After Non-Fungible Tokens sale hit their highest highs of $12.6B in sales in Jan 2022, they reached a new low point in June. Not so long ago, BAYC and CryptoPunks NFTs were the talks of the town. But the recent slump in the crypto world has impacted NFT sales, which stand at just $1 Billion in June 2022. If you don’t already know, the total market cap of the cryptocurrency market has receded from $3 Trillion in 2021 to just $1 Trillion at the time of writing.
What Experts Say About Depreciating NFT Sales?
Experts like Chainalysis economist Ethan McMahon believe the decline is definitely related to the overall slowdown in the crypto market. But he is hopeful that it is only a matter of time before NFTs make a comeback and achieve their previous status.
NFTs were Selling Like Hot Cakes in Jan 2022
Almost every NFT worth its salt was earning a massive amount of money, thanks to the endorsement by celebrities like Snoop Dogg and Paris Hilton. Mega NFTs like CryptoPunks and BAYC apes became a status symbol, and people were flaunting them for fun. Even Twitter accommodated NFTs by creating a unique hexagonal NFT profile picture.
3 Major Reasons for NFT Crash
Considering that NFTs were doing so well at the start of the year, it was unfathomable for anyone to anticipate this sort of crash.
Below are three reasons, which are cited by experts when explaining the NFT crash and the receding sales after the highs of January and February 2022. Let’s have a look:
NFTs depend on the blockchain, a form of decentralized ledger. Most NFTs use the Ethereum blockchain, and the price of the Ethereum coin ETH is currently plunging. At the time of writing, 1 ETH is only worth $1,040, far less than its all-time high (ATH) of $4891. Although there are other blockchains like Solana that are used for NFTs, Ethereum is the most important and highly preferred by NFT creators. So, naturally, NFT investors have second thoughts about purchasing Non-Fungible Tokens. One of the biggest reasons for the fall of ETH and other cryptocurrencies is the hike in interest rates by US Fed (Federal Reserve). The interest rate hike is a massive 0.75 percentage points, the likes of which haven’t been seen for decades. So as the interest rose, cryptocurrencies fell and took down NFTs with them.
Another major reason for the NFT crash is the Terra debacle. The Terra crypto rose to prominence in early 2022 but then fell like nine pins in a way that no one expected. It directly impacted cryptocurrencies and indirectly caused the NFT crash.
There have been many NFT hacks in the past, which have shaken the trust of digital asset buyers. Unethical hackers have scammed platforms like OpenSea, and people have lost millions of dollars. So, there is a feeling of nervousness among NFT buyers.
Current NFT Situation Hurting New NFT Sales
Although top-tier NFTs like CryptoPunks and BAYC are still performing marginally better, the new NFTs aren’t finding many takers. Considering that the start of 2022, i.e., Jan and Feb were so promising, one could not have envisioned how things would change. Currently, the cryptocurrency market is experiencing volatility like never before, and buyers fear losing their money.
Due to the cryptocurrency market crash in 2022, NFT sales suffered big time in June 2022. However, NFTs are a novel concept that has been hugely popular among the youth. NFTs have helped digital artists bring their creativity in front of the world. So, there is a lot of good associated with NFTs, and they serve an essential purpose in the world as we move forward. The current NFT slowdown is not the fault of the innovation but an outcome of the interest hike by the Fed and Terra collapse. So, it is only a matter of time before we see NFTs fight back and gain their past position. Although the highs might not be as high as before (as people will be cautious before investing), there will be an increase in the sale once cryptocurrencies start appreciating.