The Non-Fungible Token (NFTs) market nosedived from its peak of $17 billion in early 2022 to $470 million in September 2022, a whopping 97 per cent drop, showed data from Dune Analytics, a blockchain analytics firm. The sharp decline in the NFT market has raised concern about whether it could rebound from the current dip anytime soon.
Experts say the steep fall in NFT trading volume is a testament to the negative sentiment in the broader crypto ecosystem, but it shouldn't be construed as the end of the road for NFTs.
The global crypto market has been trading below the $1 trillion mark for quite a while as cryptocurrency prices continue to fall. However, the observers believe the negative sentiments won't last long.
Sumit Ghosh, co-founder and chief executive officer (CEO) of Chingari, the world's leading on-chain social app, says in recent times, projects like DeGods and Yoots have triggered renewed interest in NFTs. Moreover, multiple brands, celebrities, and sportspersons are joining the NFT space. Hence, "The recent downturn is just a hiccup in the journey to a larger acceptance of NFTs at the global level."
"Better market sentiments will reflect in NFT trading volumes in the near future," he adds.
Daily NFT sales volume was reportedly less than 30,000 or worth $9.2 million as of September 26.
In contrast, in January and May this year, the daily sales volume exceeded $150 million.
As global monetary policy tightens and investors shy away from riskier assets, the NFT market witnesses rapid sell-offs. Experts said the rising interest rates in the last few months deterred investors from investing in risky bets across the markets—and NFTs are no exception.
Ashwani Kumar, founder and CEO of HelperWorld, an NFT platform, says the NFT market is crashing because of investors' declining interest in these assets. "According to the recent Google Trends data, there has been a significant drop in the term 'buy NFTs,' almost 80 percent," he adds.
At the same time, the term 'Sell NFT' rises 83 percent in the Google search interest index. It signals that users lost interest in the NFT domain, he adds.
The NFT market situation appeared to be worse than cryptocurrencies. "This is a difficult time for NFT creators like us; we have reduced the minting. But we believe in the blockchain ecosystem and hope the market will be better soon," says Deepakshi Aggarwal, 23, a Chandigarh-based NFT creator.
Big NFT marketplaces like OpenSea have laid off about 20 per cent of their workforce in July to tide through the adverse market conditions.
However, some observers believe it may be a good sign of the NFT domain's maturity. "People will perform their due diligence before investing in an NFT, and this will prompt NFT creators and marketers to ensure they do not give anything that does not provide any utility," says Ramkumar Subramaniam, CEO and co-founder of Guardianlink, an India-based NFT marketplace.
Most experts believe it is not the end for the NFT market. Kumar says the market may stay muted for some time, and there’s no telling when the next bull-run will come. But as the crypto prices go up, the NFT market could be the next hot investment destination.
