NFTs burst into the limelight between 2021 and 2022, as celebrities invested millions in owning iconic images like Bored Apes and digital replicas of significant events, including the World Wide Web’s code completion and Jack Dorsey’s inaugural tweet on the platform that has since been rebranded as X.
By August 2021, NFT trading volumes reached an astronomical high of $2.8 billion. However, as the world regained a semblance of normalcy post-pandemic, the cryptocurrency frenzy dwindled, causing NFT valuations to plummet.
Millions left holding worthless tokens
A recent report from dappGambl, a website specializing in crypto product reviews, reveals a sobering statistic. It states that a staggering 95% of the non-fungible tokens (NFTs) minted during the cryptocurrency frenzy of the past few years now carry negligible worth.
To assess the current value of NFTs in a world that has moved beyond the initial hype, dappGambl conducted an exhaustive analysis of 73,257 NFT collections using platforms like NFT Scan and CoinMarketCap. A collection can encompass any number of individual NFT items, each available for purchase or sale.
The findings are disheartening. Out of the analyzed collections, a staggering 69,795 have a market capitalization of zero Ether (ETH). These NFTs are owned by approximately 23 million people worldwide, who now find themselves holding assets that have dwindled to worthlessness over just two short years.
But what about the more popular NFTs, you might wonder?
Delving deeper into the top 8,850 collections according to CoinMarketMap, the analysis revealed that 18% now boast a floor price of zero. Meanwhile, 41% of these top collections are priced between $5 and $100, and less than one percent exceed $6,000 in value—far from the multi-million-dollar price tags they commanded merely two years ago.
The NFT market’s missteps
One might assume that NFTs mirrored the fortunes of cryptocurrencies, but their unique appeal as a technology for certifying ownership and authenticity of digital collectibles should have set them apart. So, where did NFTs go wrong?
The analysis points to a demand-supply conundrum within the NFT market, exacerbated by the fading allure of these collectibles. For every NFT that changed hands, four remained unsold, creating a buyer’s market flooded with choices.
Inflated valuations also played a pivotal role in the NFT crash. The report cites the example of MacContract on Ethereum, which boasted a floor price exceeding $13 million but saw paltry sales of just $18. This glaring disparity between floor prices and actual sales data underscores the lack of genuine interest in many NFTs.
Much like their cryptocurrency counterparts, NFTs faced criticism for their carbon footprint. While NFTs’ emissions were a fraction of those generated by crypto mining, NFT minting consumed over 27 million kWh of energy—a quantity equivalent to the annual emissions from more than 2,000 US homes.
Hope for the future
Despite these challenges, dappGambl remains cautiously optimistic about the future of NFTs. The site believes that the underlying technology still holds potential in various domains, including gaming, fractional ownership, digital identity verification, and tokenization of real estate transactions.
For NFT creators, the analysis offers a valuable lesson: prioritize tokens with historical significance or genuine artistic merit. This conclusion may settle the debate on whether the Bored Ape Yacht Club (BAYC) truly represents the art of the new digital age.