Non-fungible tokens (NFTs) took the world by storm in March and April of this year with a rush of daily headlines about record-breaking sales and big companies dropping their own unique digital artwork that is dominating the mainstream media.
A few months later, the narrative has shifted to the bursting of the “NFT Bubble”, warning doom and gloom that NFT investors are on the verge of losing all their money.
The rapidly falling prices and activity in the top NFT marketplaces has led many to speculate on the death of the non-fungible token space, despite the well-known cyclical nature of the crypto market, which can come back to life in the blink of an eye.
You knew this was coming, didn’t you?
NFTs are dead
(This song can of course also be bought as an NFT) https://t.co/gj6JFpFKZX pic.twitter.com/NFveBKgdRn
– Jonathan Mann (@songadaymann) June 4, 2021
Active users jump off
Active users are the lifeblood of the NFT marketplaces, but the troubled nature of the cryptocurrency markets for the past two months, including the 19th activity sell-off.
As can be seen in the graphic above, active wallets on NFT marketplaces peaked towards the end of March and have since fallen by more than 40% as declining values combined with high transaction fees in the Ethereum (ETH) network have left traders off the market keep away.
The decline in active wallets coincided with a decline in sales across the room as rapidly falling token prices exacerbated the losses of owners and collectors who lost up to 90% of their priceless art overnight.
The decline in active users has resulted in a 60% decrease in total daily revenue, which has fallen from a high of $ 325 million on May 7 to its current value of $ 110 million.
NFTs are down, but not out
All is not lost, however, as there are many solid value propositions and use cases for NFTs that entrepreneurs and traditional businesses have noticed and embraced by the sector.
The blockchain ecosystem has already identified several viable options to solve the NFT sector’s problems, such as Enjin’s adoption of the Efinity and JumpNet protocols, which will help reduce fees and enable interoperability between different networks.
Another popular solution is Polygon, an Etheruem sidechain that allows projects to stay on Ethereum while having access to a fast, low-cost environment. In the past three months, a large number of NFT-oriented and gaming projects have migrated to Polygon and as the crypto and NFT market improves, these low fee environments should help stimulate activity on the network.
While current stats may look bad compared to recent all-time highs over an extended period of time, it can be seen that the average number of NFT sales rose nearly 300% between January and late May. This shows that the sector is strong despite the market slump that began on May 12th.
The NFT ecosystem may have seen a sharp drop in activity and token values over the past month, but it’s far too early to announce the death of NFTs as the world has only scratched the surface of what happened to this one emerging smart contract technology is possible.
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every step of investing and trading involves risk, so you should do your own research when making a decision.