders out of the market.
The decline in active wallets coincided with a decline in sales across the space, as the rapid drop in token prices exacerbated losses for holders and collectors who saw their valuable art pieces lose as much as 90%. of its value overnight.
The decrease in active users has resulted in a 60% decrease in total daily sales which fell from a high of $ 325 million on May 7 to its current figure of $ 110 million.
NFTs are down but not eliminated
However, all is not lost, as there are many strong value propositions and use cases for NFTs that traditional businesses and entrepreneurs have noticed and embraced in the industry.
The blockchain ecosystem has already presented multiple viable options to deal with the issues facing the NFT sector, such as the launch of Enjin’s Efinity and JumpNet protocols, which help lower fees and enable interoperability between different networks.
Another popular solution, Polygon, an Etheruem sidechain that allows projects to remain on Ethereum while also having access to a fast, low-cost environment. In the last three months, a large number of gaming and NFT-oriented projects have migrated to Polygon and as the crypto and NFT market improve, these low fee environments should help drive activity on the network.
While the current stats may look bad compared to recent all-time highs when viewed from a longer time frame, it can be seen that the average number of NFT sales increased by almost 300% between January and the end of May. This shows that there is strength in the sector despite the market crash that began on May 12.
The NFT ecosystem may have seen a significant drop in token activity and values over the past month, but it is too early to proclaim the death of NFTs as the world has only scratched the surface of what it is. possible with this nascent smart contract technology.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade move involves risk, you should do your own research when making a decision.