If you’re at all interested in cryptocurrency then you’ll already have heard the phrase “crypto winter” thrown around so much that it’s lost all meaning. After several years of cryptocurrency being on the rise, the market has crashed and people have lost potentially hundreds of thousands.
For some people, it’s not just the fact that they’ve lost money but the fact that cryptocurrency was starting to be adopted into the mainstream – unfortunately, the crash reminded people of the mainstream media calling digital currency unreliable and has put some people off.
What’s Happening with NFTs?
One of the major ways that we saw cryptocurrency being used over the last few years was in the buying and selling of NFTs. Non-fungible tokens allowed artists and companies a new way to make money by selling exclusive artwork (a piece of digital art, photography or even a song) that often came with other perks attached.
Celebrities, underground artists and even well-known game developers and publishers were jumping on the trend. Now that the cryptocurrency market has been plunged into winter, what’s happened with NFTs? Are they dead?
NFT sales peaked in January when they hit $12.6billion, but this has dropped like a stone in the six months up to June 2022, when NFT sales totalled just $1 billion. This is still an increase on June 2021 when NFT sales totalled $648 million, but many investors are concerned that this spells the end of the NFT market.
NFTs rely on blockchain currencies, otherwise known as cryptocurrency. The whole system works on a decentralised ledger, meaning that anyone has access to updating it and allows people to publicly track the owners of cryptocurrency. There are several different blockchains, like Ethereum and Binance.
In the past year, there has been an increase in scams related to cryptocurrency as more novice users get involved in the industry. There have been a number of high-profile rug-pulls, as well as hacks and leaks of private information which may have turned people away from investing.
The Latest on Cryptocurrency
Cryptocurrency is a victim of its own success; as the industry became more mainstream, people with less knowledge of the crypto space started investing. This meant that as soon as they started to lose money they pulled out, prompting the market to dip even further.
In addition to this, many professional investors had begun to split their funds between traditional investments and the crypto market, meaning that the crypto space became more tied to the stock market and real-world events instead of running independently.
With the war in Ukraine, the cost of living increasing and the skyrocketing interest rate, many investors have sold their assets in both markets, resulting in both taking a nose dive. The cryptocurrency market as a whole was worth over $3 trillion last year and is now worth less than $1 trillion.
Ethan McMahon, an economist with Chainalysis, said that he believed the decline in the popularity of NFTs to be linked to the slowdown in the broader cryptocurrency markets. He continued, saying “Times like this inevitably lead to consolidation within the affected markets, and for NFTs, we will likely see a pullback in terms of the collections and types of NFTs that reach prominence.”
According to data released by Chainalysis, NFT sales peaked in January. An NFT of Twitter founder Jack Dorsey’s first tweet originally sold for just under $ 3 million. The owner recently abandoned the sale when bids to buy the NFT stopped at $14,000.
The Future of NFTs and Cryptocurrency
The NFT market has hugely crashed recently, leading to some suggesting that NFTs will soon die out entirely. Some suggest this in part due to the crypto market being unregulated, unlike Slingo sites and the gambling industry.
However, what many believe is that there is a degree of Cryptocurrency regulation due to come into play would could help change things. For a long time, many were against digital currency becoming regulated, because they enjoyed the anonymous nature of buying, selling and trading currency in this way – largely untraceable. However, in the grand scheme of things, this is something that could have contributed to the crash in value and so; some are coming around to the idea that regulation could be needed.
Whether we’ll see strict regulations in the same way as the gambling industry is yet to be seen – although it is likely that we’ll be eased into rules for Cryptocurrency rather than rushing into anything too extreme to start.
For instance, it is thought that Cryptocurrency platforms will need to be licensed and that they will be responsible for vetting those that sign up and checking the ID of traders. That said, there are no official announcements regarding Cryptocurrency and/or NFT regulation so we’ll have to wait and see what the future brings.
Should I Sell?
If you hold any sort of digital currency or asset then you have probably considered selling over recent weeks. The truth is that there is no solid advice that can be given to you, as everyone’s situations are different and there is no way to tell what the future value of these assets is going to be.
It’s not the end of NFTs as a whole though. Blue-chip investments are investments that are generally regarded as a safe long-term bet, and blue-chip NFTs have so far withstood the drop and continued to hold their value. Several high-profile blue-chip NFTs have only seen their value drop by 1% in the last month, compared to the catastrophic state of the rest of the market.
Faith in NFTs have definitely been shaken, thanks to several scams, attempts and fraud and even theft; this loss of confidence has only been compounded by the loss of faith in the cryptocurrency space as a whole. Despite this, it’s unlikely that we’ll see the crypto space die a death entirely. Much like the traditional stock market, the value will come back. It’s just a case of playing the long game.