[Feature] Is the NFT Market in Decline or Are Things Not What They Seem?

With the 2022 cryptocurrency market implosion, it looks like the crypto winter is far from over with prices still in the red as of Wednesday. Based on the cryptocurrency data aggregator, CoinMarketCap, it shows that at the time of writing the global market cap is at $938.60b, which is a 5.81% decrease over yesterday. Mainstream cryptocurrencies like Bitcoin, Ethereum, BNB, and the likes, have taken quite a steep dip over the last 24 hours and further.

BTC’s downward trend as seen on TradingView.com. It is trading at $18,806 at the time of writing, which is down about 7% based on the past week.

ETH’s downward trend as seen on TradingView.com. It is trading at $1,518.64 at the time of writing, which is down a little over 4% based on the past week.

How then is this overall drop of the majority of the cryptocurrency tokens related to NFTs? Well, just like the performance of crypto, the NFT market as a whole is not faring so well either.

The number of participants in the NFT market has been on a decline since February but the nosedive seen after May, was particularly popping

According to data from decentralised app store DappRadar, trading volume on OpenSea, the world’s first and largest digital marketplace for crypto collectibles and NFTs, has taken a 99% plunge since the peak in May. The contrast is significant ─ OpenSea processed a record $2.7b in NFT transactions on May 1 but an abysmal $9.34m worth on Aug 28. Other NFT marketplaces were not spared either. Coinbase had launched its own NFT marketplace in May but it failed to gain any real traction while Gamestop experienced similar activity or lack thereof after launching its own NFT marketplace in July.

The historical activity of OpenSea as seen on the chart from DappRadar shows a drop in all three aspects in the last 30 days: users, volume, and transactions. The number of users stand at 304,055; transactions at 1,925,609; and volume at $313,804,933.33 or 341,101.51 ETH (a 1.69%, 11.3%, and 23.59% drop in the last 30 days respectively)

However, despite the seemingly plummeting popularity of NFTs, celebrities and brands have maintained their position on NFT project promotions ─ celebrities shilling their NFTs on social media without proper disclosure. This ‘promotion’ has been on the rise to the point that TINA.org, the consumer watchdog nonprofit Truth in Advertising, Inc., has been sending warning letters to a sizable number of celebrities with some notable figures like Justin Bieber, Reese Witherspoon, Madonna, Snoop Dogg, Eminem, etc.

As seen on TINA.org, these are the letters sent to almost 20 celebrities putting them on notice of the applicable law

Why then are celebrities promoting NFTs when the NFT market has dipped? Was it to line their pockets or do they genuinely love that particular NFT? TINA.org investigated the celebrities who promote NFTs on their social media channels and discovered that it is an area rampant with deception, including failing to clearly and evidently divulge the promoter’s material connection to the endorsed NFT company, and also omitting information like associated risks with investing in such speculative digital assets, the personal gain(s) the promoter may gain from the promotion, etc.

Ben Mekler is a writer and producer, known for G.I. Joe: Retaliation (2013), Kipo and the Age of Wonderbeasts (2020), etc.

Another indicator in the NFT market’s crash would be one of the most popular and well-known NFT projects, Bored Ape Yacht Club (BAYC). Its value has taken quite a painful tumble ─ its peak floor price on April 30 was 154 ETH but as of the time of writing, it hovers just below 73.5 ETH, meaning there is more than a 50% drop in value.

Some good news for the somewhat bleak NFT world: Starbucks will unveil its web3 initiative, which includes coffee-themed NFTs, at next month’s Investor Day event; Gucci presented a series of NFT collectibles that explore the past, present, and future of Gucci’s 100-year history; and some brand companies had or are taking their first step into NFTs too.

Moonbirds’ and Mutant Ape Yacht Club (MAYC)’s floor price as seen on OpenSea is 11.1 ETH and 13.29 ETH respectively at the time of writing. The former saw close to 15% decline while the latter had over 15.5% drop based on the last seven days.

According to Chainalysis economist Ethan McMahon, although one might argue that the crypto winter directly affected part of the drop in NFT transaction volume, the dive was too deep to be explained by this alone. An inflated market was also, to some extent, responsible for the rapid drop in transaction values.

Expert opinion seem divided on this: GlobalData analyst George Monaghan believes that the NFT market is at least dead for a while and expressed that NFTs were such an obvious bubble and that people would not return to them for a long time. Whereas McMahon feels that though the NFT market may look dead based on July 2022 data, the present crash is just a much-needed shake-up which will shift the market away from NFTs without additional utility.

Is the NFT crash akin to any other economic cycle or will the crash turn to an inevitable irreversible collapse? For better or worse, many are watching the space. On a subjective note, I feel it is just a bump in the otherwise smooth path and NFTs will mount a comeback. After all, what goes up must come down, and there is no way but up from down.

Are you worried if the NFT market is facing an impending doom or are you more optimistic about its future?

Disclaimer: The content in this article is solely the author’s opinion and is by no means financial/investment advice; it is purely for educational/informational purpose only. Please do your own research (DYOR) and never invest what you cannot afford to lose.