“NFTs and Crypto prices have plummeted presenting an opportunity to consolidate and reach greater heights in the future“–Paul Ebeling
A NFT is a unique digital asset that represents ownership of real-world items like art, video clips, music, and more. NFTs use the same blockchain technology that powers cryptocurrencies, but they are not a currency.
Thee past 2 yrs have been a rewarding frame for those of us who have ventured into the Nonfungible tokens (NFTs) space. Trading in this new asset reached a peak of $40-B last year and its Y 2022 figures YTD have already broken that record at more than $42-B, according to crypto research firm Chainanalysis.
For those unsure of this nascent asset class, NFTs are tradable digital assets coded on the blockchain, Ethereum, and can take up forms such as works of art, videos or images. The term made its way into mainstream consciousness last yr and has since caught the attention of seasoned and casual investors.
Despite gaining clout through media representation and endorsements, NFTs and the broader cryptocurrency have come under pressure amid volatility in the wider stock markets where sentiments are Bearish.
Rising inflation and higher interest rates have dampened the appetite for riskier investments such as tech stocks and digital assets. The recent collapse of TerraUSD and Luna, both stablecoins that are pegged to the Buck, sparked off greater skepticism about the nature of crypto assets. Additionally, the liquidation of hedge fund Three Arrows Captial spawned some cynicism in the crypto world.
Overall, the cryptocurrencies’ values have fallen and erased about $2-T from the market. The world’s leading digital currency saw its value drop by about 70% since reaching its all-time high in November 2021 at $69,000. Also going in tandem with the general downward trend are NFTs and sales have plunged this June to below the $1-B mark. OpenSea, the largest NFT marketplace saw sales volume fall by 75% since May.
Today, many are questioning whether the NFT market will be able to recover from the correction. In business terms, it is said the market is undergoing a consolidation period to correct the “errors” that were created. Of the many pressing problems, oversupply of rubbish appears to be the most pertinent that needs to be addressed. This has a silver lining because the inherent corrective measures filter out NFT projects that do not possess utility and potentiality aka rubbish.
The days of investing in NFTs just for its aesthetic appeal are gone. Investors today are more discerning with what is considered a sound investment and a trend that has emerged from this is a newfound emphasis on utility. A tangible outcome has to be offered along with the purchase of an NFT.
Blue chips are Key
Apart from fixing a utility aspect to the NFTs, it is also good to explore these tokens’ potential in the future. As the market is still maturing, new research are being made to realize the full benefits of these tokens. In a traditional stock market, investors not only look at the usefulness of the companies against the backdrop of the current demand; astute investors are hedging their money on the future of these companies in an attempt to gain a 1st mover advantage.
The state of the NFT market today presents an opportunity for creators to relearn what these tokens can do and implement these lessons to safeguard against potential pitfalls again. On a broader note, the situation with cryptocurrencies is part of a business cycle and if investors can ride out this turbulent frame, better days are around the corner.
Have a prosperous weekend, Keep the Faith!