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Who can be held responsible for the decline in non-fungible token prices? Some NFT enthusiasts are quick to blame a new trading platform, although this is merely a hopeful thought. The true cause lies in the unfortunate combination of increasing rates, decreasing cryptocurrency prices, and the lack of practicality.
In the early part of last year, Big Tech was engulfed in an NFT frenzy. Meta was actively working on solutions to enable its users to display NFT ownership on their Facebook profile. Considered crucial for the next decentralized phase of the internet, NFT transactions were expected to be recorded on the blockchain, eliminating the need for verification through banks or other third parties. NFT marketplace OpenSea achieved a staggering $13.3 billion valuation.
However, prices have plummeted since then. Take, for example, the Bored Ape Yacht Club NFTs from Yuga Labs. These distinct monkey cartoons, endorsed by celebrities like Paris Hilton, epitomize the exuberance of the sector. In late 2021, Bored Ape 8817, featuring a “rare” monkey with gold fur, was sold on Sotheby’s metaverse marketplace for $3.4 million. Now, the minimum price has dropped to around $50,000.
This price should be even lower, considering that the value attributed to these digital collectibles is difficult to prove. Additionally, trading still relies on centralized services, as major tech companies have abandoned their plans to mint, trade, or showcase digital NFTs.
One investor in OpenSea reportedly devalued its investment by 75%. The decline in OpenSea’s trading volume can partially be attributed to the emergence of competing platform Blur, which entices users with free tokens. However, these declines cannot be isolated from the broader collapse of the digital asset sector. According to digital assets brokerage K33, the total value of the crypto market has decreased by half from its peak, amounting to approximately $180 billion. Ether prices, the tokens predominantly used for NFT transactions, have also dropped by 60% since their late 2021 peak.
While a few NFTs may still change hands at high prices due to unwavering believers, the transformation they once promised has failed to materialize.
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