In a crypto market rife with bearish trends, the NFT (Non-Fungible Token) sector saw a remarkable exception in the form of Pudgy Penguins. Despite overall NFT transfer volumes plummeting and floor prices of many NFT collections spiraling downward, Pudgy Penguins witnessed a surge in interest and activity.
The Death Knell for NFTs?
While some have pronounced NFTs as dead, it’s essential not to revel in an “I told you so” sentiment. This conclusion emerged from research conducted by dappGambl, a crypto review platform. Although not the typical go-to source, their analysis drew attention.
The research report primarily emphasized that while select NFTs still command high prices, the majority hold zero valuation. Data from the Block, a U.S. company specializing in blockchain, cryptocurrency, and market research, revealed that weekly NFT sales still exceed $60 million. However, the average price of NFT transactions has dwindled to around $30-50. This decline is starkly contrasting the NFT peak in August 2021, when weekly transactions surged to a whopping $3.2 billion. So, what led to this shift, and what can we glean from it?
Key Factors at Play
Several factors influenced this shift. Firstly, the widespread awareness of cryptocurrencies like Bitcoin and Ethereum, on which NFTs were predominantly traded, had reached its zenith between May 2021 and April the following year. This period saw an intoxication sweep over many, with nearly everyone suddenly becoming a cryptocurrency expert, predicting endless upward trajectories for Bitcoin and Ethereum.
Secondly, the discussion around fairly compensating artists for their work had gained momentum. NFT smart contracts facilitated automatic fee payments to artists with every transaction, offering digital artists an avenue to monetize their creations.
Thirdly, the rise of digital art, coupled with the online presence and growing interest in all things digital, led early adopters to realize that digital art could be owned and traded. Even renowned auction houses like Christie’s entered the NFT space. Artists such as Beeple rose to prominence, with one of their NFT artworks selling for nearly $70 million. This sparked the creation of a market seemingly out of thin air.
The Pitfalls and Bubble
Like any market, several factors influence the products’ success or failure. These include scarcity, abundance, price, hype, endorsements, provenance, artist credibility, sellers, buyers, and more. When a 24×24 pixel CryptoPunk (#5822) sells for more than a Rembrandt or over 40 average London homes, questions arise about the market’s health. The oversupply of simplistic digital assets further exacerbated the situation, as the NFT market became flooded with meaningless content.
On the demand side, buyers, often enthusiastic teenagers, believed they were onto something. However, their influx eventually contributed to the market’s collapse.
A Glimmer of Hope for NFTs
Some still argue that NFTs hold monetary value for gamers looking to transfer digital assets across platforms. However, even this model may evolve. Gamer and entrepreneur Paul “The Profit” Dawalibi has emphasized that gamers view their trophies and digital assets as a way to showcase their achievements, not necessarily for making money.
The future of NFTs might involve a fusion of old and new concepts. Innovative companies like NFTrends are offering certified high-quality digital copies of originals, known as Non-Fungible Digital Images (NFDIs). Museums or owners of historically significant art pieces can create a limited series of authenticated digital copies and sell them as such. These copies are secure and their authenticity can always be verified.
Imagine owning an original copy of the Mona Lisa and being the sole owner able to display it. While tourist snapshots and smartphone photos exist, the feeling of ownership is distinct. Owners of certified digital copies can rent or display their digital art piece with a secure QR code verifying its authenticity.
While NFTs as they peaked in 2021 may have had limitations, there’s potential for a comeback. Perhaps NFTrends and similar innovations could pave the way for the next wave of NFTs. Some ideas, technologies, and trends stand the test of time, while others fade into obscurity. NFTs in their 2021 incarnation might be likened to the first wheels invented by early humans – they served a purpose but could have been vastly improved.
The NFT market’s trajectory parallels the tulip mania of the 1630s in the Netherlands, and like those tulip bulbs, NFTs have had their highs and lows. It’s a reminder that skepticism and careful consideration are crucial in any emerging market.
