For the longest time, critics of NFTs have been dismissing them as nothing more than just a passing trend. Could they be right? According to recent statistics, demand for NFTs does in fact appear to be slowing down.
But does this really mean that NFTs are a poor investment? When demand for NFTs slows down, how does this affect the overall market?
On March 4, Fortune ran an article with the headline “The NFT Bubble is Showing Clear Signs of Bursting.” This article highlighted the fact that the average price of an NFT had declined by over two thirds since January, and that cumulative daily sales had dropped from $160 million to $26 million over that same period.
In addition, primary sales dropped from 26,000 per day to just 3,200. Secondary market sales are also plummeting. Finally, total market capitalization of NFTs dropped from a high of $23 billion to a new low of $10 billion.
Investors Seem to be Cutting their Losses
Perhaps most worrying is the fact that investors seem to be cutting their losses and ditching NFTs altogether. One Bored Ape Yacht Club NFT sold for $224,000 in early March – at a loss of almost $70,000. The seller had purchased the digital asset back in January.
It’s also worth mentioning that approximately 360,000 individuals own almost all of the available NFTs out on the market, and 80% of the total value of these assets is held by just 9% of the community.
This means that if these “whales” ever decide to offload their NFTs en masse, the market will undoubtedly tank.
Is There Still Hope for NFTs?
While the statistics paint a grim picture, the truth is that there is still hope for NFTs.
In fact, some would argue that we’re just beginning to scratch the surface of a new world filled with investment opportunities, and that the full potential of NFTs has yet to be realized.
For example, the Metaverse is still very much in development. When it arrives, the popularity of NFTs could surge as investors rush to buy digital homes, digital sneakers, and other unique tokens to show off in the virtual world.
And of course, we can’t forget about the gaming community – a market that many believe will help boost the value of NFTs as developers start to introduce non-fungible tokens for the latest triple-A titles.
Continuing Concerns
Fortune also pointed out that NFTs, Bitcoin, and other crypto assets have failed to outperform the S&P 500 (although the S&P 500 is down by more than 10% YTD).
This seems to be a common theme whenever a new investment opportunity presents itself, as it’s often better to simply stick with a more conservative approach.
In addition, there are continuing concerns about the security of NFTs, in light of recent scams that have cost investors millions. At the end of the day, only time will tell whether NFTs will remain viable – but worrying signs are starting to appear.
