Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Cryptoverse: The bonfire of the NFTs

Stock Markets Jul 05, 2022 07:36PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: A non-fungible token (NFT) displayed on the website of NFT marketplace OpenSea is seen through a magnifying glass, in this illustration picture taken February 28, 2022. REUTERS/Florence Lo/Illustration 2/2

By Elizabeth Howcroft

(Reuters) - The NFT dream isn't dead, but it's taken a big non-fungible beating.

The market shone gloriously last year as crypto-rich speculators spent billions of dollars on the risky assets, pumping up prices and profits. Now, six months into 2022, it's looking ugly.

Monthly sales volume on the largest NFT marketplace, OpenSea, plunged to $700 million in June, down from $2.6 billion in May and a far cry from January's peak of nearly $5 billion.

By late June the average NFT sale sunk to $412, from $1,754 at the end of April, according to NonFungible.com, which tracks sales on the Ethereum and Ronin blockchains.

"The crypto bear market has definitely had an impact on the NFT space," said Gauthier Zuppinger, co-founder of NonFungible.com.

"We have seen so much speculation, so much hype around this kind of asset," he added. "Now we see some sort of decrease just because people realise they will not become a millionaire in two days."

The NFT market has collapsed along with cryptocurrencies, which are typically used to pay for the assets, at a time when central banks have jacked up rates to combat inflation, and risk appetite has withered.

Bitcoin lost around 57% in the six months of the year, while ether has dropped 71%.

Graphic: Monthly NFT sales volume on OpenSea marketplace, https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwbzbjvo/Monthly%20NFT%20sales%20volume%20on%20OpenSea%20marketplace.png

DIP OR DEATH SPIRAL?

For critics, the crash confirms the folly of buying such assets, tradable blockchain-based records linked to digital files such as images or videos, often artwork.

The Malaysian businessman who bought an NFT of Jack Dorsey's first tweet for $2.5 million last year struggled to get bids of more than a few thousand dollars when he tried to re-sell it in April.

But Benoit Bosc, global head of product at crypto trading firm GSR, sees the downturn as the perfect time to build a corporate NFT collection - the crypto equivalent of the fine art traditional banks display to impress clients.

Last month, GSR spent $500,000 on NFTs from what Bosc calls "blue-chip" collections - those with large online fan bases.

His purchases include an NFT from the Bored Ape Yacht Club, a set of 10,000 cartoon monkeys made by U.S.-based company Yuga Labs and promoted by the likes of Paris Hilton and Jimmy Fallon.

Such is the hype surrounding Bored Apes that Yuga Labs raised $285 million in April by selling tokens it says can be exchanged for land in a Bored Apes-themed virtual world it has not yet launched.

Yet the average sale price for a Bored Ape tumbled to around $110,000 in June, having halved since its January peak of $238,000, according to market tracker CryptoSlam.

In his New York office, Bosc put up three screens on which to display his NFTs, which include various pixelated characters and a Bored Ape bought for $125,000.

"For us, it's also a brand exercise," Bosc said. Owning a valuable NFT and using it as a profile picture on social media is a way to establish "respectability, authority and influence" in the crypto sphere, he said.

Graphic: Average NFT sale price per week, https://fingfx.thomsonreuters.com/gfx/mkt/klvykryrbvg/Average%20NFT%20sale%20price%20per%20week.png

GAME OVER? GAME ON?

Nonetheless, the future of NFTs is distinctly uncertain, as the era of low interest rates which encouraged investors to take risky bets comes to an end.

Some market watchers say the influence of NFTs on the art market will shrink. Meanwhile, even though the much-hyped vision for a blockchain-based metaverse hasn't materialised yet, enthusiasts expect NFTs to shake up the gaming industry, for example by allowing players to own in-game assets such as avatar skins.

"Everyone believes games are going to be the next big thing in blockchain," said Modesta Masoit, chief financial officer at blockchain tracker DappRadar.

This risky combination of gaming and financial speculation may face difficulties, though. Most gamers prefer games which do not include NFTs or "play-to-earn" components, according to John Egan, CEO of technology research firm L'Atelier.

Although the groundbreaking new crypto regulations agreed by the European Union last week mostly excluded NFTs, Spain is separately seeking to clamp down on the way video games sell virtual assets for real money.

Meanwhile, the biggest NFT-based game, Axie Infinity, has seen its in-game token collapse to less than half a cent, down from a peak of 36 cents last year.

For L'Atelier's Egan, the NFT market is unlikely to recover in its current form.

"Ultimately it's a situation where extraordinary amounts of money are being paid for extraordinarily limited assets that don't really produce any cash flow," he said.

But the underlying concept of creating unique digital assets is still "fundamentally important" and will have "massive applications" for the financial sector in future, he said.

Graphic: Quarterly NFT sales volume by type, https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrmbmqvm/Quarterly%20NFT%20sales%20volume%20by%20type%20across%2015%20top%20blockchains.png

Cryptoverse: The bonfire of the NFTs
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Benoit Avril
Benoit Avril Jul 05, 2022 9:15PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
No wonder why among the 7 previous comments 6 were spams.
Alan Rice
Alan Rice Jul 05, 2022 12:00PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Cryptoverse: A Black hole for "investors". (Gamble Responsibly.)
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email