A recent study conducted by Insider titled “Remember when NFTs sold for millions of dollars? 95% of the digital collectibles may now be worthless” has revealed a significant collapse in the Non-Fungible Token (NFT) market. The report paints a grim picture, indicating that the vast majority of NFTs have lost their value.
This marks a stark contrast to the fervor and euphoria that gripped the market during its peak in 2021 and 2022, leaving early adopters grappling with uncertainty regarding the future of NFTs.
The study also sheds light on the speculative and optimistic pricing strategies prevalent in the NFT market, which often bear little resemblance to the actual transaction history of these digital assets.
This glaring disparity between listed prices and actual sales suggests that many NFT sellers are holding out for a resurgence in NFT interest akin to the meteoric rise witnessed in 2021, a scenario that may never materialize.
The Rise and Fall of NFTs: A Closer Look at the 2021-2022 Surge
NFTs, short for Non-Fungible Tokens, are digital representations of art or collectibles linked to blockchain technology, primarily Ethereum. Each NFT possesses a unique signature, rendering it impossible to duplicate. In 2021 and 2022, the NFT market experienced an unprecedented bull run, at one point reaching a monthly trading volume of $2.8 billion.
During this period, iconic collections like Bored Apes and CryptoPunks were fetching millions of dollars, and celebrities like Stephen Curry and Snoop Dogg enthusiastically joined the NFT frenzy. This booming phase coincided with the peak of the cryptocurrency market when Bitcoin was trading at nearly $70,000. However, as of the latest data, Bitcoin’s price has plummeted to around $27,000.
The year 2022 marked a challenging period for the cryptocurrency sector. National Public Radio (NPR) suggested it as a turning point where virtual currencies lost their allure, becoming subjects of skepticism or viewed as part of the industry’s painful growth.
Presently, Bitcoin hovers at $27,223, and Ethereum at $1,630.99, a sharp decline from their peak values of over $65,000 and $4,700, respectively. According to dappGambl, the outlook is grim, with the vast majority of tokens now virtually worthless. Their research indicates that a staggering 95% of NFT holders possess assets that hold no genuine value, affecting over 23 million investors.
DappGambl underscores the need to temper the excessive enthusiasm often associated with tokens and the crypto sphere. It’s not solely the issue of valuelessness; there’s also a noticeable lack of interest in acquiring new assets, placing artists in precarious situations.
Currently, only 21% of the collections identified by dappGambl are under full ownership, meaning they have been acquired by investors and collectors. In other words, a remarkable four out of five NFT collections languish unused. This doesn’t imply that all tokens are dubious, but it does highlight the questionable value of certain token collections.
Consider Melania Trump’s NFT, “Man on the Moon,” which violates NASA’s rules and has gained little popularity, with only about 70 purchases in two months, despite a $75 price tag. It’s challenging to envision how it could appreciate significantly in value.
Melania Trump isn’t the only one still navigating the NFT landscape in 2023. Canon, a prominent camera company, also ventured into NFTs late but has yet to launch its platform called Cadabra for selling NFT photos.
Innovative companies like Meta (formerly Facebook) have recognized the pitfalls of NFTs and discontinued their use in March. Although they initially dabbled in NFTs in 2022 as part of their “metaverse” strategy, they eventually pulled the plug.
For newcomers entering the world of crypto today, it’s crucial to be prepared for potential setbacks. The token frenzy soared but ultimately burst like a bubble. Furthermore, it’s not just a financial issue; crypto and NFTs have substantial environmental impacts, consuming significant energy, often sourced from coal and fossil fuel generators. The majority of crypto and NFT owners have reaped meager rewards.
The Shadow of NFT Frauds and Scams
Amid the NFT market’s popularity, concerns about scams and fraud have surged. These illicit activities come in various forms, including fake sales. Scammers craft fraudulent listings, often for non-existent or stolen digital assets, tricking buyers into purchasing counterfeit NFTs and then disappearing with their money.
Phishing website scams pose another threat. These deceptive sites impersonate legitimate NFT marketplaces, coercing users into revealing private keys and personal information, leading to cryptocurrency wallet theft or unauthorized access to genuine collections. Additionally, scammers steal digital art and mint NFTs, falsely claiming ownership, which results in legal disputes and financial losses for unsuspecting buyers.
Some groups artificially inflate NFT prices by coordinating buying sprees and generating hype, only to sell quickly for a profit, leaving others with devalued tokens and losses. In decentralized marketplaces, dishonest developers create contracts with hidden vulnerabilities. After attracting funds from investors, they exploit these vulnerabilities, depleting assets and causing significant losses.
In certain cases, scammers impersonate famous artists, celebrities, or influencers to promote fake sales or giveaways, tricking people into sending cryptocurrency or personal information. Others mimic legitimate projects, enticing investors with misleading information, only to disappear once they’ve collected funds, leaving investors with worthless assets.
The NFT market’s rapid ascent and subsequent collapse serve as a cautionary tale of the volatile nature of digital assets. As the industry grapples with valuelessness and a slew of scams, participants must exercise vigilance and skepticism in navigating this evolving landscape.
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