Hold onto your digital pixelated hardhats: the NFT market is beginning to collapse.
The proof? Our Lord, savior and staunch defender of “free speech” — read: the right to talk shit about people online — Elon Musk right-clicked and saved a Bored Apes montage picture, made it his profile image and tweeted, “I dunno … seems kinda fungible.”
For an industry built on being non-fungible, it’s far from the ideal press.
To pull back a little, of course, this isn’t proof. Musk is just some rich asshole. His tweet is just another of the many he has riffed off that swing between being bullish and bearish on these markets. Yet unfortunately, when Musk speaks (tweets), the majority of the crypto/blockchain market listens. After all, those in the market often see him as they see themselves; a disruptor, a maverick, a revolutionary.
But the tweet comes at a bad time for the NFT market, which is still struggling to shake off its current slumber.
Thanks to data from the Q1 2022 report released by Non Fungible, an NFT Market data and analysis company that tracks decentralized asset transactions in real-time on the Ethereum blockchain, the proof of the current collapse is laid bare. The numbers make for grim reading as the market enters Q2, especially in contrast to the tail end of 2021.
Some notable data points from the report include;
- a 46% drop in the number of NFT sales. (The data looks even worse compared to the peak market in 2021; NFT sales have dropped to a daily average of about 19,000 per week, a 92% decline from a peak of about 225,000 in September.)
- a 30% drop in buyers.
- the number of active wallets dropped from 380,000 in November to just under 150,000 active wallets per week (the daily number currently sits around 20–30K).
- and a nearly 50% increase in total loss during resell.
The last point is particularly poignant; with all the talk of diamond hands and ‘hodling,’ many have assessed the landscape and come to the decision that leaving with some money is better than none — even if the losses are hard to swallow. This trend doesn’t bode well moving forward. Scarcity is key, and demand needs to outweigh supply to keep prices ticking upward and to entice new buyers into the market. If holders are calling it quits, and the buying pool is drying up, it will leave the few holding the many — but with no one to sell to. (Does this sound like a Ponzi scheme? Just me?)
There have also been several high-profile sales that have failed to meet expectations, which are likely filtering into public perception of the assets. Last month, the NFT of Jack Dorsey’s first tweet went back on sale, with the owner, Sina Estavi, hoping to bag $48 million. At the moment, he stands to gain… $28,136. Doggie #4292, an NFT curated by Snoop Dogg, hoped to fetch 8,888.8888 ETH, around $24,066,844, at auction. The bidding currently stands at… $595.65.
The bad press and lack of hype will not be helping the already slowing search traffic. As I wrote in The Metaverse and NFT Boom Is About to Go Bust, google trends data showed traffic for the term NFT has fallen over 60% in January. Since then, its trajectory has followed the same path, showing no signs of returning to the forefront of the general public’s mind.
Sales down. Market down. Traffic down. Entrepreneurial juggernauts are dissing the assets. So, is the bubble about to burst?
It’s too soon to call.
For one, data from the report showed the average price of an NFT increased, despite volume being down. This could means that the NFTs that remain in circulation, like the Bored Apes, are recognized as being truly valuable. It’s also possible that this drop is nothing but a large-scale slow-down that was inevitable on the back of the extraordinary highs of 2021, and we’ll soon see the market rocket once more. Another possible explanation is that the plummet is more of a market cleanser, removing those who only came in for short-term gains and culling the bad projects that were nothing more than a scam. Cryptocurrencies have endured several similar spells, and the majority of those convinced by the coin’s potential have stayed the course, and those less so have taken their losses and got the hell out.
On the other hand, the market may have decided this form of NFT isn’t the long-term format. Interest is waning, and the community is constantly looking for the next big thing. How long before everyone just moves on?
Again, I feel like a broken record is writing this repeatedly, but widespread adoption — or even acceptance — will always come down to whether the technologies can find use cases that benefit the users. Those uses need to start appearing soon, before nothing remains of this wild time but a pile of pixelated ape ashes and lot of wasted money.