Non fungible tokens (NFTs), which saw explosive growth in 2021, appear to be losing steam.
NFT sales have plummeted 92 percent over the last eight months, from a daily average of 225,000 in September to about 19,000 this week, according to the market tracker NonFungible.
The number of active market wallets also fell by around 75 percent, from a high of 119,000 in November 2021 to about 29,000 this week.
Tesla CEO Elon Musk who recently inked a deal to buy Twitter for $44 billion, briefly changed his profile picture to a collage of Bored Ape Yacht Club NFTs and remarked, "I dunno … seems kinda fungible."
NFTs are essentially unique digital receipts which can prove ownership of an underlying digital file. Even though the underlying file can be copied and pasted freely, the unique receipt will only belong to the true owner since it can't be replicated.
Investors Are Getting Cautious
The increase in interest rates, especially in the United States (US), have pushed investors to be more cautious, according to The Wall Street Journal. NFTs, which are among the most speculative and volatile asset classes, have been affected by this sentiment. Bitcoin has also fallen by 43 percent.
"Overall, the indicators are bearish," admitted NonFungible in its market report.
"With nearly $8 billion traded in the first quarter of 2022, the market cannot really be considered to have collapsed. We are observing a stabilization of the NFT market, in line with the last quarter of 2021."NonFungible, NFT Market Report Q1 2022
Twitter's founder Jack Dorsey’s first tweet was sold as an NFT last year for $2.9 million.
The buyer, Sina Estavi, CEO of Malaysia-based blockchain company Bridge Oracle, listed the NFT for $48 million on the marketplace Opensea in April, only to receive a highest bid of about $14,000.
"My offer to sell was high and not everyone could afford it ... It's important to me who wants to buy it, I will not sell this NFT to anyone because I do not think everyone deserves this NFT," he told Reuters.
According to Google Trends, the number of searches for the term 'NFT' peaked in January and has fallen roughly 80 percent since, indicating reduced interest in NFTs, according to Wall Street Journal.
“I don’t think it’s surprising that we’re seeing a little cooling off like we’re seeing in other markets as well," Jonathan Victor, NFT and gaming lead at Protocol Labs, told the publication last month.
He added that, after the high valuations of 2021, the market is now broadening and the focus is shifting to the utility that NFTs provide.
The NFT market is also plagued by rampant plagiarism and stolen content. Cent, the platform on which Dorsey's tweet was first sold, temporarily suspended most transactions in February, due to this.
Scams and phishing attacks have also skyrocketed.
(With inputs from Wall Street Journal and Reuters.)
(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)