NFT Market Collapse: Causes and Predictions for Recovery
The world of Non-Fungible Tokens (NFTs) has seen a dramatic evolution over the past few years, with various types of digital assets being created on different blockchains, ranging from music and gaming assets to visual artworks. This digital revolution gained significant momentum in 2021, marking a real boom for the NFT market.
Brands like Gucci and D&G joined the bandwagon by launching their collectibles, and the first metaverses were introduced. The market's value exploded, with high-profile purchases such as Christie's auction house buying a Beeple NFT for $69 million and Pak's NFT "Merge" selling for $91.8 million in December 2021, surpassing the price of the Beeple NFT. Monthly NFT sales amassed over $500,000, indicating heavy investment in the market.
However, the NFT market's success was not without its challenges. Market saturation became a problem, with the overwhelming amount of NFTs surpassing collectors' needs and demands. This, coupled with NFT scams and fraud, including free mint scams and Discord hacks, contributed to the NFT market crash in 2022.
The crash was not solely the result of issues within the NFT market. Broader macroeconomic issues such as supply chain problems, the Ukraine conflict, and global inflation also affected cryptocurrency prices, leading to sharp market corrections and investor panic selling. These patterns, including profit-taking by long-term holders signaled by on-chain metrics, could have been anticipated through historical indicators like NUPL and Coin Days Destroyed that often precede corrections.
The collapse of big web3-related systems, such as FTX and Terra blockchain's TerraUSD and LUNA, further affected the NFT market. Celebrities like Justin Bieber, Logan Paul, Steve Aoki, Snoop Dogg, and others have lost millions of dollars due to the NFT market crash.
Despite the market's downturn, the NFT market is expected to continue. By doing thorough research, investors can avoid scams and make wise long-term investments. In fact, the new NFT marketplace Blur reported a 120% increase in monthly trading volume, surpassing OpenSea.
The NFT market started gaining significant interest in 2017, with the launch of CryptoPunks, Rare Pepes, and other Ethereum collections. The European Union recorded the highest inflation level in 2022 at 9.2%, which also had an impact on the global economy, including the NFT market.
As we move forward, it is essential to learn from the past and navigate the NFT market with caution and knowledge, ensuring a sustainable and thriving digital art ecosystem for all.
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