Digital Currency Troubles: Has the NFT Bubble Burst Already?
In recent years, the advent of digital currency and blockchain technology has dominated the conversation about finance. Despite this, a lot of confusion remains as to how this technology works, and how any investment into it can be productive. However, some are saying that it may already too late.,
Before many people even understood what an NFT was, has its time come and gone already?
Let’s take a look.
What Is an NFT?
An NFT, or non-fungible token, is a unique digital asset. Made possible as an outgrowth of blockchain technology, NFT ownership is stored electronically in a distributed ledger the same way that Bitcoins and other cryptocurrency ownership are established. By comparison, a Bitcoin would be a fungible asset, meaning all Bitcoins are the same and interchangeable.
Bitcoins all have the same value — depending on the value at the time — the same way traditional currency does. NFTs vary in price a lot depending on what people are willing to pay to “own” a digital asset.
For example, Mike Winklemann (known as “Beeple”) created an NFT video clip that sold for $67,000 in October 2020. Five months later, the same 10-second clip resold for $6.6 million.
The NFT market has exploded over the past year. Monthly sales in Q1 2020 were about $1.5 million a month. By January, NFT sales jumped to $8 million and in February — wait for it — sales topped $86 million. Even renowned art auction house Christie’s started hosting NFT auctions, including a piece by Beeple that sold for $69 million.
The NBA also started selling digital video clips. These are highlights of games that you may have watched on TV or can see anytime you want on YouTube. But buying them means you own the clip with a unique serial number. A LeBron James dunk sold for more than $200,000. People have spent more than $230 million buying and trading digital collectibles of basketball highlights.
How Quickly Things Can Change
By May 2021, NFT sales were setting records. In a 7-day stretch, sales of more than $176 million were recorded. A week later, transactions plummeted. According to analysis by Protos, sales dropped nearly 90%.
The number of NFT wallets has dropped from 12,000 to less than 4,000 — a nearly 70% decrease.
Has the NFT bubble popped?
After a meteoric rise, major art pieces are seeing significant drops. CNBC reports that one of the most popular NFT projects, CryptoPunks, saw sales slashed in half from May to June. SuperRare digital art pieces which were selling for more than $31,000 are now selling at $5,300.
Whether the bubble has burst or not, the market is certainly seeing a correction.
Analysts note that Bitcoin has gone through a similar slump. In April, Bitcoin was a high as $65,000. Since then, the market has dropped 40% to where it stands as of June 15 at just more than $39,000. Experts theorize that much of the buying spree for NFTs may have been fueled by the rapid rise of the cryptocurrency and has cooled as Bitcoins values have dropped.
Anil Dash, CEO of Glitch, is credited with co-creating the first NFT. He says he’s skeptical about where NFTs are going. The market, he told Quartz, has been inflated and full of scammers.
Many wonder if we should have seen this coming. Pizza Hut’s digital representation of a pizza slice sold for $8,824. Taco Bell sold a picture of a taco (yes, a digital taco) for a whopping $187,000. Even Charmin jumped into the fray with a toilet paper NFT. It’s possible that the correction isn’t over yet…