26 April. 2022
The NFT market, which has grown hugely over the past year, is declining. Sales on OpenSea, the world’s biggest NFT marketplace, are down 67% over the past month according to DappRadar’s NFT marketplace tracker. The number of traders on the top marketplaces also decreased in the past month, with. OpenSea, losing 23% and the search interest retuned to base level. The NFT hype is over.
Though many in the industry still believe that a wide variety of applications, from land deeds to club memberships, digital art ownership and brand digital advertising will support the growth of the NFT market, the frivolous spending seems to have fizzled out in less than a year.
The expectations for large brands entering the NFT space as well as crypto trading platforms like Coinbase, Binance and FTX have been tempered. As public interest in NFTs declines, it looks unlikely that entering NFT space will generate significant volume of additional sales for the brands or reduce the reliance of trading platforms on the trading fees and the sentiment of retail traders.
While the adjacent markets face some turbulence to their place to leverage NFTs as a new asset, the highest risks remain with the individual collectors. A case in point is Sina Estavi, a scandalous crypto entrepreneur, who bought a digital token representing Twitter founder Jack Dorsey’s first tweet for $2.9 million. He put it for sale two weeks ago for $50 million but the bidding culminated in $3,600, arguably the true market price for this little piece of internet history.
The market ‘correction’ by slow sales and prices plunge on some assets is likely brought on by weak collectibles with loosely tied communities. Valuable blue-chip NFT projects like Bored Ape Yacht Club(BAYC), Mutant Ape Yacht Club (MAYC), and Azuki have increased 169%, 199.6%, and about 146% over the past month despite the market decline.
Despite the market decline, the owners of blue-chip NFTs prefer to hold rather than sell. To respond to the growing demand, there has been a rise in NFT lending to allow the owners to gain liquidity. The NFT loan volume on decentralised lending NFT marketplaces Arcade and NFTfi have increased 171% from $30.63 million in Q4 2021 to $83.17 million in Q1 2022.
One cannot help but wonder if this belief in considerable long-term value of the digital collectables is going to end in a wave of bankruptcies next year. Are we in the last few months of the Tulip Mania of the Dutch Golden Age? While the tulip market itself survived the crush and has reached $7 billion in size, no tulip bulb in the world is worth as much as it did in 1634 when, according to Extraordinary Popular Delusions and the Madness of Crowds 12 acres of land were offered for a single Semper Augustus.