The current state of NFT markets

The non-fungible token (NFT) craze took over the cryptocurrency industry in 2021, sparking an astonishing number of NFT projects in the process. The majority of these groups are now testing the first bear market; Did the bubble burst and the noise ended?

As happened after the “ICO craze” during 2017/2018, the vast majority of NFT projects actually fell into their bear market throughout the year. 2021 ended with low liquidity, low trading volumes, and floor prices close to zero for many groups. However, the so-called NFTs have managed to maintain their strong communities, establish more partnerships, and motivate potential buyers to participate in the project. An overview of the state of the markets.

Different behavior from replaceable tokens

In the financial and cryptocurrency markets, there is usually talk of a bear market or a bull market. A bear market refers to continuing declines in prices, while prices generally rise in a bull market. Bitcoin and Ether peaked in November 2021, with continued declines in price and volume since then; A bear market by definition. NFT markets were hardly affected. to rise NFT minimum prices and trading volumes called for a break from the financial cycles of the market as a whole.

Aggregate trading volumes in the largest NFT markets / Source: CryptoSlam

Several market participants explain the ambiguous price behavior of the different end users that NFTs deal with. Since cryptocurrencies have financial implications in their own right, the communities around redeemable tokens like bitcoin and ether are usually very similar. Profiles and tradable images in the form of NFTs have been able to reach a target audience beyond financially savvy investors. Due to the deeper overlap between these communities, prices have also proven to be relatively robust.

Leading stocks remain strong

At the start of the bear market, some well-established NFTs managed to hold their dollar value and even raise the value of ether. Currently the most popular project, Bored Ape Yacht Club (BAYC), has registered a moderate price drop on the one hand, and on the other hand the number of owners is constantly increasing. With a chain limited to 10,000 pieces, the distribution to 6,462 owners is an indication of the good diversification of the project.

Various schemes for Bored Ape Yacht Club (BAYC) / Source: CryptoSlam

However, the “big companies” in the area also had to accept some price losses. Prices measured by ether often mask higher dips, which should be seen in relation to ether price movements. Because the minimum price for boring monkeys dropped from 150 to 95 ether (-37%), but in US dollars the group was close to 67% of its all-time high. The previously sought-after Crypto Punks (-80%), Meebits (-63%) and Azukis (-82%) performed similarly; It can be well compared to the declines of different altcoins.

NFTs: Here to stay?

The state of the NFT markets shows strong similarities with Initial Coin Offerings (ICOs) in the 2017/18 era. The benefits of core technology are undeniable. From token artworks to digital identities to NFT music tracks, the use cases for non-fungible tokens are diverse. However, over the past year, it has also become clear that the market, like other assets, has overheated and that sustainability has often been left out.

As in the ICO bubble, speculation took hold. Dozens of new projects popped up every day, denting the rest of the market while scammers broke into millions. The basics are becoming irrelevant and the sole point of buying an NFT is to flip it at a premium. In the general crypto winter, these practices are likely to gradually disappear. Since some projects from the ICO craze made solid products years later (Aave, Filecoin, Chainlink to name a few), there will also be survivors of the first NFT bear market. It remains to be seen if these are the most traded combinations today.

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