Is the NFT Boom Finally Bottoming Out
NFT or non-fungible tokens had reached mass hysteria in the recent past and then came the crypto winter. The winter continues and even took pegged or stable coins down with them. Billions of dollars in wealth seemed to have vanished over night, but many in the crypto space stay positive.
A recent WSJ headline, “NFT Sales Are Flatlining", which is based on data provided by Nonfungible, which compares trade in NFT's to moments in time in the past years. It has been reported that NFT average sales have declined by ~92%, compared to September of last year. Furthermore, the digital wallets that hold these assets have also dropped by 88%, as compared to November of 2021.
According to Nonfugible's data published as of Q1 2022, it has been reported that, “The NFT market experienced strong euphoria in 2021, mainly driven by the Collectibles segment,” it tees off, “But at the end of the year, the various volumes began to decline and this trend continued in the first quarter of 2022.”.
Additionally commentary in the report suggests that 2022 data trends as an inevitable correction from the previous peaks. “Overall, the indicators are bearish,” says the NonFungible release. “As we announced in our 2021 annual report, a decrease in NFT sales volume due to the saturation of the collectible market was to be expected…However, this drop in sales volume is accompanied by a much smaller drop in the volume of dollars traded (only 5% drop)… With nearly $8 billion traded in the first quarter of 2022, the market cannot really be considered to have collapsed. We are observing a stabilization of the NFT market, in line with the last quarter of 2021.”
What is our disposition on NFT?
We see NFT's similar to pink sheet investments i.e they are speculative and risks associated with these assets are high. Unlike pink sheets though, NFT's are also tied to the bigger trend of Metaverse, which in itself is in its infancy stage. There is now a standards body to define Metaverse, which may also include provisions about NFT's. Therefore, the key for each investor to manage the risk based on their own threshold. More to follow...
0 Comments