NFTs or Non-Fungible Tokens were the hottest things in the market in 2021. However, NFTs have lately experienced a dramatic fall from grace.
Their trading volumes have crashed by 97% from the beginning of 2022 ($17 billion) to September 2022 end ($466 million). OpenSea remains the most popular NFT marketplace, while LooksRare comes a distant second.
The chart above shows you the weekly trading volume. In September, OpenSea saw average weekly volumes of ~$80 million, reaching ~$11 million daily trading volume.
At the peak of their hype, NFTs were nothing short of a cultural phenomenon. People were paying millions of dollars for a rock jpeg. Celebrities were shelling millions to get Bored Ape Yacht Club (BAYC) profile pics. Even Visa purchased a CryptoPunk for $150,000 to diversify its portfolio. Of course, it wasn’t all positive. NFTs were ridiculed by many – most famously by South Park.
Now, this could just be the effects of a bear market, right? No one wants to spend money buying Ape jpegs when going through a global financial meltdown. Well, not really. Keep in mind that NFTs are not supposed to be just vanity pieces. They are supposed to be a legit investment. However, the ~$11 million daily trading volume is pretty dismal. Bitcoin had a daily trading volume of $45 billion in 2021 when it reached an all-time high. BTC currently has a 24-hour trading volume of $15-$25 billion. Sure, that’s still lower than what it was doing previously, but it is still a significant amount.
So, this brings us to the main question. Are NFTs dead?
Well, yes and no.
Yes. NFTs, as we know them today, is dead. The market was extremely overhyped, and prices got bloated way past their actual value. Unfortunately, the use cases were limited to “cool profile pictures.” We are not saying there is anything wrong with that. However, when you are paying over half-a-million dollars for something like this…
…then we definitely have a bubble waiting to burst. Of course, this overhype attracted all kinds of scammers and rug pullers. For example, in September 2021, the developers of “Evolved Apes NFTs” pulled the rug from their community by stealing a staggering 798 ETH (~$2.7M). Unfortunately, horror stories like these have become all too common. This combination of overpriced jpegs and scams has definitely erased some of the sheen from this market.
However, we could see a potential NFT resurgence in the future if there are more exciting and practical use cases. As of writing, there is an increased demand for ENS (Ethereum Name Service) domains, which are essentially NFTs. A few more use cases like these, and we could see the second wave of NFT hype.
NFTs serve a very important function by bringing scarcity into the digital world. However, for them to flourish, it is important to expand their use cases. It is also crucial to keep in mind that as long as Ethereum remains slow and expensive to use, it is going to deter users from using NFTs for simple everyday use cases. So, if these factors improve, then there is no reason why we won’t see a resurgence in the market in the future.