non-fungible token (NFT) took the world by storm with an onslaught of daily headlines in March and April of this year record breaking sales and big name companies Leaving one-of-a-kind digital artworks that dominate mainstream media.
Fast forward a few months and the narrative has shifted to the ‘NFT bubble’ popping and doom and gloom that NFT investors are on the verge of losing all their money.
Rapidly declining prices and activity in top NFT markets has inspired many speculation on death The irreplaceable token space, which can come back to life at the drop of a hat, despite the well-known cyclical nature of the crypto market.
You knew this was coming, didn’t you?
nfts are dead
— Jonathan Mann (@songdaymann) 4 June 2021
Active users jump ship
Active users are the lifeblood of the NFT marketplace, but the choppy nature of cryptocurrency markets over the past two months, including the May 19 selloff that wiped $1.2 trillion in value from the crypto market cap, caused a massive drop in users. is. activity.
As seen in the chart above, active wallets on the NFT Marketplace peaked in late March and have since fallen by over 40% combined with declining values. high transaction fees on Ethereum (ETH) network kept traders out of the market.
The drop in active wallets coincided with a drop in sales across the space as the sharp drop in token prices added to the losses for holders and collectors, who saw their valuable artifacts lose up to 90% of their value overnight.
The drop in active users resulted in a 60% drop in total daily sales from a high of $325 million on May 7 to its current figure of $110 million.
NFTs are down but not out
However, all is not lost, as there are many solid value propositions and use cases for NFTs that entrepreneurs and traditional businesses have seen and embraced in the sector.
The blockchain ecosystem has already presented several viable options for tackling the problems facing the NFT sector, such as the launch of Enjin. Affinity and Jumpnet Protocol Which help reduce fees and allow interoperability across different networks.
Another popular solution is Polygon, an Ethereum sidechain that allows projects to remain on Ethereum while also having access to a fast, low-fee environment. A large number of NFT-oriented and gaming projects have moved to Polygon in the past three months and as the crypto and NFT markets improve, these low-fee environments should help fuel activity on the network.
While the current figures may look bleak, when viewed from a longer time frame the average number of NFT sales between January and the end of May has increased by almost 300% compared to all recent highs. This shows that the sector is strong despite the market downturn that started on May 12.
The NFT ecosystem has seen a significant drop in activity and token values over the past month, but it is too early to announce the death of NFTs as the world has just scratched the surface of what is possible with this nascent 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. Every investment and trading move involves risk, so you should do your own research when making a decision.