Nonfungible tokens (NFTs) took the world by storm in March and April of the year with an onslaught of daily headlines regarding record-breaking sales and big-name companies dropping their very own one-of-a-kind digital art pieces dominating the mainstream press.
Fast forward a couple of months and the narrative has changed into the ‘NFT bubble’ popping and doom and gloomers warning that NFT investors are on the point of losing all their money.
You knew this was coming, right?
NFTs Are Dead
(of course you can purchase this tune as an NFT)https://t.co/gj6JFpFKZX pic.twitter.com/NFveBKgdRn
— Jonathan Mann (@songadaymann) June 4, 2021
Lively users jump ship
Active users will be the lifeblood of NFT marketplaces, however, the choppy nature of this cryptocurrency markets within the past two months, including the May 19 sell-off which saw $1.2 trillion in value wiped from the crypto market cap has led to a precipitous decline in user action.
As seen in the graph above, the busy wallets on NFT marketplaces peaked close to the end of March and has since fallen by over 40% as falling values combined with higher transaction fees on the Ethereum (ETH) network kept traders out of the marketplace.The decline in busy wallets coincided with a decline in sales across the space as rapidly falling token prices exacerbated the declines of holders and collectors who saw their valuable art pieces lose up to 90 percent of the value overnight.
The reduction in busy users has led to a 60% decline in overall daily sales which dropped from a high of $325 million on May 7 to its present figure at $110 million.
NFTs are down but not out
All is not lost, however, since there are many solid value propositions and use cases for NFTs that entrepreneurs and conventional businesses have noticed and adopted the sector.
The blockchain ecosystem has put forth multiple workable choices to take care of issues facing the NFT sector, like the launching of Enjin’s Efinity and JumpNet protocols which help to lower prices and allow for interoperability across various networks.
Another popular alternative Polygon, an Etheruem sidechain that makes it possible for jobs to stay on Ethereum whilst also using a fast, low fee environment. In the past 3 months a high number of NFT-oriented and gambling jobs have migrated into Polygon and since the crypto and NFT marketplace improve, these low fee environments should help boost activity on the network.
Source: DappRadar
While the present statistics might seem bad compared to recent all-time highs when viewed from a longer time frame one can see that the normal amount of NFT sales rose nearly 300% between January and the end of May. This shows that there is strength in the sector regardless of the market plunge that began on May 12.The NFT ecosystem might have seen a considerable drop in action and nominal values within the past month but it’s far too premature to proclaim the death of NFTs since the world has only scratched the surface of what’s possible with this smart contract technologies.
The perspectives and opinions expressed here are only those of the writer and don’t always reflect the views of Cointelegraph.com. Every single investment and trading proceed entails danger, you need to run your own research after making a determination.
