- Non-fungible token or NFT sales have plunged by around 50% this year alone, a handful of new projects are hoping to revive enthusiasm for a market that lives and dies on hype and sentiment.
- It remains to be seen if the recent uptick in volumes is genuine, or if NFT fever has returned to the market, especially if risk appetite wanes against a backdrop of tightening monetary policy.
Despite the challenging year for cryptocurrencies in general and even though best estimates suggest that non-fungible token or NFT sales have plunged by around 50% this year alone, a handful of new projects are hoping to revive enthusiasm for a market that lives and dies on hype and sentiment.
There are some green shoots of recovery, with weekly volume now up around a third from a low in March, according to data from blockchain analytics firm Nansen, but the overall NFT market remains small.
Cryptocurrency exchange Coinbase Global (-4.22%) launched an NFT index this week in addition to a trial version of an NFT marketplace that could lead a jump in transactions as the space becomes more accessible for investors.
According to DappRadar, the first quarter of 2022 saw around 200,000 daily unique wallets interacting with NFTs, which could see a surge if even a fraction of Coinbase Global’s 90 million verified users comes onboard to embrace NFT trading.
In a sector already known for speculation, NFTs represent speculation on steroids, as evidenced by the investor who paid around US$2.9 million for Twitter founder Jack Dorsey’s first tweet which was made into an NFT, and which attracted a bid of just US$280 two weeks ago.
Nevertheless, NFT proponents remain undeterred, with new developments from Yuga Labs, the creator of the white-hot Bored Ape Yacht Club, arguably one of the most successful NFT collections, possibly enticing NFT investors back into the fray.
In March, Yuga Labs raised a whopping US$450 million to fuel its expansion plans and its ApeCoin commands a staggering US$4 billion market cap, according to data from CoinMarketCap.
Capitalizing on the popularity of Bored Ape, Coinbase Global last week announced a Bored Ape film series, to drum up interest and trading in the NFTs.
But NFTs are very much art and susceptible to wild price swings – one man’s masterpiece is another man’s madness and data from Nansen confirms that as many as one in three NFT projects have little to no trading, given how users and collectors are constantly moving on the next big thing.
Trading volumes are also highly suspect, with many NFT prices being derived from wash trading (trading amongst insiders to jack up the price).
It remains to be seen if the recent uptick in volumes is genuine, or if NFT fever has returned to the market, especially if risk appetite wanes against a backdrop of tightening monetary policy.