Non-fungible tokens (NFTs) took the world by storm in March and April of this year, with a flood of daily headlines about record sales and big companies releasing their own unique digital art pieces dominating the media.
A few months later, the narrative has shifted to the “NFT bubble” bursting, and doomsayers warn that investors in NFT are about to lose all their money.
The rapid decline in prices and activity in major NFT markets has led many to speculate on the death of the non-fungible token space, despite the known cyclical nature of the cryptocurrency market, which can be brought back to life in the blink of an eye.
You knew this was coming, right?
NFTs Are Dead
(of course you can buy this song as an NFT)https://t.co/gj6JFpFKZX pic.twitter.com/NFveBKgdRn
– Jonathan Mann (@songadaymann) June 4, 2021
You knew this was going to happen, right?
NFTs are dead
(of course you can buy this song as NFT)
Active users leave ship
Active users are the lifeblood of NFT markets, but the hectic nature of crypto markets in the past two months, including the massive sale on May 19, which posted a loss equivalent to $ 1.2 trillion of cryptocurrency market capitalization, has led to a precipitous decline in user activity.
As seen in the graphic above, active wallets in the NFT markets peaked at the end of March and have since fallen more than 40%as declining values combined with high transaction fees on the Ethereum (ETH) network have kept traders out of the market.
The decline in active wallets coincided with a decrease in sales throughout the space, since the rapid drop in token prices compounded the losses of holders and collectors who saw their valuable art pieces lose up to 90% of their value overnight.
The decrease in active users has resulted in a 60% decrease in total daily sales, which has gone from a peak of $ 325 million on May 7 to its current figure of $ 110 million.
NFTs are down, but they haven’t disappeared
However, all is not lost, since there are many strong value propositions and use cases for NFTs that traditional entrepreneurs and businesses have noticed and they embraced the sector.
The blockchain ecosystem has already presented multiple viable options to address the issues facing the NFT industry.such as the launch of the Efinity and JumpNet protocols, which help lower fees and enable interoperability between different networks.
Another popular solution is Polygon, an Etheruem sidechain that allows projects to stay on Ethereum while having access to a fast, low-fee environment.. In the past three months, a large number of NFT- and gaming-oriented projects have migrated to Polygon, and as the cryptocurrency and NFT market improves, these low-fee environments should help drive network activity.
While the current stats may look bad when compared to recent all-time highs, when viewed from a longer time frame you can see that the average number of NFT sales increased almost 300% between January and the end of May. This shows that there is momentum in the sector despite the market crash that started on May 12..
The NFT ecosystem may have seen a significant decline in token activity and value over the past month, but it’s too early to proclaim the death of the NFTsas the world has only scratched the surface of what is possible with this fledgling smart contract technology.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. All investments and trading involve risk, so you should do your own research when making a decision.