In a Wall Street Journal article on a study by market analysis platform NFT Nonfungible, it is claimed that the entire NFT market is on the verge of collapse. They came to this conclusion because there has been a 92% drop in NFT sales since September 2021.
What is happening? These three words could sum up the current coverage of the NFT market. Because right now there are almost overflowing reports that speak of an NFT market crash. The surprise of these reports becomes especially clear if you look only at the last four weeks. It has also been reported here that the NFT market growth figures far exceed the development of cryptocurrencies in terms of value. But now everything looks different.
So there was a huge plus of 103.7%, which we can be proud of. The clarity of this growth relative to Bitcoin as a cryptocurrency, for example, is illustrated by its previous performance in 2022. Bitcoin was just 1.9%.
NFTs, what are they really?
The term “NFT” stands for “Non-Fungible Token”. And a token is proof of ownership in the digital world of cryptocurrencies and blockchain networks. So an NFT is a non-tradable proof of ownership in the crypto world, a title deed or certificate of authenticity, so to speak.
These clear proofs of ownership are important for commerce in the virtual world of the metaverse. Without this, digital products could simply be copied and therefore duplicated, making these digital items unappealing to retailers.
Inevitable fall of the NFT market
It is not surprising that the NFT market could collapse. After all, all financial and asset stocks are currently under pressure due to high inflation in Europe and the United States. Which is increasingly fueled by the pandemic and the war in Ukraine. But if you take a closer look at the NFT market numbers, a different picture emerges when it comes to current reports.
Despite weaknesses, the NFT market is robust
The current report was triggered by an article in the Wall Street Journal. Citing data from the NFT market analysis platform Nonfungible, this article concludes that there has been a 92% decline in NFT sales since September 2021. Active wallets in the Ethereum NFT market have also decreased by around 88 %, according to Nonfungible.
Both references read chillingly. But you have to see the starting position. In September 2021, it was at an all-time high, an NFT sales record. But this is not the only weakness of the report of the market analysis platform NFT Nonfungible. Even though there have been declines, the NFT market is currently proving to be very robust.
This is also indicated by the figures from OpenSea, the NFT market. In the last few days since May 1 alone, there have been sales worth around 550 million euros. This is also supported by the Solana NFT Okay Bears project. Although sales here were lower than OpenSea, they still reached around $47 million during the same period.
The different transaction numbers also indicate that the NFT Nonfungible market analysis platform did not take into account all the transaction numbers. Which is also not irrelevant to the outcome of whether the NFT market is doing well or badly.
Growth rate up to 81%
Individual NFT projects also show that the NFT market is robust overall. If you look at NFT projects that are particularly popular, growth rates of up to 81% have been recorded here. Elsewhere in the NFT market, primarily arts and games, there were declines ranging from 39% to 49%.
And even with those numbers, you have to take a closer look to be able to classify them properly in the end. In gaming, the P2E game gameAxie Infinity reached $40 million in November 2021. It reached an all-time high.
This trend continues: BAYC, Azuki, CloneX, Doodles and now Moonbirds are breaking away from everyone else.
I’ve talked about the outperformance of large caps, but it’s really the top 5 projects that drive all the gains. pic.twitter.com/UsUlwHMJ9M
— NFTstatistics.eth (@punk9059) April 26, 2022
Development of individual NFT projects
If you look at development now, there’s not much left with the P2E game Axie Infinity and the $40 million. Meanwhile, it is only 500,000 US dollars. Drops of 39% add up quickly when a good $39,500 million is lost in a single game in a matter of months.
The development of the various NFT projects and the stability of the value are therefore significantly different. And there are weaknesses in the stability of value for another reason. While value stability issues are most evident in some art and gaming projects, which have fallen in value by 41%, and some digital real estate.
come on man pic.twitter.com/CTJFldAHNk
—Tom Schmidt (@tomhschmidt) May 3, 2022
Here especially with Decentraland or Sandbox, which can hardly be realistically assessed in terms of value. At present, great uncertainties are unavoidable. If you look at the entry’s message again, you might conclude that the NFT market is collapsing. This can be seen in the analysis in the case of another weak point, namely when individual areas cannot be reliably assessed at all.
On the other hand, the top 10 of the NFT industry is still on an uptrend, these blue chips of the NFT industry have increased in value by another 81% since the beginning of 2022. In no case can we speak of a collapse here.
There is clearly a current trend that five or six of the best performing projects are doing significantly better, while the others are stable or declining.
the future is uncertain
The development of the first months of 2022 in particular shows that the NFT market cannot be said to have collapsed. On the contrary, it is very clear that there has been change and, if any, only slight declines in individual areas. If you remember here that the NFT market was still at an all-time high in September 2021, the NFT market is still in good development.
In the current uncertain times, there must be a big question mark as to whether this will remain the case in the long term. The longer the pandemic, war and associated inflation drag on and even increase, the more likely it is that a decline in the NFT market cannot be ruled out.
Keep an eye on the current situation
Furthermore, it will also depend on factors such as new developments and innovations that must come from artists, creators and developers. But the industry itself must also ask why the NFT market is collapsing. Current reports certainly do not encourage many new interested parties to invest their money in the NFT market or expand their financial commitment.
This is all the more critical as it turns out that the analysis on which the current reporting is based has significant shortcomings on many points. Confidence in current values is important, especially when investing in the NFT market. Inaccurate statements can also artificially cause a crisis in the NFT market.
@DJohnson_CPA suggests AxieInfinity was so big it topped the numbers in November and has since plummeted. It seems possible.
From where I’m sitting, this is a wildly different message than “NFTs are collapsing”https://t.co/lq66GbhbAj
— NFTstatistics.eth (@punk9059) May 3, 2022
Conclusion on the Non-Fungible Report
The NFT market is much more volatile than the rest of the crypto market. Large areas of the NFT Market deal with collectibles from the fields of art, sports and general collectibles, here values and prices are determined by the collector’s passion and up-to-date taste. Just like in the market for real art and collectors, random shifts in collector behavior also occur on the digital counterpart. What is still coveted and expensive today may be unattractive and almost worthless tomorrow.
No one would argue that the entire art market collapses when the artwork of individual artists goes out of demand and loses value. The same goes for the NFT market. There will always be extreme fluctuations in value, but money will continue to be earned and a lot will continue to be invested in the broader market.