The NFT market is no stranger to popularity-dropping, scams, and hacks. The story of the NFT crash continues as they keep seeing a downfall in terms of activity and popularity.
The NFT crash hasn’t seen any speed breaker since its peak popularity two or three years ago, when in August 2021 the trading volume of NFTs reached 2.8 billion dollars.
The Number Game
A new detailed study by dappGambl, where they studied 73,257 NFTs to know the health of the market, gave shocking results.
It was revealed that 69,725 NFTs out of those 73,257 are now worth equal to 0 Ethereum, which means nothing. This estimate also leaves more than 23 million users with worthless investments.
They also pointed out that there is only paltry demand for NFTs in comparison to abundant supply, and 79% of 73.257 are unsold, i.e. 4 out of 5.
Further study also says that less than 1% of NFTs price higher than $6,000, and 41% of them remain in the $5-100 range. These numbers are very low in comparison to the boom period.
The study also quotes, “This daunting reality should serve as a sobering check on the euphoria that has often surrounded NFT space.”
“Amid stories of digital art pieces selling for millions and overnight success stories, it is easy to overlook the fact that the market is fraught with pitfalls and potential losses.”
When did the NFT Crash Start and how?
The major reason that led to the NFT crash is its very rapid growth from 2021 to 2022, barely lasting 1.5 years.
In economics, there is a term “bubble burst,” referring to quick inflation of the market and then again quickly followed by sharp deflation.
Bubble Burst Process that Led to NFT Crash
The 5-step process includes:
Displacement
When people start to notice new technology that has the potential for good returns on investment, it get endorsements from high-profile celebrities to lure people in.
Boom
Prices start to rise and keep on rising because investors are pouring in, and because of human nature’s FOMO (fear of missing out), the number of investors increases exponentially. Big companies also jump on the bandwagon.
Elation
The market has now reached its peak, and no one can guess when it may start dwindling.
Withdrawal
Many investors start taking out their profits, thinking that they have already made enough from their initial investment, and they also get the sense that a bubble burst can happen anytime leading to a NFT crash.
Panic
If the price of NFTs just drops for one or two days, that is enough to create great panic among investors. Now every investor is ready to cash it out at any price.
Other Major Factors Contributing to the NFT Crash
Zero Utility and Zero Value: One of the main reasons for the NFT crash is that most of the NFTs are just pictures of random objects, mostly cartoons, and that’s all.
For the majority of people, owning a random picture on the internet doesn’t add any value to the real world, nor does it solve any problems, which is why its utility is nearly zero.
Lack of Originality: As the market became saturated, it always got tough to sell unique items. As a result, most of the NFTs are just recycled JPEGs, serving as a quick cash grab.
In 2022 major trading platform OpenSea revealed that 80% of NFTs on its platform are fake or plagiarized which creates a doubt in mind of the investors leading to low to no investment overall.
Low Resale: As the NFTs market is highly unpredictable, there is a challenge of price stability, and investors avoid investing large sums of money.
For example, an NFT was created for the first ever tweet on Twitter by founder Jack Dorsey, which was sold to Iranian investor Sina Estavi in 2021 for 2.9 million, and then in 2022, Estavi listed the same NFT for 48 million but only managed to get the highest bid of a paltry $280.
No Regulation and Trust: Countries either ban NFTs altogether or don’t do much about them, like creating a framework and good regulation.
That’s what gives rise to scams, Ponzi schemes, money laundering, and terror financing, resulting in a lack of trust among users and skepticism before investing.
How do I Avoid Scams in NFTs?
- Use 2-factor authentication on every website you have an account on.
Use hardware wallets to store your digital assets. - Verify authenticity before purchasing NFTs through cross-checks on the internet.
- Something too good to be true is most likely a scam. It becomes important not to fall for greed.
- Don’t deal with digital assets on the dark web illegally. Always use genuine and established platforms.
Conclusion
The data provided in this blog is a good indicator of what led to NFT crash, which was once on cloud 9, and took a nosedive back to the ground with all this happening in a short amount of time.
NFTs can revive again only when more categories of NFTs also go mainstream and focus on increasing utility in real life.
FAQs
Q: What caused the recent NFT crash in the market?
A: The NFT crash was a result of an oversupply of NFTs and investors’ skepticism about them, resulting in a decline in demand and prices to an all-time low.
Q: Will the NFT crash have a long-term impact on the market?
A: The NFT crash may lead to the downfall of the NFT market, but the advancement of technology could recover it and continue to thrive only if it focuses on increasing the use of NFTs in daily activities.
Q: Are all NFTs affected by the NFT crash equally?
A: The NFT crash has affected NFTs across various categories, but NFTs purchased by high-profile celebrities and speculative investments seem to have experienced a much more significant decline in value compared to unique NFTs.
Q: How can investors protect themselves from the NFT crash?
A: Investors can reduce the impact of an NFT crash by conducting thorough research, diversifying their portfolio, and being cautious of investments that lack value or demand.
Q: Is the NFT crash a sign of an unsustainable trend?
A: The NFT crash is a normal part of market cycles and does not necessarily indicate the end of the trend completely but It serves as a correction and encourages market participants to focus on sustainable growth and encourage meaningful use cases for NFTs.
Hi, I’m Utkarsh Singh. I developed an interest in technology when I was around 9 years old, and since then I love learning about it every day and also sharing knowledge with everyone around me, which can make a difference in their lives. Smartphones and gaming laptops in particular attract me the most. Apart from technology, I play various sports, especially badminton, and I also like trying new food dishes.
