NFT Sales Plunge Amid Crypto Market Meltdown, Rising Inflation and Withered Risk Appetite

NFT sales on OpenSea plunged to $700 million (roughly Rs. 5,500 crore) in June, down from $2.6 billion (roughly Rs. 20,600 crore) in May.

By Reuters | Updated: 5 July 2022 13:47 IST

NFT Sales Plunge Amid Crypto Market Meltdown, Rising Inflation and Withered Risk Appetite

Photo Credit: Reuters

Bosc put up three screens in his New York office on which to display his NFTs

Highlights

NFT average sale sunk to $412 by late June
OpenSea's monthly market sales had peaked at nearly $5 billion in January
GSR, a crypto trading firm, spent $500,000 on NFTs last month

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 (roughly Rs. 5,500 crore) in June, down from $2.6 billion (roughly Rs. 20,600 crore) in May and a far cry from January's peak of nearly $5 billion (roughly 40,000 crore).

Crypto Trading Volumes in India Take a Hit Following TDS Rule Enforcement

By late June the average NFT sale sunk to $412 (roughly Rs. 33,000) from $1,754 (roughly Rs. 1,40,000) 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."

Coca-Cola to Release Pride-Related NFTs to Celebrate Gender Diversity

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 percent in the six months of the year, while Ether has dropped 71%.

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.

What You Need to Know About Crypto, NFT Laws in India

The Malaysian businessman who bought an NFT of Jack Dorsey's first tweet for $2.5 million (roughly Rs. 20 crore) 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 (roughly Rs. 4 crore) 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 US-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 (roughly 2,300 crore) 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 (roughly Rs. 87,00,000) in June, having halved since its January peak of $238,000 (roughly Rs. 2 crore), 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 (roughly Rs. 1 crore).

"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.

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.

Will crypto tax hurt the industry in India? We discuss this on Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.

Affiliate links may be automatically generated - see our ethics statement for details.

Comments

For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.