The meteoric rise of NFTs, once hailed as the next big thing, has given way to a challenging period, with many in the crypto world feeling the pinch. Daniel Maegaard, who first encountered NFTs in 2018 and became a notable collector under the alias Seedphrase, amassed a fortune in these digital tokens by 2021, even scoring a jaw-dropping $4.45 million for one in 2022.
However, recent months have seen Maegaard gradually reducing his holdings as a critical segment of the NFT market, in his own words, has “taken a nosedive.”
Nonfungible tokens, primarily linked to digital art and collectibles recorded on blockchain technology, have seen their values plummet, losing their luster among crypto enthusiasts who once clamored for them. The hype and FOMO (fear of missing out) that surrounded NFTs have faded since their peak in January 2022, leaving both buyers and sellers struggling to find lasting value in these speculative assets.
According to data from DappRadar, monthly trading volume for NFTs has dropped by a staggering 81% between January 2022 and July 2023. Over the same period, monthly NFT sales figures have seen a 61% decline, as reported by DappRadar. Even blue-chip NFTs like Bored Ape Yacht Club and CryptoPunks have seen their floor prices hit two-year lows, according to NFT Price Floor, an industry data tracker.
Lorenzo Melendez, president of NFT project Pudgy Penguins, noted, “When you look at the charts, everything is down. You are seeing a lot of capitulation, people unsure of what steps to take next.”
NFTs, along with the broader crypto market, experienced a painful reckoning last year, marked by high-profile collapses and scandals that soured investor sentiment in an already challenging digital asset market grappling with rising interest rates. However, while the broader crypto market has found some stability this year, NFTs have struggled to regain their momentum.
Investors aren’t the only ones feeling the effects. NFT marketplace Recur, backed by billionaire Steve Cohen and known for its Hello Kitty NFT partnership, has announced its winding down due to “unforeseen challenges and shifts in the business landscape.” Nifty’s, an NFT social-media platform supported by Mark Cuban and Joe Lubin, which initially partnered with Warner Bros. on Looney Tunes-themed NFTs before shifting its strategy, also announced its closure, citing unsuccessful investment opportunities.
Even surviving platforms and projects are facing difficulties. Leading NFT marketplace Blur has witnessed its sales volume, measured in Ether, plummet by 96% between a late June peak and early August, according to data from Dune Analytics.