Nft Hype Cools Off, Market Volumes Hit Lowest Levels Since July

Weekly market volumes of non-fungible tokens (NFTs) has plunged to its lowest levels since July 2021, per a report by Nonfungible.com, a site that curates data related to NFTs.

NFTs are assets that give people ownership of digital files of real world items such as art or music. According to the ‘completed sales’ chart on Nonfungible.com, the weekly market volume of NFT sales has plunged to around $176 million. That’s approximately five times less than the weekly trading value of around $924 million on January 31. In the first quarter of 2021, NFT sales had totalled roughly $2 billion.

It’s not just trading volumes, retail investors are also not searching the web as much for NFTs as they were around October last year, per search data from Google Trends.

But does this mean the popularity of the once infallible NFTs is fading?

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Over the last two years, NFTs or non-fungible tokens have taken the world by storm. Digital works of art were selling for millions of dollars. Some of the world’s biggest brands were looking to bring NFTs into their business models. Even Bollywood stars were hopping onto the digital asset bandwagon. Therefore, the current slump in trading volumes comes as a big surprise, raising investor eyebrows the world over.

Lowest weekly market volume in nine months:

Due to current world affairs, the broader crypto market has taken a significant hit. And with it, the NFT market also seems to be taking its fair share of damage. Trading volume is a critical metric that indicates the health of the NFT market, and it has declined substantially.

Trading volume refers to the number of NFT transactions carried out on various blockchains over a specified period. When the trading volume increases, more NFT assets are being traded, indicating a rising interest in the asset. And when the trading volume decreases, it is typically an indication of low interest in the asset.

As the overall cryptocurrency market is highly volatile, it is hard to give a definite reason for the drop in trading volumes within the NFT space.

During a similar downtrend in NFTs in June last year, Geoff Osler, CEO and co-founder of NFT app S!NG, pointed out to CNBC that the “pent-up demand” could have driven the digital collectibles craze, since there was money accumulated from rising cryptocurrency prices.

Crypto prices have crashed following Russia’s invasion of Ukraine. Bitcoin, trading at under $39,000, is at less than half the price at which it had peaked out in November last year.

The environmental cost of minting NFTs has also been a hot topic for debate over the past few months. The immense amount of computing power required to keep the NFT market up and running is contributing to global warming in a big way. And this could be another reason why investors are dropping off. Or it could just be that the hype of a speculative asset like NFTs is just dying down after a period of excitement for a new piece of technological innovation.

However, this loss in interest might be temporary, as the mainstream adoption of NFTs is still rising as companies and institutions are figuring out a way to incorporate NFTs in their business models.

(Edited by : Priyanka Deshpande)

First Published: Mar 08, 2022, 08:29 PM IST