After the initial euphoria that preceded their surge in popularity, the market for non-fungible tokens (NFTs) has collapsed. Many NFTs saw a dramatic decline in value, which led some people to wonder about their long-term viability. There were several contributing variables, but the sell-off in digital assets over the previous three months was the main one.
According to the DappRadar analytics platform, trade volume on OpenSea, the largest NFT marketplace in the world, decreased to 99 percent in the four months between May and August 2022. To put things in perspective, NFT is a brand-new class of immutable, blockchain-based assets. Consider it to be unique rather than something you could mass-produce, like a signed jersey or a baseball card. As a result, NFTs are essentially digital assets that can be utilized as tokens or as collateral. Despite this, there have been some serious doubts raised about whether this technology is ready for widespread use. There are many reasons to wonder how widely accepted NFTs will be and whether this trend is just getting started or if it will eventually fade away.
Let us see why NFTs are declining
Lukewarm response to questionable activities
The blockchain sector is home to numerous questionable businesses, but the NFT market is particularly rife with scams. The NFT industry includes a substantial portion of shady developers selling basic content on marketplaces. Given how easy it is to set up a website and sell fake artwork or sports collectibles, this presented a perfect opportunity for scammers. And the market is responding as it should. The poor response to questionable NFT market operations was one of the primary reasons for the prices’ precipitous decrease. These simple marketplaces aren’t being used by anyone, and business isn’t taking off.
Intense cryptocurrency sell-off
According to CoinMarketCap, the worldwide cryptocurrency market has decreased by 15% since January 2022, from $1.02 trillion to $970.03 billion. The recent decline has put even long-term investors to the test, with all major cryptocurrencies trading in the negative. The floor price of NFTs was directly impacted by the more than 50% decline in the price of Ethereum.
NFTs’ lack of distinct use cases
NFTs’ key selling point is their practical use. Everything that is sold on a marketplace can subsequently be sold again. Even though it works fantastically for things like digital art, it is not particularly helpful for digital goods like apparel or footwear. Sure, you can sell a pair of shoes to someone, but what will you do with that pair? They cannot be worn, and it is unlikely that they can be sold again in the future. It is difficult to imagine how NFTs can ever be valuable because there are no obvious use cases for them in the actual world. Because of this, almost all widely used NFTs are works of digital art.
The same issues that plague ICOs also affect NFTs.
The blockchain industry is tremendously hyped up, and it appears like every new initiative is going to revolutionize society. However, the reality is that only a small percentage of blockchain ventures succeed, while the majority fail. The intermediaries in centralized markets receive a percentage of each sale of a digital asset. Additionally, they have high listing costs and offer no assurance that the thing you purchase won’t be fake. Therefore, despite the success of centralized marketplaces, Initial Coin Offerings (ICOs) and NFTs both have issues. Centralized markets contribute to the rise in the value of digital assets, but they can also be detrimental to investors. The sole distinction is that ICOs pledge to create