NFTs, or non-fungible tokens, are digital assets that represent unique and scarce items, such as art, music, games, or memes. They are recorded on a blockchain, usually Ethereum, and have a unique signature that cannot be duplicated. NFTs were supposed to revolutionize the digital economy, empower creators and collectors, and make millions for savvy investors.
However, in the past few months, the NFT market has experienced a dramatic crash. According to a report by DappGambl, 95% of NFT collections have a market cap of zero. That means that the vast majority of NFTs are worthless and that millions of people who bought them have lost their money. How did this happen? And what does this mean for the future of NFTs?
The Rise and Fall of NFTs
The concept of NFTs is not new. The first NFTs were created in 2017, with projects such as CryptoKitties and CryptoPunks. However, it was not until 2021 that NFTs exploded in popularity and price. Driven by the hype and speculation around crypto assets, NFTs attracted celebrities, artists, influencers, and investors who saw them as a new way to express themselves, support causes or make profits.
Some of the most notable NFT sales in 2021 include:
- A collage of 5,000 digital images by the artist Beeple, which sold for $69 million at Christie’s auction house.
- A video clip of LeBron James dunking by NBA Top Shot, which sold for $208,000 on its own platform.
- A tweet by Jack Dorsey, the founder of Twitter, which sold for $2.9 million on Valuables.
- A digital painting of a rock by EtherRock, which sold for $1.3 million on OpenSea.
These astronomical prices created a frenzy in the NFT market, as more and more people wanted to get in on the action. New platforms, projects, and collections emerged every day, offering various types of NFTs, from art and music to sports and gaming. The supply and demand of NFTs skyrocketed, reaching a peak in August 2021, when the monthly trading volume of NFTs hit $2.8 billion.
However, this boom was not sustainable. The NFT market was driven by hype and speculation, not by intrinsic value or utility. Many NFTs were created without originality or quality, simply to cash in on the trend. Many buyers were not interested in the content or meaning of the NFTs, but only in their potential resale value. Many platforms and projects were not secure or reliable, exposing users to scams and hacks.
As a result, the NFT market started to collapse in September 2021. According to a report by The Wall Street Journal, which refers to data collected by NonFungible.com, NFT sales have plummeted by 92% since September 2021. Just eight months ago, an average of 225,000 NFTs were sold on a daily basis. Now, that number has dropped to less than 20,000.
How to Survive the NFT Crash
The NFT crash is not the end of the story. It is a wake-up call for the NFT industry and community. It is an opportunity to learn from the mistakes and failures of the past. It is a chance to improve and innovate for the future.
If you are an NFT creator or collector who wants to survive the crash and thrive in the long term, here are some tips:
- Focus on quality over quantity. Create or collect NFTs that have artistic merit, cultural significance, or practical use. Avoid buying or selling NFTs that are low-quality, generic, or plagiarized.
- Do your research before buying or selling an NFT. Check the reputation and credibility of the platform, project, or collection you are dealing with. Verify the authenticity and provenance of the NFT you are interested in. Read the terms and conditions carefully before making a transaction.
- Diversify your portfolio. Do not put all your eggs in one basket. Invest in different types of NFTs across different platforms and projects. Balance your risk and reward ratio.
- Be patient and realistic. Do not expect to make a quick buck or become rich overnight from NFTs. Understand that the market is volatile and unpredictable. Be prepared for ups and downs.
- Enjoy the journey. Do not let money be your only motivation for engaging with NFTs. Appreciate the creativity and innovation that goes into making and collecting NFTs. Support the artists and communities that inspire you. Have fun and learn along the way.
NFTs are not dead. They are evolving. The NFT crash is a natural and necessary correction for a market that was overheated and overhyped. It is a chance to weed out the bad actors and the low-quality products. It is a time to reflect and improve. It is a moment to reset and rebuild.
The future of NFTs is still bright. There are still many opportunities and possibilities for NFTs to create value and impact in the digital world. There are still many challenges and problems to solve and overcome. There are still many innovations and experiments to explore and discover.
The NFT crash is not the end. It is the beginning.
Sources:
(1) The NFT Crash: Key Takeaways And How You Can Survive it - Techopedia. https://www.techopedia.com/the-nft-crash-how-a-crypto-fad-turned-into-a-flop-and-how-you-can-survive-it.
(2) After 2022’s Crypto Crash, the Future Vision of NFTs Is Looking Far More Banal – ARTnews. https://www.inferse.com/741706/after-2022s-crypto-crash-the-future-vision-of-nfts-is-looking-far-more-banal-artnews/.
(3) NFT Crash: 95% of the Market May Now Be Worthless, Study Finds. https://markets.businessinsider.com/news/currencies/nft-market-crypto-digital-assets-investors-messari-mainnet-currency-tokens-2023-9.